Surf's Up for Cardholders

Credit Card Wipeout

Stoller, Arnold and Goldberg are making the most of what credit card companies are offering, but how long can they, and others like them, keep riding the wave of low-interest-rate offers before lenders get craftier?

Rate surfers, along with other consumers, are paying back more of the minimum payment, says Cynthia Ullrich, a director in Fitch Ratings' asset-backed-securities department. For the first time since 1998, the credit card industry lost money last year, mostly because of higher minimum-payment rates, or MPRs, and higher interest rates. As of March 2006, the MPR was 21.74%, a jump from 2005's average of 18.6%.

But card issuers are particularly angry about rate surfers. "This consumer is very savvy and very mobile, and they move according to the next best offer," says Ullrich. "But there's a danger in this strategy, and that is, issuers have the ability to identify them."

Experienced rate surfers who know how to manage their accounts aren't concerned, says Arnold, but he worries about the amateurs who might get trapped in the backwash. In March, Arnold began noticing a few offers from Chase and MBNA that had fees for a balance transfer but didn't include a cap on the move. A cap of $50 or $75 is a great deal for transferring $10,000, but a fee of 3% -- $300 -- is something to think twice about, he notes.

Chase spokeswoman Jessica Iben said the company's move away from a cap "is competitive with the industry." MBNA didn't return calls, but an operator reached through the company's 800 number said, "If the card is worth more, there's usually no cap."

"The ground is definitely shifting," says Arnold. "You can definitely expect to see more of these offers in the future."

Surfing Tips

If you want to take advantage of lower rates, what do you look for? Locate the terms. They've been moved from the cardholder agreement to a box in the offer letter. "If you see, 'a 3% fee applies,' or a $5 minimum or $75 maximum, you're OK," says Arnold. "But if you see '3% balance-transfer fee applies,' or a '$5 minimum,' and no mention of a cap, you're not OK. You've got to kick the tires and look under the hood."