I’m a firm believer that the stock market will tell you the answer to nearly any financial related question if you know how to ask the question, and similarly, where to find the right answers.
So when someone posed the following question to me today, I did a little digging.
What happened to all the zero interest credit cards so I can transfer all my credit card debt?
The answer isn’t quite as simple as you would think. Primarily, it’s because banks can’t take the risk in making short term loans because it reduces the amount of capital on their books. Additionally, now that profits are becoming a rare commodity these days, banks are looking to make money any where they can.
But that didn’t satisfy me.
The following chart is the banking index (BKX) and is generally considered the best way to track the banking sector as a whole. You don’t have to be a genius to figure that the banking stocks are “sick” to say the least.
As you can see, the big rise in the banking sector came into its prime in the mid 90s. For those too young to remember, this coincides fairly well with the time credit cards became a mainstay in everyday life.
Pretty soon, the banks figured out that charging 10% or more interest on easily justifiable loans was a fairly profitable business. Especially when you gave them to a culture of people who thrived on instant gratification. In fact, spending the money they earned wasn’t a enough — they spent money they didn’t have on stuff they didn’t need.
And that’s when the big bucks started rolling in. Profitable business indeed!
So when the economy turned south, and the average consumer figured out that they actually had to save part of their salary instead of relying on their assets to keep appreciating in value — like their homes — they stopped spending.
Now that no one is buying anything, except for vulture investors like me who are buying everything at half price, the economy will just sit stagnant or keep getting worse for the foreseeable future.
So to answer the original question, zero percent interest credit cards are probably out there somewhere if you have stellar credit, but don’t count on them sticking around for any significant amount of time.