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Balance transfer credit cards can be a powerful tool when it comes to paying off debt, although your final outcome will depend on how you use them and which offer you apply for. For example, you may be able to find balance transfer offers that extend 0% APR for anywhere from 12 to 21 months, although balance transfer fees almost always apply. If you use this time to cut back on spending and tackle as much debt as you possibly can, a solid balance transfer offer can easily save you hundreds, if not thousands, of dollars.
That said, there are some balance transfer rules and “gotchas” you may not know about. These can depend on the card issuer offering the balance transfer card, and they can also depend on your personal financial situation when you apply.
Before you use a balance transfer credit card to consolidate and pay down high-interest debt, make sure you understand the following rules and which ones could apply in your situation.
Balance transfers won’t work with the same bank
First off, you should know that you have to pick a new card issuer when you apply for a balance transfer credit card instead of going with the card issuer you already owe money to. This is due to the fact that, almost all of the time, credit card issuers don’t allow balance transfers from one of their card products to another.
This means someone carrying high-interest debt on a Citi credit card will need to pick a balance transfer card from an entirely different card issuer, like Chase or Discover. This rule is true across all card issuers, and you can usually find it spelled out on each company’s website or in their fine print.
On the Chase website, for example, fine print explains the following:
“Balance transfers may not be used to pay other credit cards or loans issued by JPMorgan Chase Bank, N.A. or any of our affiliates.”
Your transfer may be limited by how much available credit you’re approved for
Also note that, based on how much available credit you’re given when you apply for a balance transfer credit card, you may not be eligible to transfer all the debt you owe. If you have $20,000 in high-interest credit card debt to consolidate and your new balance transfer credit card gives you a limit of $15,000, for example, you may be left with $5,000 in high-interest debt on your old card after the request you transfer is completed.
Once again, you can read about this rule in each card’s fine print. As an example, the CardName lists the following fine print regarding balance transfers within its terms and conditions:
“We will evaluate your balance transfer requests in the order listed on your response. If your request(s) exceeds the amount that we approve, we may either decline the request or send less than the full amount requested to your designated payee.”
There may be company-wide balance transfer limits
Some credit card issuers that allow balance transfers may also set company-wide limits that apply to consumers regardless of their credit history or credit score. These limits mean you can only transfer a specific amount of debt to one of their cards within a specific timeline no matter what.
As an example, Chase has a company-wide policy that limits balance transfers made online or with a customer service specialist to $15,000 across their cards over any 30-day period.
There are often time limits for balance transfer offers
Some balance transfer credit cards also have time limits that dictate when their best offers apply, and these offers lapse once these limits do. For example, the card_name offers intro_apr_rate,intro_apr_duration and balance transfers made within the first 60 days of account opening. (After this promotional period, regular reg_apr,reg_apr_type applies.) You can miss out on taking advantage of offers like this one if you run late transferring your balance and miss the deadline by even one day.
There are also credit cards that promise 0% APR on balance transfers for 21 months from the date of the first transfer, such as with the card_name. If you look at the terms closely, however, you’ll notice that the intro 0% APR rate only applies to balances transferred within four months of opening the account. (After the promotional period, regular reg_apr,reg_apr_type applies.) Citi is a CardRatings advertiser.
There may be fluctuating balance transfer fees
In addition to balance transfer offers that can lapse or change over time, there are also cards that have introductory balance transfer fees that increase the longer you wait. For example, you might qualify for a 3% balance transfer fee for the first four months after account opening, and the fee increases to 5% for balances transferred after that.
This difference in fees may not seem like a huge deal, but it can be hundreds of dollars depending on how much debt you have. For example, consolidating $10,000 in credit card debt on a card with a 3% balance transfer fee would require an upfront fee of $300 that is added to the amount of debt you repay, whereas the fee amount at 5% works out to $500 instead.
New purchases can trigger a loss of your grace period
Also note that some cards offer 0% APR for balance transfers only (and not purchases), or they might offer 0% APR for purchases for a shorter period of time. In either case, you’ll want to avoid using a balance transfer card to pay for new purchases if you can. When you do this, you can trigger the loss of your grace period, which is what helps you avoid paying interest on purchases from the time charges are made until the payment is due.
As an example, imagine you have a card that offers 0% APR on balance transfers only for 18 months. You wind up using the card for purchases, in which case you can be charged interest on those purchases from day one until all your balances on the card are paid off.
Discover, for example, lays this fact out clearly in its fine print about balance transfers:
“There is no grace period on your balance transfers. If you take advantage of this balance transfer offer, you will be charged interest on purchases unless your purchase APR is at a promotional 0% APR. To avoid interest on new purchases after you transfer a balance, you must pay all balances on your account, including any balances you transfer under this offer, in full by the first payment due date.”
Chase also explains this policy within its fine print on balance transfers:
“If you take this offer and do not pay off your entire balance each month (including the promotional balances that you add by using this offer), you will lose that interest-free period. This means that you will begin paying interest on all new purchases, even if you pay your purchase balance in full each month.”
Using a balance transfer credit card to consolidate debt is an excellent way to save on interest and pay down debt faster, yet some of the fine print on these offers could easily derail your plans. Your best bet is reading over all the card terms and conditions before you apply for a balance transfer card, then making sure you have a plan to attack debt that works with the card you select. After that, paying down as much debt as you possibly can while you have 0% APR will yield the best results.