Definition
A gamer is a consumer that juggles credit card debt by transferring balances in order to maintain below market interest rates on balances.
Analysis
Gamers are savvy consumers that have learned to make sure they are paying the lowest possible interest rate on credit card debt. They utilize a combination of promotional rates and sometimes even below market rates for the life of a balance in order to keep finance charges low.
Some gamers take advantage of competing offers in order to repay their debt faster. Other gamers have even intentionally borrowed from credit cards at extremely low rates in order to invest the money in stocks and other investments. This is a risky endeavor, since a fairly high return is needed to offset the interest paid on the debt and the taxes paid on investment gains.
The art of gaming the credit card industry become very popular beginning around 2002, when interest rates began dropping. Balance transfer fees were relatively low, which made many offers very appealing to debtors.
Starting in 2007, a new trend among credit card issuers made it harder to save money through balance transfers. Instead of capping the 3% fee at a maximum of $50, many card issuers began raising the cap, and ultimately most caps were removed by 2008. Therefore, a balance transfer offer of 4.9% for 6 months would actually carry an APR of around 7.9% when accounting for the balance transfer fees.
Additional changes proposed by the Federal Reserve will likely make gaming much more difficult. Card issuers may be required in the future to apply excess payments in a way that favors the cardholder, rather than simply applying it only to the lower interest rate balance that was transferred through a special offer. This will likely cause balance transfer offers to become less attractive to gamers.
