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TIPS FROM THE MONEY COACH
A Credit Card Perks Column
Lynnette Khalfani-Cox, The Money Coach®, is a personal finance expert, speaker, and the author of more than a dozen books. She now works as a financial educator, helping Americans to better handle their money - especially managing credit and debt.

Tackle debt with balance transfer credit cards

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Updated, November 14, 2018

Taking advantage of a good balance transfer offer is an excellent way to jump start your finances.

Ideally, transferring a balance from one credit card to another will shave your interest rate considerably and lower your monthly credit card bills. So, if you’re like most people shopping around for the best credit card balance transfer offers, you’re probably focused on the chance to save money by getting an ultra-low rate – or maybe even a 0 percent deal.

Here’s what you need to know about doing a balance transfer the right way – as well as some recommendations on where to get the best credit card balance transfers available.While it’s certainly smart to pay the least amount of interest possible, a credit card balance transfer also has one other major benefit that you may not have considered: When done right, balance transfers can protect your credit rating and may even boost your credit score. 

>> Related content: Compare balance transfer credit card offers side by side 

How a credit card balance transfer helps your credit score

Doing a credit card balance transfer can help preserve your credit health or even raise your credit score in three ways.

      1. If your credit card payments have become too high and you need a balance transfer with a lower rate to free up cash flow, the right balance transfer offer can give you some financial breathing room – and ensure that you don’t miss any payments, which would ding your credit score.

      2. A balance transfer gives you a new line of credit, which is often viewed favorably in the world of credit scoring.

        Why is this?

        Well, 30 percent of your FICO credit score is based on your credit card balances that are outstanding. Specifically, FICO scores – as well as VantageScores – take into consideration something called your “credit utilization.”

        That’s just industry speak for how much credit you’ve charged versus how much credit lenders have extended to you. For example, if you have just one credit card with a $10,000 credit limit and you’ve charged a total of $5,000, you currently have a 50 percent credit utilization rate.

        The way credit scoring systems work is that the lower your credit utilization, the higher your credit scores. So in this example, let’s assume you were able to pay down half of your debt and lower your credit card balance to $2,500. You’d then have a credit utilization rate of just 25 percent – giving you a nice jump in your credit scores.

        But that’s assuming you’ve got a pot of cash sitting around to throw a lump sum toward your credit card bills.

        What if you really don’t have the cash to pay off debt outright or to pay down a big chunk of it? That’s where a balance transfer can come in handy in terms of boosting your credit score. It’s always best to lower debt when possible. But when that’s not possible, shifting debt around can also be an effective way to increase your credit score.

        Assume you still have that $5,000 in credit card debt on a card with a $10,000 limit, but now you apply for and get a second card with a $10,000 credit limit.  Now you have a total of $20,000 in available credit on both your cards. But do the math and you’ll see that by adding that second card, you were able to lower your credit utilization to just 25 percent ($5,000 in charges to $20,000 in total credit limits).

      3. A final reason the balance transfer boosts your credit is that credit scoring systems look at how maxed out you are with each card. Carrying higher balances on individual cards is more damaging to your credit score than is spreading out your debts across multiple cards.

For all these reasons, a balance transfer can help you strengthen your credit rating – even if you don’t have the funds on hand to reduce your balances or wipe out your credit card debt altogether.

5 great credit card balance transfer deals

Let’s look now at where you can get a good credit card balance transfer offer.

Here are five great credit card balance transfer deals that can help you save money each month – and help you potentially boost your credit scores, too.

Citi Simplicity<sup>®</sup> Card - No Late Fees Ever

Citi Simplicity® Card - No Late Fees Ever: 5 percent or $5 (whichever is greater) balance transfer fee; 0 percent intro APR on purchases for 12 months after account opening and 0 percent intro APR for 21 months on balance transfers from the date of first transfer, all transfers must be completed in the first 4 months (then, 15.99% - 25.99%* variable, based on creditworthiness).

(Citi is a Cardratings.com advertiser)

Why take this deal? This is a great balance transfer card if you’re looking for a super long-term offer – 21 full months at 0 percent. Most other balance transfer offers typically involve 12 or 15-months' worth of interest-free payments, so this deal stands out from the crowd by letting you lock in a no-interest term for a full 21 months. Note, if you transfer a balance with this offer after your 0% introductory purchase APR expires, both new purchases and unpaid purchase balances will automatically accrue interest until all balances, including your transferred balance, are paid in full. The upshot is that, if you’re not done repaying your credit card debt in a year or so, you won’t have to scramble to find a new deal.

By the way, if a 21-month intro period on balance transfers appeals to you and you'd also like a few extra perks like access to 24/7 concierge services, check out the Citi® Diamond Preferred® Card - 21 Month Balance Transfer Offer. (This card is not currently available on CardRatings) It, too, comes without an annual fee. After the intro period the APR goes to 14.99% - 24.99%* Variable).

Citi Simplicity® Card - No Late Fees Ever


Capital One® Quicksilver® Cash Rewards Credit Card

Capital One® Quicksilver® Cash Rewards Credit Card: 3 percent balance transfer fee on amounts transferred within the first 15 months; 0 percent intro APR for 15 months (then, 14.74% - 24.74% (Variable)).

Why Take This Deal? Let’s face it: not everyone has pristine credit and a blemish-free credit report. Maybe you missed a payment or two a couple years back or perhaps you lost your job and ran late on bills, but now you’re bouncing back. If that sounds like you, take heart in knowing there’s a balance transfer that’s ideal for your credit circumstances. In fact, this Capital One balance transfer deal is a very good option if you have decent credit, but not necessarily excellent credit.

Learn more


BankAmericard® credit card

BankAmericard® credit card: 3 percent balance transfer fee (minimum $10); 0 percent APR for the first 18 billing cycles on transfers made within the first 60 days as well as on your purchases for the same 18 billing cycles.

Why Take This Deal? The BankAmericard® credit card is an attractive option if you’re looking for a good balance transfer deal with no annual fee, a generous teaser rate period (18 billing cycles) and a competitive interest rate after the introductory 0 percent period ends (14.99% - 24.99% Variable APR on purchases and 14.99% - 24.99% Variable APR on balance transfers). This card has all those features and then some.

BankAmericard® credit card


Discover it® Balance Transfer

(This card is not currently available on CardRatings)

Discover it® Balance Transfer: 3 percent balance transfer fee; 0 percent APR for 18 months on balance transfers (then, 13.99% - 24.99% Variable).

Why Take This Deal? In addition to the solid balance transfer offer, Discover it® Balance Transfer comes with loads of ways to turn your credit card purchases into all sorts of financial perks and rewards. You earn 5 percent cash back in various rotating categories, which have included restaurants, gas stations and even purchases from Amazon.com. The cash-back deal is good up to the quarterly maximum each time you activate. You also get 1 percent cash back on the rest of your purchases.

Discover it® Balance Transfer


Wells Fargo Propel American Express® Card

 

Wells Fargo Propel American Express® Card: Introductory 0% intro APR for 12 months on purchases and balance transfers (fees apply), then a 14.49%-26.99% Variable variable APR; balance transfers made within 120 days qualify for the intro rate and fee.

Why Take This Deal? The Wells Fargo Propel American Express® Card is a solid rewards credit card that comes with a just-as-attractive intro APR offer. If you're looking for a few extra months to pay off a big purchase, but you also like the idea of collecting cash back in everyday categories, this card could be for you. You'll earn three times points at U.S. gas stations, two times points at U.S. restaurants and one point per dollar spent on all other purchases. Plus, if you happen to have a qualifying Wells Fargo checking, savings or PMA package, you'll earn a 10 percent bonus on your accumulated points annually. New! Earn 30,000 bonus points when you spend $3,000 in purchases in the first 3 months which amounts to a $300 cash redemption value. All of this comes with no annual fee.

Wells Fargo Propel American Express® Card


If you do decide to go for it and pursue a strategic balance transfer deal, just remember a few guidelines.

3 tips when transferring balances from one credit card to another

Obviously, you’ll want to get a lower interest-rate deal than you currently have. But remember that a good balance transfer deal isn’t just tied to interest rates. Make sure the overall deal is good in terms of the rate, fees (such transfer fees) and other features of the card you’re being offered. It pays to carefully read the fine print.

Next, even though a balance transfer deal can help your credit score by lowering your overall credit utilization ratio, don’t go overboard with credit card applications. In fact, you should know that applications for new credit cards almost always generate inquiries on your credit report, which can temporarily lower your credit score. Rest assured that having that additional line of credit will usually more than make up for any small hit to your credit that results from the credit inquiry. That’s because, as mentioned, your credit utilization ratio comprises 30 percent of your credit score while inquiries only account for 10 percent of your score, according to officials from Fair Isaac, creator of the FICO credit score.

Still, you generally don’t want to apply for multiple cards all at once as that would result in multiple inquiries on your credit report. Do your research and select the best option for you.

Finally, don’t close out old credit card accounts. This is a common mistake many people make during or after the balance transfer process, but closing credit card accounts can backfire on you by actually lowering your credit scores.

Part of the reason for the drop is that 15 percent of your credit score is based on the length of your credit history so, even if you’re not using a card anymore, it’s usually best to just keep it open and maintain a longer credit history.

Interested in checking out more offers? Click here to compare balance transfer credit card offers side-by-side. 

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