Balance transfer credit cards are designed to help you move debt from one credit card to another credit card. Ideally, the transfer is performed in order to reduce or eliminate payment of interest on credit card balances. For instance, you may wish to transfer the balance on a credit card with a high APR, say 22% or above, to a card with an APR of less than 10%. The money you save in such transfers can then be applied to pay down principal faster. All in all, such cards are an effective tool in any long-term program to reduce or eliminate personal credit card debt.
MyBankTracker experts has picked the following as top balance transfer credit cards:
1. Best Card With the Longest 0% APR Intro Period
Key Citi Simplicity Card Feature
The Citi Simplicity card has the longest 0% APR introductory period on balance transfer at 21 months -- that’s nearly two years without having to pay interest. The card does not apply late fees (normally, up to $35) or a penalty APR (a higher interest rate that kicks in when you make a late payment). Additionally, the card has no annual fee.
How balance transfers work
A balance transfer is a feature that can be found with most credit cards and it can be made by phone, online or through checks. It is not a credit card transfer -- you’re moving debt, not an entire credit card account. Normally, you’ll be asked to provide account information of the credit card from which you want to transfer a balance out. When you transfer all high-interest debt to a low APR credit card, you are consolidating the debt -- you’ll pay less interest and you reduce the number of payments you have to make to different cards.
Balance transfer checks can be mailed to you, allowing you to use them as you would a personal check -- designate the recipient of the funds and the amount will be charged to your credit card. To many consumers, these balance transfer checks are considered somewhat risky since they can be used for additional purchases rather than the elimination of debt.
The timeline of a balance transfer
Typically, a balance transfer takes 7 to 10 days to process and complete. Many credit card companies will not allow you to transfer balances between two cards that are issued by the same company. For instance, Citi does not allow customers to transfer a balance from one Citi credit card to another Citi credit card.
2. Best Balance Transfer Card to Consolidate Debt
Key Chase Slate Card Feature
Chase Slate card is the only credit card that offers a 0% APR introductory period along with no balance transfer fees during the first 60 days (3% after that), so it is the best card for anyone who wants to use it to consolidate debt with the purpose of paying it off faster. The card has no annual fee and the introductory period lasts 15 months. One of the most attractive card traits is that you can be approved with average credit (scores in the range of 600 to 650).
Pay down debt when you have fair credit
Some great balance transfer offers may be out of reach for many people because they are tied to credit cards that often require good to excellent credit (a score in the range of 700 to 850). Having a large amount of credit card debt does not necessarily mean that your credit score is bad. As long as you’ve been making your monthly payments on time, it is still likely that you have a great credit score, which will help you qualify for the best balance transfer cards.
Before you apply for any credit, you should check your credit reports at the three major U.S. credit bureaus -- Equifax, Experian, and TransUnion. By federal law, you are allowed to retrieve one free credit report from each of the credit bureaus per year through AnnualCreditReport.com.
How your FICO credit score matters
The standard credit score used by the lending industry is the FICO score, which ranges from 300 to 850, higher is better. Typically, each credit score costs roughly $20 but more and more credit cards provide free FICO credit scores to customers. If you already have a credit card, check to see if you’re already receiving monthly FICO scores at no cost.
Even if you have average credit is still very possible to obtain a solid credit card for transferring balances.
To benefit the most from a balance transfer credit card with the intent of debt consolidation, it is best not to spend with it because you’ll just add more to the balance and delay your debt elimination goals.
Why the balance transfer fee can be expensive
The main drawback of a balance transfer is the fee, which is usually 3% of the amount that is transferred ($5 minimum) and the fee is added to the card’s balance as well. When transferring a large balance, the fee could get expensive.
Few credit cards will waive the fee -- either during promotional periods or for the life of cardmembership. It is important to review the card’s terms and conditions to understand the exact balance transfer policy.
Before the financial crisis in 2008, many credit cards would offer limited-time free balance transfers, but that trend has since disappeared. It was easily abused by borrowers who would cycle the same debt repeatedly without any real plan to pay it off.
A balance transfer is most effective when combined with a credit card that provides a 0% APR introductory period, which typically ranges from six months to 18 months depending on the signup offer. After that initial period, it changes to an ongoing APR that is usually the same as the APR that applies to purchases.
Knowing you will not pay off the entire balance within the promotional period. It is still worth it as long as you made a good effort to eliminate as much debt as possible while you didn’t have to pay interest. It is certainly possible to transfer this balance to another credit card to continue on your goal to become debt-free.
3. Best Card for Free Balance Transfers
Key Barclaycard Feature
The Barclaycard Ring MasterCard boasts the combination of a low APR of 8.25% and unlimited free balance transfers for no annual fee. The card is advantageous when used in tandem with rewards credit card that may have a relatively high interest rate. If you expect to carry a balance on the high-interest credit card, just transfer the balance to the Ring MasterCard to minimize the interest charge.
Take advantage of unlimited balance transfers
Ideally, a 0% APR credit card is used for balance transfers. However, even if a credit card does not have a 0% APR introductory period, a balance transfer is still worth it because you’re moving the debt to a credit card with a much lower APR. For example, if you have a $5,000 balance at 22.99% APR and made $200 monthly payments, the total interest paid would be $1,871. Transferring the balance to a card with an 8.25% APR under the same payment plan would mean you paid a total interest of $505.
It is possible to perform multiple balance transfers as long as the total transferred amount plus fees do not exceed the credit limit on your card. Furthermore, the card issuer may place a set limit on the amount that you can transfer. For any reason, the issuer could deny or reduce the size of the balance transfer.
What to Watch Out for When Moving Debt Between Credit Cards
The credit limit is the highest balance that you can carry on your card. If you want to transfer a balance that is higher than your limit, you can ask the card issuer if you can be approved for a credit limit increase.
It is important to note that you do not earn any kind of rewards on your balance transfers because they are not counted as purchases. All rewards credit cards will only issue rewards when you use your card on purchases. The exception also applies to any signup bonuses that require a certain amount of purchases -- a large balance transfer will not meet the requirement.
The balance transfer APR only applies to the portion of the debt that is moved between two credit cards, so you should expect to pay interest on your purchases if there isn’t any special APR for purchases as well.
Tip: You can “delay” a credit card payment for roughly 30 days by transferring the debt to another credit card. However, note that unlike purchases, balance transfers do not have any kind of grace period. Therefore, the transferred balance will begin to accrue interest as soon as it arrives in your account.
4 Tips for Making a Seamless Balance Transfer
The best balance transfer isn’t always quite as simple as moving money from one card to another -- in fact, it can create more money problems if certain factors are overlooked. Take some of these tips to create the right balance transfer that keeps you out of debt.
1. Beware of creating more debt
Opening a balance transfer account may actually harm your credit than help it and contribute to larger debt. Remember that you’ll still need to make your minimum monthly payments if you want to avoid penalty APRs, which can still be high enough on a balance transfer card to prevent you from getting ahead of your debt. We’d recommend the Barclaycard Ring Mastercard and its lower 8.25% interest rate for this very reason, but take note that any balance transfer card will still operate like any other card -- fall behind on payments, and you’ll get penalized. Consolidating your debt makes paying it off easier, but don’t fall for the myth that transferring your balance is the same as repaying it.
2. Compare and calculate transfer fees
Choose your balance transfer card wisely; like we mentioned above, the balance transfer fee you incur may cost you money that cancels out the savings you’d get from a low APR. The average balance transfer fee is about 3 to 5 percent; that means if you have a balance transfer of $7,500, you may be stuck with an overall fee between $225 and $375. You’ll want to gauge how much you’ll pay in balance transfer fees when shopping for cards. If your interest rate and annual fee is too high, you’ll only be adding to your financial burden with a pesky transfer fee.
3. Don’t make new purchases on a balance transfer card
It may seem tempting to start making purchases on your brand new credit card, since that’s what credit cards are for, right? But racking up a balance on a card designed to transfer an existing balance will only compound the debt you’re struggling to pay down. Use the card strictly for what it’s intended for: paying down the balance migrated from your other credit card(s). What you don’t want to do in this case is close the account of the card you’ve just transferred money from, since that can lower your credit score. Also avoid making any additional purchases on the old card, too. Some discipline may be needed if you’re compelled to charge a purchase, so do whatever you can to curb your pending urges; experts recommend to stop carrying the card with you, cut up the card, or even keep it in a block of ice in the freezer so you can’t access it.
4. Check your credit score first
Have you checked your FICO numbers in a while? Your credit score may have been excellent when you were approved for your original credit card, but if it’s racked with debt, your score may have taken a few hits, and that may impact the terms and APR of the balance transfer card you’re looking to get. You might still get approved for a balance transfer card even with less-than-excellent credit, but the consequence could be higher interest rates, larger fees, or no promotional offers. The three cards we’ve listed above are for consumers with good to excellent FICO scores, so it’s best to get your numbers first and shop around for a card if your credit doesn’t pass muster.