What kind of credit card user are you? | Common balance transfer credit card terms and features |
Best practices for comparing balance transfer credit cards | Final thoughts when comparing balance transfer credit cards | Compare offers
Balance transfer credit cards are one way to get out from under the weight of paying high interest on a credit card debt you already have. They allow you to transfer an existing balance to a card with a lower or even 0 percent interest rate, and pay down debt more quickly and with far less interest money out of your pocket.
But how do you go about comparing balance transfer credit card offers? Is it as simple as looking for one with the longest, 0 percent APR? Well, maybe; but it's more likely that you're going to need to look at some fine print, as well as consider your credit history and credit card needs/expectations. Read more...
When it comes to balance transfer credit cards, many of them are no-annual-fee cards that lack rewards, but do offer stellar opportunities to get out of debt; on the other hand, there are also a bunch of options that offer you the chance to rack up credit card rewards, though sometimes (not always!) with slightly shorter 0 percent periods.
And deciding whether you want a rewards card is just one of the things you'll want to consider as you compare cards. So let's jump into the process by asking what should be a pretty straighforward question...
Choosing a credit card depends what you want from a card, sure, but your credit history and score certainly has an impact on your options. That's why it's a great place to start when you're comparing any credit card options, including balance transfer cards.
Balance transfer credit cards usually require good or excellent credit. The credit card company is taking a risk by letting you transfer a balance to their card, and they understandably want to make sure you're a good credit risk to take. That's why most will only give you a balance transfer credit card if they think you'll make regular payments.
Before applying for a card, know your credit score. If you already have a credit card, it's possible one of the perks of that card is a free FICO or other credit score each month (it's become a fairly common feature of many top credit cards).
It's also a good idea to keep an eye on your credit report, which keeps a record of your credit history. You can request a free credit report once a year, so take advantage of that offer.
Once you know your score, be sure to think about other financial elements that influence whether a bank views you as a safe or risky consumer. For instance, a person with an average credit score, but a solid income stream is probably going to be more appealing to anks than a person with an excellent credit score and no steady income.
Once you know and understand your own financial history, you can use tools like CardRatings' Compare Cards section, which list a general range of credit required for each card, to start narrowing down your list of options.
You'll also want to find a credit cards that matches your needs, interests, lifestyle and spending habits. Sure, you're looking to compare balance transfer offers, but some of those balance transfer cards also offer cash back or travel rewards, along with other perks and features. Furthermore, if the card you like charges an annual fee – that generally only applies to rewards cards – you want to make sure you can offset that fee with the rewards you'll earn.
Which card is best for you depends on your interests and how you use your card. If your primary goal is to lower your debt, it's best to find a card with generous balance transfer and low APR offers. If your credit is solid, you can always focus on finding a great rewards card later on.
Figuring out which credit card is right for you is a process. You have to know yourself and you have to know the cards you're comparing. Yes, that means digging into the fine print and relying on tools and comparisons through sites like CardRatings to help you in the process.
Here are some credit card, particuarly balance transfer credit card, fine print elements to know:
Now that you understand better what balance transfer credit cards are all about, it's time to actually start making some comparisons. Take a look at these tips:
Figure out when you plan to transfer a balance.If you don't expect to do it for six months, make sure the introductory period on the card your eyeing allows you to make a transfer for that long. Many limit you to making a transfer within the first 45 or 60 days in order to take advantage of the intro period.
Do the math. What we mean is that you should consider your full balance plus any balance transfer fee and then look for a card that offers a 0 percent period long enough for you to pay off as much of that balance as possible before the intro period ends. Use tools like the CardRatings Credit Card Payoff Calculator to determine how much you'll need to pay each month in order to pay off your balance then look for a card that offers you at least that long of a period.
Check out the fees. Remember to take any annual fees and/or balance transfer fees into account as you compare offers. If it's important to you, check to see whether there are foreign transaction fees to consider.
Notice any penalties. What happens if you miss a payment? Is there a fee or does your 0 percent intro offer disappear? Obviously, you want to make every payment on time, but life happens. Make sure you know what to expect if you miss a payment.
A rewards card is a great perk, but remember the main balance transfer credit card goal is to reduce your debt. Find the best balance transfer card to get rid of your debt, and appreciate the opportunity if your best option also happens to be a rewards card (as long as rewards you can earn would offset an annual fee if the card charges one). By the way, balance transfers are not going to earn you rewards or count toward the spending threshold required to earn a signup/welcome bonus. In other words, don't transfer a balance hoping for mega rewards; it simply won't happen.
Look for a card with budgeting or debt tools. You don't want to fall back into massive credit card debt. Use your situation as a learning experience. Search for cards that provide cardholders with tools to help you manage your finances going forward.
Whatever you decide after doing your research, remember that a balance transfer credit card could be an excellent tool for getting out of debt that you already have, but it isn't a substitute for solid budgeting and living within your means. Consider the card a chance to get on track and then make every effort to stay there.
Here are few final tips for really making the most of your new balance transfer card so that you set yourself up well for the future:
Don't count on being able to transfer your entire balance. It's possible that you could be approved for a credit limit that is less than what you need to transfer your entire balance. Make sure that you continue paying on both cards until your balance is $0; hopefully, whatever is left over on your old card will be small and you can knock it out quickly.
Similarly, keep paying your original card balance until the transfer is finalized.A transfer can take seven to 10 days. You don't get a free month when you transfer your balance so make sure you make your payment or it will hurt your credit and likely result in a late fee. As we mentioned earlier, some issuers will even cancel your 0 percent period if you miss a payment.
DON'T cancel the other card, but DO make a plan for staying out of debt.It may seem like a good idea to get rid of the temptation to spend that your old card offers, and if it truly is too much a temptation to resist, than you should cancel it. That said, canceling an old card could hurt your credit since you are potentially shortening your credit history and you are definitely negatively impacting your credit utilization ratio, that is, the amount of credit available to you compared to the amount of debt you have. Instead of canceling the old card, consider putting it away for awhile until you're out of debt. Even more importantly, make a budget and stick to it. Getting out of debt is why you are comparing balance transfer cards to begin with; do your best to stay out of debt going forward.
Set up automatic payments. Creating these automatic payments will assure you don't miss a payment. Try to set it up so you pay off as much of your balance as possible before the introductory period ends. If necessary, you can often set up multiple payments in a single month so that they align with your pay days or other bills. Remember, the goal is to pay off this debt so take advantage of all the tools available to help you do that.