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TheStreet Open House

Chase's Revival of Free Balance Transfer Card Is Questionable

Trying to recoup losses incurred during the Slate Card's 15-month intro period in this manner is a very risky bet for Chase to make, though, and it most likely won't pan out.

Chase: giving the false impression of growth?
Some of the most common metrics tracked by investors researching major banks are the outstanding balances and default rates of their credit card operations. Together, they can provide a snapshot of how much business a bank does, given that credit cards are some of the most popular products offered by banks, and how efficiently it does this business, as default rates are directly correlated to underwriting sophistication.

But what happens when a bank adds a bunch of new accounts that have revolving debt but won't make it any money? Well, outstanding balances go up and default rates go down, but the bank is not operating its business any more effectively and is not turning a greater profit. If anything, it's losing money in the process. Investors won't know that for some time, though, and could be misled into putting more money into the company, thereby driving up stock prices and making executives richer.

Conclusion: Questionable for Chase, Good for Consumer
Only time will tell exactly what Chase is doing, whether or not it's successful, and whether other major issuers like Bank of America (BAC) and Citibank (C) will follow suit.

In the meantime, indebted consumers have a very lucrative opportunity before them. By transferring a $5,000 balance from a card with a 15% APR to the Slate Card, for example, and paying it down within the 15-month 0% introductory period, one would save well over $500 in interest. And in a time of high gas prices and rising debt levels, we could all make do with an extra $500 in the bank.

--By Odysseas Papadimitriou, CEO of Card Hub, a website that helps people find the best credit cards for their needs.

For more on free balance transfer credit cards, visit Cardhub.com .

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