Update 3/1/12- Offer no longer available.

I did not think we would be seeing new credit card offers with 0% interest AND no balance transfer fee as they disappeared long ago with the economy collapse. I was surprised earlier this week when, of all card companies, Discover Card notified me that new accounts for the Discover More Card can receive 12-months of 0% interest with no fee. Discover Card is typically very conservative with bonus offers, credit lines, etc., and no balance transfer fee is a bold step for Discover Card to use and lead the pack. For the past several years, I continue to receive daily offers from various card companies offering zero percent interest, but there is always a charge (typically 3-5% and often with no maximum).

So why is this offer different and worth while for someone that does not currently hold a Discover Card? There are two groups of people that this card could really help.

1) Those that carry a balance on another card, and pay monthly interest. This new card will allow one to avoid paying interest for 12 full months with only minimum payment requirements. Depending on your balance, this could save one a substantial amount of interest.

2) Anyone who does not carry a balance on a credit card, but could use the “free money” from a balance transfer to their advantage and leverage gains. For those that do not know how this works, here is a brief summary.

• Lets assume one already has a credit card with another issuer with say a $10,000 credit line and a zero balance.
• After opening the Discover More card, one transfers funds from the other card to the Discover More card, creating a negative balance on the other card (i.e. a credit).
• One then requests a refund from the other card issuer for the credit.
• The “free” money is then leveraged in a high interest checking or savings account to earn some discretionary income while making the minimum payments to the Discover Card over the 12 month repayment period.

Sounds simple, but there are a couple of things to note with this deal. You want to make sure you have at least the same amount, if not more of an available credit limit on the Discover Card. When applying for the Discover card with the goal of performing a balance transfer, the point is to try and get as high of a credit limit as possible. So make sure you factor into your application any income that you personally receive.

So let’s say we use the same example above with a $10,000 limit on another card. In order to minimize impacts to my credit score, I would not want to use more than 80% of my available credit on the new Discover More card, while maximizing the amount of free money on my non-Discover card. Therefore, I would want at least a $12,500 credit limit on the Discover Card. Then when I balance transfer $10,000 to Discover, I am only using 80% of my available credit. While the exact percentage varies depending on the credit agency, 80% maximum credit usage is a good limit to minimize impacts to credit.

Unfortunately, one does not earn rewards on Discover with a balance transfer. Your reward though is that hopefully you would turn around and place that free money into a decent earning checking or savings account. This in itself can be a tough task in this market, when it can be extremely tough to earn 1.5-2.5% interest, but at least it is something. It is not like years ago when one could do these zero percent offers over and over again with no fees and be earning 5+% on their money.

Placing the money into the market is not recommended with the balance transfer game. The idea is the money needs to remain safe and liquid.

Before applying for the Discover More card, note to be approved you must not currently be a Discover Card holder. Discover no longer allows new applicants to receive a new Discover card, even if they are a different product, if you already hold one of their cards. I was fortunate to get the Discover Miles card several years ago, when I already had a Discover More card. So the point is do not waste a credit inquiry if you already have a Discover Card.

Note that the banner of the left side of InACents for the Discover More card offers 18-months of zero percent interest, but DOES incur a transfer fee. Therefore, if you are looking for the zero percent and zero fee offer, be sure to use the appropriate link and read the Fee Schedule to ensure the application you are using does indeed show a fee of $0.