Balance transfer best practices: Lower APR vs. longer term

Curtis Arnold
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Curtis Arnold
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Balance transfer: Longer term or lower APR?
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Learn why a 1.99%+ rate for a long term (18-24 months) may save you more than a 0% balance transfer for a short term (6-12 months).

At the start of the new year, a survey by Principal Financial Services found that 28% of consumers listed paying off credit card debt as a major goal.

The importance of this goal can’t be overstated, especially considering that card debt soared 15.6% during the second quarter of 2022 in a year-over-year comparison. Moreover, we predict card debt will continue to grow in 2023 due to the likelihood of additional Fed interest rate hikes.

Given this reality, as well as our prediction that balance transfer offers may not be as generous in 2023, you should feel a sense of urgency if you’re considering a balance transfer in an effort to pay down your debt and avoid rising rates.

“Every time the Fed raises rates that [almost always] affects how much you owe in interest,” explains Ruth Susswein, director of consumer protection at Consumer Action. “With rates likely to continue to rise in 2023, it only makes sense to try to transfer your hefty credit card balance to a low or no rate offer.”

While most financial experts agree that balance transfers offer an effective way to lower your card debt, you typically only hear them tout the benefits of 0% offers. Certainly, 0% offers provide the most popular type of transfer offer, there are other offers that have a higher rate think, 1.99% or 2.99%) that, believe it or not, can actually save you more.

So, before you jump on the 0% transfer bandwagon, let’s “do the math” to find the best offer for you given your individual circumstances.

What’s the catch of a intro 0% balance transfer offer?

Zero percent transfer offers typically feature a limited time rate, usually lasting from 6-18 months before the rate increases to the normal APR. Don’t confuse a 0% transfer offer with a 0% purchase offer, which only applies to new purchases you make with the card. Additionally, you usually see these offers for new cardholders (look for language like, “… an introductory 0% APR on balance transfers for the first 12 months after opening and account.”) That said, existing cardholders will sometimes receive them as well.

Taking advantage of such offers appears straightforward since you’re not charged any interest or finance charges during the offer period as long as you make your payments on time. It’s true you can avoid interest charges with a 0% offer, but there are other costs and factors to consider that may make the 0% offer less appealing:

  • You will almost always pay a transfer fee of around 3%-5% of the amount you transfer (you should verify the fee prior to applying).
  • The rate on 0% offers, as mentioned above, will increase overnight to the regular APR after the offer period ends. Keep in mind that the regular rate at the end of the period will likely be higher than the regular APR when at the start of your period since more Fed rate increases are expected this year.
  • You may not qualify for a 0% offer if you have less than a stellar credit score. You could instead see a higher transfer rate, such as 2.99%, 3.99+%, etc. Similarly, you may be offered a shorter term, perhaps three to six months rather than a longer term of 12-18 months.

The bottom line is that you have to consider the overall costs of a 0% offer before you apply and not just the eye-catching 0% rate.

“A 0% temporary fixed rate is an excellent was to do a balance transfer if you read the fine print to be sure to know when the 0% will end and what the rate will jump to at that time,” points out Dr. Mary Ann Campbell, a certified financial planner and personal finance edu-tainer/financial wellness coach. “Be sure to compare transfer fees as well.”

Using the “total cost approach” is the most financially savvy way to compare offers. As I shared in my book “How to Profit from Credit Cards,” don’t fall for the marketing hype surrounding card offers and automatically assume a 0% offer is your best option.


Confused by how to calculate interest costs? Our online balance transfer calculator is a powerful tool and you don’t have to have a degree in math to use it. It can easily calculate the interest savings you will realize by taking advantage of a top balance transfer offer.

How do I know if a longer term, higher rate offer is better than a 0% offer?

I always preach that the length of a transfer offer is as important, if not more important, than the rate. Ideally, of course, you want both, but the ultimate goal is to find the lowest rate with whatever length of time you need to totally pay off the balance during that period.

Therefore, even if you find a 0% offer for 21 months (there were a few out there at the time of this writing), should you assume that offer is the gold standard? The short answer is not necessarily.

Let’s use an example to illustrate. Let’s say you have $10,000 balance you want to transfer and are considering two offers. Regardless of which offer you choose, you plan to have the balance paid in full by the end of 24 months.

  • Offer #1 is a 1.99% rate for 24 months with a 3% balance transfer fee.
  • Offer #2 is a 0% rate for 21 months with a 5% balance transfer fee. The rate increases to the normal purchase rate of 19.9% after the introductory period ends.

Using a CardRatings calculator, I quickly computed the interest and fees for just the introductory periods:

  • Offer #1 would result in interest charges during the intro period of about $207 (24 months at 1.99%) and you would pay a transfer fee of $300 (10K multiplied by 3%). The total cost would be $507.
  • Offer #2 would result in interest charges during the intro period of $0 (21 months at 0%) and you would pay a transfer fee of $500 (10K multiplied by 5%). The total cost would be $500.

While it appears the Offer 2 (0% intro APR) would save you $7, remember you didn’t plan to pay off the balance in full until 24 months, and Offer 2 will cost you more than Offer 1 by the end of 24 months.

Why? The Offer 2 APR skyrockets to 19.9% at the end of the 21-month introductory period but you have an additional three months to go before paying the balance off in full. Let’s assume you’d been making regular monthly payments divided up so you could pay off your balance in 24 months. That means you’ve been paying about $417 monthly during the 21-month 0% period and you should have a balance of about $1,243 remaining at the end of the intro period. If you continue paying $417/month to finish out your balance within 24 months. You’ll pay about $39 in interest, thereby making Offer 2 more costly than Offer 1. 

Importantly, if you made a small tweak in your Offer 2 payment plan, you could reduce or even avoid extra interest charges. By paying $477 monthly during the 21-month intro period, you could pay off the balance in full before the higher APR kicks in. 

Bottom line: Consider all the options and resulting costs when considering a balance transfer offer. You may find the best one for you isn’t what you expected it to be.

Darrell Smothers recently transferred his balance from a Citibank card to a Bank of America (BofA) card. He had put large purchases on his Citi card, such as home and auto insurance, as well as taxes, and will use an 18-month BofA 0% offer to pay those purchases down.

He has two kids in college and says he mainly did the transfer to improve his cash flow in order to help pay for college. His strategy is to always look for longest 0% offer. “They already make 3% off the top (transfer fee) so I don’t want to pay any more interest or fees than that if I can keep from it!” he notes. “Lately, I just applied for offers online because that was convenient and I wanted to transfer quickly.”


Susswein cautions not to focus on card rewards when searching for a balance transfer offer card. She strongly urges consumers to choose a lower long-term rate over rewards as no amount of paying interest will compensate for high interest charges on an existing balance. Before applying, she also cautions that you should know your credit score since most balance transfer cards require good-to-excellent credit for approval. That usually means a credit score of at least 661.

Final thoughts and suggestions

Zero percent APR offers are indeed wonderful and tend to get all of the attention from consumers and experts alike. It’s understandable, but unfortunate. You shouldn’t ignore 1.99%, 2.99%, 3.99%, etc. offers. These offers may be hidden gems if you use the total cost approach and, as noted above, may actually save you MORE than a 0% offer.

Think outside the box when it comes to balance transfers and work within your budget constraints (i.e. how long will it realistically take you to pay off the balance in full that you transfer). This can be done using multiple approaches and not just the approach described above.

Case and point, Susswein shared that she recently reviewed “one offer that started at .99% for 6 months then jumped to a rate somewhere between 9% and 18% — far lower than the typical 18-28% rates.”

Most consumers would likely ignore such an offer. She wisely adds, though, that “this could make sense for those who are not likely to pay off their balance during the introductory period and want to lock in a more reasonable rate long term — for both balance transfers and future purchases.”

Campbell adds, “A 0% transfer can be a blessing or a ‘gotcha’ depending on whether or not you work your repayment plan timetable into your budget and stick to it. One of my clients, for example, was just one month off with their repayment plan. They thought that wouldn’t amount to much, but it did. A safer way to utilize a 0% transfer is to set your repayment plan up to pay the balance off early if possible, so you can weather any bumps along the way.”

I sincerely hope these insider tips are helpful to you and would love your feedback on your personal experiences with balance transfers. Who knows, I may include a tip from you in a future article! Best wishes in using these cards to your financial advantage this year!

Curtis Arnold
CardRatings Founder

Curtis founded in 1998 and, in so doing, helped pioneer the concept of rating credit cards. He has been a nationally recognized expert in consumer credit for well over 20 years. He is the author of “How You Can Profit from Credit Cards: Using...Read more

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