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Balance Transfer Day Could Be Boon For Banks, Bust For Customers

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In an attempt to ride the recent wave of antibank sentiment fomented by November's Bank Transfer Day, a 35-year-old freelancer from Brooklyn, New York, is encouraging people to transfer their credit card balances.

Michael Germanovsky, creator of the Balance Transfer Day Facebook page, is calling for consumers to apply en masse for low-interest credit cards on December 11. Germanovsky's goal, he says, is to send a message to big banks about high-interest rates.

But that message could get muddled, and balance transfer day may actually help fatten banks' bottom lines.

"People are not given a chance to get a handle on [debt]. For big banks, the whole system is based on a simple idea to lure new customers and create more debt," said Germanovsky. "Balance transfer allows you to get away from high interest."

The problem is that not everyone can get a lower-rate on their credit cards. Many of the current zero-interest offers are aimed at customers who already have high credit scores.

"Good luck. You better be sporting some killer FICO scores if you think you're getting those [zero-percent] offers," said John Ulzheimer, president of consumer education at Smartcredit.com, a consumer credit management resource.

Anyone with a FICO score lower than 700 is unlikely to qualify for these promotional deals, Curtis Arnold, a credit card expert for CardRatings.com, a consumer credit information website, told HuffPost sibling site Daily Finance earlier this month.

Worse, those who apply for a low-rate card and are denied could actually wind up hurting their credit rating, said Ken Lin, CEO of CreditKarma.com, a credit-score service.

Germanovsky said the gains made by the message balance transfer day sends to banks and by successfully lowering interest rates by even a few percentage points offset any dip in a credit score, which he said would be minimal.

For those who do qualify, low-interest rates on credit cards and other types of loans are there for the taking. Banks have been ratcheting up offers on cards over the last few months with fierce competition driving longer promotional terms, including Citi's Simplicity Card that offers 0 percent for as long as 21 months to qualified customers.

The promotions are a way to bring in new customers, and make an immediate profit on balance transfer fees (typically between 3 percent and 5 percent of the total balance.) So balance transfer day could be a boon for banks.

When asked whether he'd transfer a balance, movement founder Germanovsky, who was laid off from his job as an architect in 2008, conceded that he carries $5,000 on his Discover card, paying 15 percent interest. He hasn't yet applied for a new card.

"I'll do it on December 11 with everyone else," he said.

CORRECTION:An earlier version of this report misspelled Michael Germanovsky's name. It's Germanovsky, not Germanovski.

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