In most cases, banks assess finance charges on balance transfer credit cards at a similar APR to cash advances. However, the balance transfer deal has become a popular method to lure customers from competing banks. Understand the differences between popular balance transfer credit card offers to learn whether you'll save cash or blow out your wallet when shuffling debt between accounts.
The terms and conditions for your credit card state how much you'll pay in interest on your balance transfers. Popular balance transfer promotions include:
- Low introductory rate teaser deals. The most common balance transfer offers charge a much lower interest rate than usual for a fixed period of time, usually between 6 and 18 months. You'll often find deals like these from Chase, Citi, and other mainstream lenders.
- Lifetime low introductory rate deals. A handful of banks and credit unions promote deals that lock in your balance transfer for as long as you need to pay off your debt. PenFed and Barclaycard U.S. have been growing their portfolios using these offers.
- Credit card consolidation offers. Some banks build loyalty by revisiting their teaser rate deals a few years into a customer's relationship. Discover Card holders report seeing offers like these in the mail, offering the convenience of rolling multiple loans into a single credit card account.
Even when your credit card issuer offers a 0 percent APR for balance transfers, you'll likely pay a one-time, advance fee of between 3 and 5 percent to complete your transaction.
Watch for fine print that suggests that you have to pay down the amount of your balance transfer in full before a deadline to avoid paying interest. Like similar retail credit card offers, this kind of balance transfer deal can sting you with a year or more of accrued finance charges if you don't manage your balance carefully. Under federal rules, your bank must apply your payments toward this balance first. Just make sure you've budgeted enough to pay your entire transfer before the deadline on your statement.
Pay extra attention to your credit card statements after you complete a balance transfer. Some banks still use older systems to process these transactions, which result in an actual check being sent from your new issuer to your previous issuer. Until the bank cashes and notes the transaction on your statement, you need to stay current on your minimum monthly payments. Otherwise, you could trigger penalties ranging from late fees to hiked interest rates on your old card.