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Balance transfer credit cards 101

Last Updated, January 15, 2019

Balance transfer credit card offers. What exactly are they? How do they work? How do you choose and good one and, most importantly, is a balance transfer credit card the right choice for you? They're all questions we've heard from readers about balance transfer credit cards, so we'e put together this comprehensive look at the advantages, disadvantages, top picks and more when it comes to these financial tools. And, make no mistake, under the right circumstances, balance transfer credit cards are likely the right tool for the job.

>Already understand the ins and outs? Jump to some of our favorite balance transfer credit cards.

What is a balance transfer credit card?

Let's start with what it ISN'T: A balance transfer credit card is NOT a way to hide from debt you've run up on a card you already have. Your debt won't magically disappear if you transfer it to a new credit card.

Now for what they ARE: Balance transfer cards are designed for debt holders who are transferring debt from one credit card to another, typically to save money. Used wisely, balance transfer cards are all about paying down debt faster with a lower APR and they can save you a boatload of money.

The primary incentive of balance transfer cards that make people perk up is the 0 percent introductory interest rate common to balance transfer cards. Low introductory rates on balance transfers and purchases are typically reserved for credit card users who have excellent credit, but there are options for those with good or average credit as well, particularly if you have  relationship with a local bank or credit union.

Balance transfer cards can be a great way for cardholders to save money if the process is done strategically.

CASE STUDY

Let's say that you have a credit card balance of $5,000 and an APR of 17 percent. If you pay $200 a month, it will take 32 months (nearly three years) to pay off your credit card with interest, and the total interest you would pay is $1,253.44.

If you take advantage of a balance transfer opportunity with a card that has 0 percent interest, and a $0 transfer fee, it will only take you 25 months, 7 months less, to pay off your credit card by using the same payment schedule (assuming you pay 0 percent interest the entire time). If you pay a little more you’ll see your balance go down even faster. By upping your monthly contributions by a mere $25 you’ll save an additional 2 months of payments. Plus, you'll save that $1,253.44 in interest payments.

Do it yourself:

Find out how long it will take you to pay off your credit card with your current balance and APR, and then see how much you can save with 0 percent interest.

One other thing to think about: it's not uncommon for a balance transfer card to be a rewards card. too. While you won't earn rewards on the amount you transfer, you will earn rewards on any other purchases you put on the card, which is a nice incentive.

While there are many benefits of using a balance transfer credit card, there can also be downsides. Read on to find everything you should look out for while deciding if a balance transfer credit card is right for you.

Interest rate calculator

What should I know about transferring a balance from one credit card to another?

As mentioned earlier, transferring debt from one card to another doesn’t make your debt disappear. Still, balance transfers can be a useful tool if done wisely, but there are a few questions you should ask yourself before using a balance transfer card.

Will a balance transfer affect my credit score?

This question doesn't have a black and white answer, but there are a few things to keep in mind. Applying for a new credit card will always affect your credit score. Each time you apply for a credit card, a hard inquiry is placed under your name, and inquiries to your credit history account for about 10 percent of your FICO® credit score.

"You should think about your current credit rating," said Lynnette Khalfani-Cox, a financial blogger and CardRatings contributor. "If you're maxed out already or if you've been 'churning' credit cards a lot, you may get declined. Under these circumstances, it can sometimes be better to wait a bit before applying for yet another credit card."

On the flip side, opening a new account should help your credit utilization ratio and allow you to reduce the amount of credit you're using on each of your cards. Think of it this way: if you currently have one credit card with a $10,000 limit and a balance on $5,000, you're using 50 percent of your available credit. Most experts recommend keeping your utilization ratio to 30 percent or less, and credit utilization makes up about 30 percent of your credit score.

If you then open a second credit card with a $10,000 limit, you've upped your available credit to $20,000 and reduced your utilization to 25 percent (plus, hopefully you opened that card to take advantage of lower APRs with a balance transfer).

Credit utilization and credit history are reasons we don’t recommend closing the account you balance transfer from; it may have a negative impact on your overall credit score, especially if the account you aim to close has been open for a while. Credit history makes up about 15 percent of your FICO® credit score.

How frequently should I use my balance transfer card?

Using a balance transfer card when there is no fee on the line is one thing, but be warned, balance transfer cards that tout an intro offer of 0 percent interest and $0 fees won’t be forever. After the intro period expires, APRs can (and often do) skyrocket. Furthermore, if you have the rare card that doesn't charge a balance transfer fee for a period, be aware that period is usually only 45 or 60 days from account opening. After that (and with the vast majority of balance transfer cards from the beginning) you'll pay a 3-5 percent fee for each transfer.

In other words, use your card responsibly and understand what the cost of your balance transfer transaction will be each time you intend to do one – don’t rack up unexpected fees.

What happens if I make a late payment?

If the glitz and glamour of the introductory offer is what drew you to the balance transfer credit card in your wallet, be sure to pay on time every billing cycle. If cardholders make late payments within the intro period, issuers may:

- Assess a late fee
- Cancel the intro offer
- Switch to the normal APR

Do I need a balance transfer credit card?

If you have excellent credit and are paying a credit card balance with interest, strongly consider a balance transfer. Having excellent credit will likely earn you a low introductory (or ongoing) rate on your balance transfer card which will help eliminate your debt faster. 

For everyone else, balance transfer credit cards are a tempting option, especially if you have a higher than usual credit card balance, and an APR that makes the debt mount up faster than you’re able to pay it off. But, before you succumb to the temptation, take a moment to really assess what you're signing up for. If you have a "good" or "average" credit score (or lower) the APR and terms you are signing up for may not actually help your situation.

>For more details jump to: How do I pick the best balance transfer credit card for me

When should I use a balance transfer credit card?

If you're searching out a balance transfer card, you're, we assume, going to be making a balance transfer. But when you do that and then what you do with your card after that are important factors to consider. Here are a couple of questions to ask:

Do I have to make the transfer within a certain time frame?

Some credit cards offer a 0 percent balance transfer for an introductory period of, say, 15 months BUT you have to make the transfer within the first 45 or 60 days in order to qualify for that 0 percent APR. Just because the introductory APR lasts for a year or more, don't assume that you can make your transfer at any point during that period and still qualify for the introductory APR. That said, many cards that offer blanace transfer intro periods offer similar terms for purchases; in that case, your purchases will be interest free throughout that time. 

Either way, the introductory period will be the lowest APR you can expect from a balance transfer card, so it’s wise to use your card during that specific time frame. 

What are the fees I need to consider?

Many balance transfer credit cards, regardless of the introductory 0 percent period, will assess a fee for all balance transfers made. Usually that fee is in the 3-5 percent range of each transfer made. Reading the fine print to see if the card of your choice charges this fee will help you decide if the balance transfer you’re aiming to make actually makes sense.

Once again, being hyper-aware of the time frame here could save you some money. Among the handful of cards that offer fee-free balance transfers, most of them only waive that fee for transfer made within the first 45 or 60 days of you opening the account. Missing that window could cost you a bundle.

Balance transfer fees typically range from 3-5 percent, so if you decide to transfer $1,000 of credit card debt, be ready to pay $30-$50 (plus interest). And, while that may not seem like that much money, it can certainly add up, especially if you are transferring larger sums of money or plan to make several balance transfers.

Is your credit card actually a balance transfer credit card?

Balance transfers are available on just about every credit card, but without reading the fine print, you could be in for a surprise. Unless your card is offering a lengthy 0 percent period, low fees and more, you could cause yourself more trouble than if you'd just left your balance alone. Just because the option is available doesn't mean you should always take it.

How do I pick the best balance transfer credit card for me?

Know your credit tier

Before you do anything else, get to know your credit score/history. If your credit has taken a hit in the past, getting a balance transfer card at 0 percent APR may be a bit of a challenge. Applying for cards for which your credit score disqualifies you will only negatively impact your credit score with no purpose.

There are balance transfer options available for cardholders with average or fair credit, but the terms may not be as desirable (as in, maybe they offer a lower APR but probably not a 0 percent APR). Understanding what fee and rate you will be getting is a valuable first step to determining which card will be best for you. All in, you may still pay less with a balance transfer, but you'll need to crunch some numbers to know for sure.

>Calculator: How much can you save with a balance transfer credit card? 

Read the fine print

We're starting to sound like a broken record with this point, but it's just so important. Often cardholders don’t look beyond the excitement of an initial 0 percent APR and that's a flashy feature, sure, but it can get you in trouble if it distracts you from the rest of terms. Ensuring that whatever APR your card transitions to (after the introductory offer) is just as important as looking into the intro offer. Ask yourself: What if your APR jumps from 0 percent to 20 percent – would the card still be worth it to you? Maybe it is if the rewards program is strong enough and you have a solid plan to pay off your balance during the initial 0 percent period.

Also, as we mentioned above, some cards also charge fees for each transfer you make. Knowing the terms inside and out will be the best way to save yourself some money.

Compare your debt to your credit line

Many people have a one-track mind when it comes to balance transfer credit cards: Get the lowest interest rate possible for the longest period of time. This line of thinking isn’t wrong, but it’s important to expand your mindset, too.

Remember that credit utilization makes up about 30 percent of your credit score. When you make your transfer, it's likely best to keep your old card open; closing it would reduce your available credit and your credit score could take a hit. Additionally, it's not a great idea to max out any credit card. In other words, if your new card has a $2,000 limit and you transfer $2,000, your credit score could still take a hit even if you keep that old card open.

Note the issuers of your existing card and the new card

How disappointing to go to the trouble of opening a new card only to find you can't use it for the thing you most wanted to use it for. If you aren't paying attention, it could happen.

In most cases, a bank won't allow you to take advantage of a balance transfer offer if you're just moving a balance from one card the bank offers to another the bank offers. In other words, you won't be allowed to move a balance from your Chase Freedom® card to a Chase Slate® card (This card is not currently available on CardRatings) and take advantage of the 0 percent period. You'll want to look outside you're current issuer if you need to make a balance transfer.

CASE STUDY

The best approach, of course, is to pay off your balances in full each and every month. That way you can enjoy all of your rewards without any of the heartburn that comes with hefty credit card balances.

But there are times when carrying a balance happens – even to the best of us.

Here's what worked for one CardRatings editor recently:

My 1930s house desperately needed a kitchen remodel, so my husband and I got to work (we're DIYers whenever possible). We had saved and planned and had every intention of paying cash for the full project. 

Everything (miraculously) went pretty much as planned, so we stayed largely on-budget. But then it occurred to me, "Why would we empty our savings account to pay for this when we could open a balance transfer credit card and just pay this off slowly, interest-free, over the course of several months?" So that's what we did. We opened a Chase Slate® card and transferred a balance to it. 

Doing this allowed us to keep our savings in our account just in case some other emergency happened, but we still didn't pay anything in interest; it was basically an interest-free loan. We set up two automatic payments each month so that we never missed a payment and we were certain to pay off the card well within the zero-interest period. Worked like a charm. We have a new kitchen, no debt and money in our savings account.

A few of our favorite balance transfer cards

There are many options out there when it comes time to choose your balance transfer credit card, but we here at CardRatings have a few top choices. In fact, "Best Balance Transfer Credit Card" is a category in our annual Editor's Choice awards. The 2018 winner and runner-up cards are described below. If you're looking for even more choices, check out our expanded picks for Best Balance Transfer Credit Cards.

Winner: The Amex EveryDay® Credit Card from American Express

(This card is not currently available on CardRatings).

Zero-interest details: Take advantage of 15 months no interest on purchases and balance transfers. After the intro period, your rate goes to 14.99% - 25.99% Variable.

Balance transfer fees: $0

Rewards: Earn our two times the points on the first $6,000 you spend at U.S. supermarkets each year. Earn one point per $1 spent on your other purchases and on your supermarket purchases after reaching the spending cap. Plus, each billing period you use your card 20 times or more, you'll receive 20 percent more points on those purchases. Read our full review of The Amex EveryDay® Credit Card from American Express.

Annual fee: $0. Terms apply. See Rates and Fees


Runner Up: Wells Fargo Platinum Visa® Card

Zero-interest details: You'll enjoy 0% for 18 months on purchases and balance transfers then, 17.74%-27.24% Variable.

Balance transfer fees: 3% for 120 days, then 5%

Rewards: Cell phone protection of up to $1,200 annually; auto rental collision damage waiver; roadside dispatch; travel accident insurance; and travel and emergency assistance services.

Annual fee: $0


Applying for a balance transfer credit card

After assessing which card fits within your spending wheelhouse, applying is an easy process.

Let's say you've decided on a card. With most credit cards, there will be an opportunity to apply online. You will need to enter some personal information, so make sure to apply over a secure connection in a private area.

You'll enter sensitive information like:

- Name
- Address
- Social Security number
- Housing costs
- Employment status
- Annual income

Usually after you've entered in all of the requested data, the inquiry will automatically be submitted to the lender. Sometimes you'll see approval immediately and other times you'll receive a letter and/or a phone call to verify your approval or denial of credit card issuing. The process usually happens within a week at the latest (unless you're applying for a secured credit card or credit cards for bad credit in which cases the process can take up to four weeks).

PITFALLS TO AVOID

Avoid adding new debt

The beauty of balance transfer offer is it can help you get rid of credit card debt more cheaply and quickly. Now is not the time to run out and add to your balance. This is especially true if your new card only features a 0 percent APR for balance transfers, but not on purchases (there's that pesky fine print again).

Don't Overspend

Just because you can use balance transfers to purchase that new couch and move the payments over to a new low APR card doesn’t mean you should. Being a responsible credit card user, and purchasing items that are within your budget will always be the best way to utilize a credit card. You never know if your financial circumstances will change unexpectedly and just because having a year or longer to pay off your debt looks good on paper, it doesn’t mean it will always work out that way. Ensure that you make smart purchases every time you use your credit card.

Our Ratings System

We rate cards with the everyday consumer in mind by scouring the fine print and comparing offers. In short, if we wouldn’t use the card ourselves, we won’t recommend it to you. Our goal is to see if it fits your lifestyle and needs. Don’t worry if you aren’t a master credit card juggler – there are plenty of no-frills options that get the job done.

Comments
10 Comments

  1. Mary Hanlon
    August 24, 2017 - 4:42 am
    I have good to excellent credit, in the 750's and have always paid my balance in full on all my cards. The problem is I let my adult daughter be an additional card on my American Express. She is almost $10,000 in debt but my statement shows that i am paying the interest. The apr will soon change from 9.99 to 14.2. I was going to apply for a Chase diamond card with a zero apr for 21 months on transfers and new purchases and a 3% transfer fee. The problem is when I used a credit simulator and entered applying for a new card and transferring a $9,000 balance, my credit score goes down over 100 points.Would I be better transferring the $9,000 to my Capitol One which I have had for 9 months and has offered me 0% for 18 months with a 3% transfer fee?
      Reply »  
    1. Brooklyn Lowery
      August 31, 2017 - 8:44 pm
      Hi Mary. I can't say with absolute certainty what will happen to your credit score when you open a new card (neither can a simulator) -- that said, it isn't uncommon for a credit score to drop initially after opening a new card and then rebound within the next few months (assuming you pay your bills on time, of course). In your case, I'd recommend you decide whether that extra three months (21 months vs. 18 months) is going to be necessary to pay off the debt you have. If you think you can pay it off in the 18 months offered by the card you already have, I'd probably stick with that. If you do need those extra three months, you can apply for the Citi Diamond card and just be prepared for your score to drop in the short term. Good luck!
        Reply »  
  2. Chico
    January 26, 2017 - 8:52 pm
    I have a Chase card now and am looking to get a "balance transfer" card from Chase as well. Does Chase allow you to transfer from one of THEIR cards to another with the same introductory benefits. Or do I have to transfer a Chase balance to another "unrelated" card? Thanks!
      Reply »  
    1. Brooklyn Lowery
      January 26, 2017 - 9:55 pm
      Hi there, smart thinking on the balance transfer card! It's a great way to give yourself some time to pay off a balance without accruing interest. That said, Chase likely won't allow you to take advantage of a balance transfer offer when you transfer from one Chase card to another. You can always call and speak with a customer service representative, but I've never heard of a bank allowing this. You'll need to look for a card outside the Chase family, perhaps the Citi Simplicity card that offers 21 months interest-free on balance transfers.
        Reply »  
  3. KelsieRae
    December 19, 2016 - 12:26 pm
    I have a USAA credit card that is close to maxed out, not even that high really, 2 grand, BUT I know because of the APR I'm barely paying it off. I'd love to transfer the balance to another card. My credit is good but not excellent. I do have a Chase Freedom credit card but do not want to max that one out by transferring the balance to that one. Is there anyway to know my likely hood of getting the Chase Slate card without excellent credit. I'm mid 600's...
      Reply »  
    1. Brooklyn Lowery
      December 20, 2016 - 6:32 pm
      Well, there's no way to know for certain whether you'll be approved for a card before you apply. That said, a score in the mid-600s is an average credit score -- not excellent, but not terrible either.Are you eligible for a 0 percent APR on your Chase Freedom? If you are, I would recommend going ahead and transferring your balance to that card. Even though you say you'd be close to maxing out that card, you'd presumably be clearing out your USAA card so your credit utilization would stay about the same and you wouldn't have to worry about a hard credit inquiry to open a new card. This only makes sense if you're eligible for a 0 percent APR on balance transfers with Chase Freedom. That would give you some time to pay off the balance interest-free.If you really just want to open a new card, Chase Slate is a good option for balance transfers. Before you apply, pull a credit report and check for any blemishes that might be red flags to an issuer. Also make sure you KNOW your credit score (there's a big difference between 630 and 670, so know where you stand). If you feel confident in your situation, go ahead and apply. If you are denied, don't just give up. Call Chase and find out specifically why you were denied (it's your right to know). Sometimes credit card companies will reconsider applications even after a denial.Good luck!
        Reply »  
  4. The Wilsons
    November 18, 2016 - 5:24 pm
    Have about $1,800 on a card. Paying 29% interest yearly ! Considering transfer to a new card offering 8.25% interest ( not a promotional purchase/balance transfer)
    They add 4.75% to the prime rate. We have to carry a balance;can't pay it off monthly. Based on this info, does this new card sound good for us, or will it end up costing as much or more than we can afford to carry month to month ? Thanks for any help.
      Reply »  
    1. Brooklyn Lowery
      November 21, 2016 - 6:31 pm
      If I understand your comment, you mean that you are paying a 29% APR (that's a bit different than paying 29% interest yearly, but is generally the way credit card interest is discussed).If that's true and you qualify for a card that charges 8.25% interest, even with the 4.75% added to the prime rate, you'd likely be in a better position with the new card.One more thing to consider, however, is whether the new card charges a balance transfer fee -- that's a percentage, usually 3% or 5%, of the amount you want to transfer. If you transfer $1,800 with a 3% fee, you'll pay $54 to make the transfer ($90 if it's a 5% fee). Even with a fee, however, you may still be in better shape long term with the new card. It all depends on how long you expect it will take you to pay off your balance completely.You might want to plug some numbers into our calculators and see what would work best for you. The calculators can help you determine how much you'll need to pay monthly to pay off the balance completely and in what period of time, information that's important to have before you make a balance transfer.Here is a link to the calculators: http://www.cardratings.com/creditcardextrapaymentcalc.html
        Reply »  
  5. Charles Conant
    June 23, 2016 - 2:10 pm
    I have a question and I need help badly. I am on a fixed income and only have 0ne credit card. This summer I had west coast family emergenies requiring me to fly out and help. I also had the lease car I'm driving require early turn in and replacement, requiring another larger sum. I was also an old fool and let the card get out of hand. Now it's maxed out and they want payments of more than I make a month almost. My score is down now and I need transfer approval to set my score and life in order. What are my options, please
      Reply »  
    1. Brooklyn Lowery
      June 29, 2016 - 8:25 pm
      Hi Charles. Sorry to hear you've had some unexpected financial burdens lately. In terms of getting back on your feet, time is on your side as long as you make your minimum payments on time -- missing payments will dramatically affect your credit score. Your best option is to contact your credit card company and discuss your situation with them. Be specific about the situation and emphasize that you want to make good on your debt but need to negotiate to make that happen. Most major issuers would prefer to work with you rather than have your debt go completely unpaid, so make that call for sure.What you absolutely SHOULD NOT do is apply for a bunch of credit cards for which you aren't going to be approved with your current credit score. That will only decrease your score further.If you are convinced a balance transfer for a lower rate is what you want, however, you MIGHT qualify for the UNITY® Visa Secured Credit Card - The Comeback Card™ (http://www.cardratings.com/credit-card/unity-visa-secured-credit-card-the-comeback-card.html). This one doesn't require a minimum credit score, but it does have a balance transfer intro period of 6 months during which time you'll pay 9.95 percent interest on your transferred amount -- I'm guessing you pay more than that on your current balance, so it could help you out in the short term. This is very important, though: The interest will jump up again at the end of that 6-month period, so you'll want to work hard to reduce your balance or pay it off completely during that time.
        Reply »