If you’re grappling with credit card debt, you might be considering a balance transfer credit card as a strategy to reduce your interest costs.
A balance transfer credit card is specifically designed to help you transfer high-interest credit card balances to a card with a lower interest rate, often with an introductory period of 0% APR.
This article will explain what a balance transfer credit card is, outline its advantages, and provide practical advice on choosing and using one effectively.
What Is a Balance Transfer Credit Card?
Key Features of Balance Transfer Credit Cards
A balance transfer credit card offers an introductory low or zero percent interest rate for a set period, typically between 12 and 21 months.
It allows you to consolidate one or more high-interest card balances onto a single card with lower interest costs.
How Balance Transfers Can Save You Money
- Interest Savings: By transferring debt to a card with a lower interest rate, you can save significantly on the amount of interest paid during the introductory period.
- Simplified Payments: Consolidating multiple debts onto one card means you’ll have fewer payments to manage each month.
Evaluating the Costs: Fees and Rates
Understanding Balance Transfer Fees
Most balance transfer cards charge a one-time fee of 3% to 5% of the amount transferred. This fee is crucial to consider as it can affect the total savings you might gain from the transfer.
Interest Rates After the Introductory Period
It’s also important to consider the standard APR that will apply after the promotional period ends. If you haven’t paid off the balance by then, this rate will dictate your interest payments moving forward.
How to Choose the Right Balance Transfer Credit Card
What to Look for When Selecting a Card
- Long Introductory Period: The longer the low or zero percent period, the more time you have to pay down your balance without accruing interest.
- Low or No Balance Transfer Fee: Some cards offer promotional terms that include no balance transfer fee.
- Competitive Post-Introductory APR: Look for a card that offers a reasonable interest rate after the promotional period if you anticipate carrying a balance.
Comparing Top Balance Transfer Offers
$0
1%-5%
$200
Excellent, Good, Fair (630 – 850)
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Product Details
- Earn a $200 cash back bonus after spending $1,500 in the first 6 months (fulfilled as 20,000 ThankYou® Points).
- 2% cash back on purchases: 1% when buying and 1% upon payment.
- Limited-time 5% total cash back on hotel, car rentals, and attractions booked through Citi Travel℠ until 12/31/24.
- 0% intro APR on Balance Transfers for 18 months, then variable APR of 19.24% – 29.24%.
- Balance transfers do not earn cash back, and intro APR does not apply to purchases.
- Intro balance transfer fee of 3% (min $5) in the first 4 months, then 5% (min $5).
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Our Take
Pros:
- Up to 2% cash back – 1% when buying, 1% when paying
- No limit on cash back earnings
- No annual fee
- Intro APR period for balance transfers
Cons:- Foreign transaction fee
- Balance transfer fee
- Limited additional benefits
- No intro 0% APR on purchases
$0
2%
$200
690-850 (Good – Excellent)
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Product Details
- Earn a $200 cash rewards bonus after spending $500 in purchases in the first 3 months.
- Earn unlimited 2% cash rewards on purchases.
- 0% intro APR for 15 months from account opening on purchases and qualifying balance transfers. 20.24%, 25.24%, or 29.99% Variable APR thereafter; balance transfers made within 120 days qualify for the intro rate and fee of 3% then a BT fee of up to 5%, min: $5.
- $0 annual fee.
- No categories to track or remember, and cash rewards don’t expire as long as your account remains open.
- Find tickets to top sports and entertainment events, book travel, make dinner reservations, and more with your complimentary 24/7 Visa Signature® Concierge.
- Up to $600 of cell phone protection against damage or theft. Subject to a $25 deductible.
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Our Take
Pros:
- Unlimited 2% cash rewards on purchases
- Earn a $200 cash rewards bonus*
- $0 annual fee
- Cell phone protection benefit
Cons:- There’s a balance transfer fee
- There’s a foreign transaction fee
- No travel transfer partners
$0
N/A
N/A
690-850 (Good – Excellent)
-
Product Details
- 0% Intro APR for 21 months on balance transfers, and 0% Intro APR for 12 months on purchases.
- Balance transfer fee of $5 or 5% of each transfer amount, whichever is greater.
- Free access to FICO® Score online.
- Special access to tickets for events with Citi Entertainment®.
- No annual fee.
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Our Take
Pros:
- No annual fee
- Extended intro APR on balance transfers
- Special event access with Citi Entertainment®
- Zero liability on unauthorized purchases
Cons:- 3% foreign transaction fee
- No rewards program
- High variable APR post-introductory period
Maximizing the Benefits of a Balance Transfer
Effective Strategies for Using Your New Card
- Avoid New Purchases: Focus solely on paying down the transferred balance; avoid using the new card for additional purchases, which may not be covered under the 0% APR offer.
- Plan a Repayment Schedule: Work out a monthly payment plan that ensures you will pay off the entire transferred balance before the end of the introductory period.
- Monitor Your Progress: Regularly check your balance and adjust your budget if you’re off track to fully pay off the debt before the promotional rate expires.
Avoiding Common Pitfalls
- Forgetting the End Date of the Introductory Period: Mark this date on your calendar to avoid unexpected interest charges.
- Failing to Transfer Balances in Time: Some cards require that transfers be completed within a certain period after account opening to qualify for the low introductory rate.
What If You Still Have a Balance After the Introductory Period?
Planning for Interest Rate Changes
If you anticipate that you won’t be able to pay off the entire balance by the end of the promotional period, consider options like another balance transfer to a new card or exploring alternative debt repayment strategies such as a personal loan.
Is a Balance Transfer Credit Card Right for You?
Balance transfer credit cards can be a strategic financial tool for managing and reducing debt efficiently. By understanding how these cards work, what to look for when choosing one, and how to use them effectively, you can take control of your financial health and work towards becoming debt-free.
Remember, while a balance transfer credit card can provide relief from high-interest rates, it’s not a solution to underlying debt problems. Responsible use and disciplined payments are key to benefiting from a balance transfer offer.
