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Balance Transfer Credit Cards

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A balance transfer is a way of moving the balance from one credit card to another to pay down debt. The new card typically comes with a promotional, low or zero percent interest rate, which lasts usually 12-18, but in some cases could go for 24 months.

Some key takeaways regarding balance transfer credit cards:

  • You will need a good credit score (690+) to qualify for a balance transfer credit card.
  • Not all credit cards are eligible for balance transfers.
  • Balance transfer cards are most effective when you pay off your debt before the end of the introductory period.
  • Some cards may waive balance transfer fees if you transfer your balance within a certain time frame after opening an account.
  • You can’t get a balance transfer card from the same card company you already owe a balance on. In other words, you can’t get a CitiBank balance transfer card to offset the debt another CitiBank card.

How Balance Transfers Work & How to Do One

The application experience for a balance transfer card can vary depending on the credit card company, but most balance transfers can be completed following these steps:

  1. Apply for a balance transfer credit card. Compare card rates and fees across various issuers. You should aim for a card with a 0% interest rate or, at least a rate lower than what you pay now. A longer intro period gives you more time to repay debt, but a shorter intro period could be worth considering if you can avoid fees and you’re confident in your ability to repay on time.
  2. Decide which balances to transfer and remember to prioritize high-interest credit cards. The total amount you can transfer will depend on your approved credit limit. If your new balance transfer credit card has a limit of $5,000, then this is the max amount of debt you can transfer.
  3. Review the terms and conditions before locking yourself in. Make sure to account for balance transfer fees, which are usually subtracted from the credit limit. So, if you’re transferring $2,000 in debt to a card with a 5% transfer fee, the balance on your new card would equal $2,100.
  4. Initiate the transfer and pay down debt: You will need to provide the issuer name and address, account number, and the amount you wish to transfer. You can transfer online, over the phone, or using checks.

Keep Balance Transfer Grace Periods & Transfer Fees in Mind

A balance transfer fee is the amount it costs to transfer the balance from one or multiple cards to another. It ranges between 3%-5% of the balance. This means transferring $2,000 would cost between $60-$100 in transfer fees. Some companies may offer to waive the fee if a transfer is made soon after opening the account.

Many balance transfer cards offer 0% interest on transfers but finance new purchases at a normal rate. This means making new purchases on your card will not only make it harder to pay down debt but could cost you in interest, as well.

For example, your balance transfer card may offer 0% intro APR on transfers but 18% APR on purchases. If you transferred $2,000 to this card, you would be charged no interest until the end of your intro period, and your monthly payments would go to paying down the balance every month.

However, once you made a new purchase with that card, interest would begin to accrue on that purchase alone, and not the balance you transferred. Nevertheless, if you continue making only the minimum payment, the issuer is within its rights to apply this to your transferred balance, which means the interest on your new purchase would continue to accrue until you pay it off in full.

You can make life easier for yourself by not using your card for new purchases. If you must make a new purchase, make sure to pay off the balance in full to avoid self-defeating interest charges. Or consider applying for a card that offers 0% interest on purchases.

Balance Transfers to Existing Credit Cards

It’s sometimes possible to initiate a balance transfer on a card you already own. This can work to your advantage if the issuer is running a promotion and you’ve already established positive credit history. However, if you already have a balance on the card, transferring more debt could make this more complicated and might even result in you paying more.

Another thing to keep in mind: most balance transfers are only possible across different issuers. This means if you’re trying to pay off the debt on your Discover card, you will likely need to apply for a balance transfer card from somewhere other than Discover.

What to Look for In a Good Balance Transfer Card

A good balance transfer card should come with features that enable you to save money while paying off your debt. “Look for a balance transfer card that has a 0% introductory APR,” said Mason Miranda, a credit industry specialist for Credit Card Insider. “This will save you a lot of money in interest, and give you time to pay off the full balance without paying extra.”

If the card costs more than the amount you can save on interest and late fees, it may be worth considering an alternative method to paying off your debts. Here are some features you should key in on to get the most out of your balance transfer.

Introductory period and interest rate: The ideal balance transfer card offers a 0% intro rate for up to 24 months. This would give you two years of interest-free payments to whittle down your debt, but you would need an excellent credit score to qualify for this one. Some cards may offer higher interest rates and shorter intro periods, but it could still save you money if it reduced the amount you spend on interest each month.

Transfer fee: This ranges between 3%-5% of the amount transferred. This fee is hard to avoid, but consumers with good credit may be able to get it waived if they transfer within a certain window after opening an account.

Annual fee: This is a fee charged for keeping the account open. These fees can range from under $50 to hundreds of dollars. Fortunately, it should be possible for most people to find options that don’t charge annual fees.

Comparing Balance Transfer Cards

As with any financial service, it’s important to shop rates before sealing an offer. Finding a card that marks all the boxes can be tricky, especially if your credit score limits the deals you have access to. If you’re certain you won’t be able to pay off the card before the end of the promotion period, consider what the regular APR will be when comparing cards.

“If you plan on carrying a balance past the 0% introductory period,” said Miranda, “a balance transfer card may not be the best option for you, since it will turn into a normal credit card with a high interest rate.”

After the promo, some cards may shoot above 20% interest, which in certain cases could be more than what you were paying with your original cards. Those with excellent credit are more likely to see their post-promo rates ranging between 12%-18%, which is about the same one with similar credit could expect on a debt consolidation loan.

Is a Balance Transfer a Good Idea?

Balance transfer promotions are becoming less common, so if you’re fortunate enough to find an offer in your mailbox, it might be time to take advantage. According to the Wall Street Journal, balance transfer solicitations fell by 28% from April 2019 to April 2020.

 A balance transfer is a good idea if you’re able to reduce the amount you pay on interest and can avoid succumbing to excessive fees. It’s a good idea for those confident they can repay their debt within the introductory period.

It’s not a good idea for those with poor credit or those unable to qualify for low enough interest. It can also be a bad idea if your new card comes with a high annual fee, or if the fees exceed the amount of potential savings. There’s not much point in shifting debt from card to card unless doing so can reduce the burden of your monthly payments.

Pros of a Balance Transfer:

  • Simplify monthly payments
  • Reduce the amount you spend on interest
  • No need for collateral

Cons of a Balance Transfer:

  • You need good credit to qualify
  • The intro period is temporary
  • Regular APR could be higher than your original
  • Balance transfer fees

Alternatives to a Balance Transfer

A balance transfer is just one way consumers can take control of their finances. Here are some other methods for managing debt and reducing the amount you spend each month on bills.

Improving your credit score – will put lenders at ease when you’re looking for a loan. Lenders and banks offer their best rates to those with great credit because, from their viewpoint, these consumers have shown a level of fiscal responsibility.

Debt consolidation loans – are designed to help consumers pay off large amounts of unsecured debt. DCL limits can reach into the six figures, so this can be a good option for those with too much debt to consolidate with a balance transfer.

Credit counseling – can help consumers identify the root cause of their debt. A certified counselor from a nonprofit credit counseling agency can take an in-depth look at a consumer’s complete financial situation and offer recommendations tailored to their circumstances and resources.

Debt management plan – is a way for consumers to consolidate debt without taking out a loan. DMPs can greatly reduce the amount of interest you spend and simplify the monthly payment process. Also, credit score aren’t a factor in your ability to qualify.

Debt settlement – can reduce the amount of debt you have to repay. Some companies may be able to cut your debt by up to 50%. This usually comes with a few drawbacks, however. For starters, debt settlement companies take a cut of your savings, usually around 15%-25%, but this can vary. Not to mention, interest may pile up while the company is busy negotiating down your debt.

About The Author

Bents Dulcio

Bents Dulcio writes with a humble, field-level view on personal finance. He learned how to cut financial corners while acquiring a B.S. degree in Political Science at Florida State University. Bents has experience with student loans, affordable housing, budgeting to include an auto loan and other personal finance matters that greet all Millennials when they graduate. He has a prodigious appetite for reading, which he helps feed with writing from Scottish philosopher Adam Smith, the “Father of Capitalism.” Bents writing also has been published by JPMorgan Chase, TheSimpleDollar and


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