If you're dealing with credit card debt, chances are the last thing you want to think about is taking on a new credit card. Ironically, that could be just the solution to get you out of debt.
Balance transfer credit cards come with an introductory rate of little to no interest for 6-24 months. If you're approved, then that card will be used to pay off your other credit card (or cards). Then you'll have the time allotted in your introductory offer to pay your balance without the interference of interest.
It's not always possible to pay off a credit card before the introductory rate is up. But what you can do at that point is get another balance transfer credit card and continue until the balance is finally paid off. When it comes to paying off debt, the more time you have to pay without interest, the better.
MyBankTracker experts picked the following as top balance transfer credit cards:
Best Card for Free Balance Transfers
Key Barclaycard Ring™ Mastercard® Feature
Take Advantage of Unlimited Balance Transfers
Ideally, if you're trying to pay off credit card debt, you'd do so with a 0% APR credit card. However, even if you can't get your interest rate that low, any lower APR than what you currently have will help.
Let's look at an example. Let's say you have a$5,000 balance on a card with 22.9% APR and you make $200 in monthly payments. The total interest you're paying on that card would be $1,871.
Now let's say you transfer your $5,000 balance to a card with 8.25% APR at $200 per month. Now your total interest is only $505.
It's worth saying more than once: the more you can decrease your interest, the faster you can pay your debt off. Even if you can't get approved for a 0% interest card today, find the card that offers lower interest than you're paying. If you make your payments on time every month and decrease that balance, then your credit score will improve in about six months to one year. Then you can apply again for a 0% balance transfer card and kick your payoff into high gear.
Best for Debt Consolidation
Chase Slate® card is the only card that offers a 0% APR introductory period and no balance transfer fee. The caveat is that you have to do the balance transfer within the first 60 days of getting the card. If you wait until after 60 days, you have to pay a 3% balance transfer fee.
Chase Slate® also doesn't charge an annual fee, and the balance transfer introductory period is good for 15 months. Even better, you don't have to have a perfect credit score to get this card. Typically approval rates work for credit scores in the range of 600-650).
Getting a Balance Transfer When You Have Fair Credit
Some of the best balance transfer credit cards may be out of reach to those who need them the most. Why? Because many require a credit score in the range of 700-850.
The good news is that owing a significant amount of credit card debt doesn't automatically mean you'll have a lower credit score. As long as you're making your payments on time, your score could still be in good shape.
Before you apply for any credit, check your credit score and your credit report. You can get your Experian, Equifax, and TransUnion credit report free each year at annualcreditreport.com. It's important to review your score because there could be errors. If this happens, you can contact the bureau that shows the error and ask them to fix the error. This will help your credit score and keep you abreast of potential fraud. It's a good financial best practice for everyone to review their credit reports annually.
Why Your FICO Credit Score Matters
The standard credit score used by the lending industry is the FICO score, which ranges from 300 to 850. The higher your score, the better. It's important to note that your credit score won't show up on your credit score. You can get your credit score in a variety of ways, though. More and credit cards provide free FICO credit scores to their customers. If you already have a credit card, check to see if you’re already receiving monthly FICO scores at no cost.
Credit Score Ranges and Quality
|Credit Score Ranges||Credit Quality||Effect on Ability to Obtain Loans|
|300-559||Very Bad||Extremely difficult to obtain traditional loans and line of credit. Advised to use secured credit cards and loans to help rebuild credit.|
|560-649||Bad||May be able to qualify for some loans and lines of credit, but the interest rates are likely to be high.|
|650-699||Average/Fair||Eligible for many traditional loans, but the interest rates and terms may not be the best.|
|700-749||Good||Valuable benefits come in the form of loans and lines of credit with comprehensive perks and low interest rates.|
|750-850||Excellent||Qualify easily for most loans and lines of credit with low interest rates and favorable terms.|
Why the Balance Transfer Fee Can Be Expensive
The main drawback of a balance transfer is the fee. The fee is usually 3% of the amount that transferred and is added to the total card balance.
Few credit cards will waive this fee. Review the card’s terms and conditions to understand the balance transfer policy before you sign up.
Before the financial crisis of 2008, many credit card issuers offered free balance transfers. That trend has since disappeared. It was too easily abused by borrowers who would cycle the same debt repeatedly without any real plan to pay it off. Luckily, there are still a few credit card issuers who offer balance transfers for free.
Best Card With the Longest 0% APR Intro Period
Citi Simplicity® Credit Card
The Citi Simplicity® card has the longest 0% APR introductory period on balance transfers. With this card you get 21 months (almost two years!) interest-free. There's no annual fee for this card and there are no late payments or penalty APRs should you miss a payment.
Balance Transfers Can Help You Consolidate Debt
As mentioned above, balance transfers are a useful debt payoff tool since they give you a break from interest charges. But they're also a great debt payoff tool because they can help you consolidate debt.
If you're carrying a balance on a few different credit cards, it can be harder to keep track of your progress. Plus, if they all have high interest rates, much of your money gets lost to that interest instead of going to the balance. Now imagine if you could put them all on one card and decrease your interest to zero. Suddenly your payments get a lot more efficient, and you finally see your balance steadily decrease.
This is why balance transfer credit cards can be so helpful. They can help you save time and create efficiency in your balance payoff. And all you have to do is find the card with the longest introductory interest rate and a credit limit high enough to cover your debt. Once you get your card, you simply fill out a simple form to do the transfer of the balance(s). Within a few days, the debt will all be on one card, and you can start chipping away at it.
What to Watch Out for When Moving Debt Between Credit Cards
As you probably already know, the credit limit is the highest balance you can carry on your credit card. If your balance transfer card has a lower limit than the amount of the balance you want to transfer, you can ask for a higher limit. If that doesn't work, transfer as much as you can and apply for a new transfer when your credit score improves. Before you do that, though, shop around to see if you can get approved for a card with a higher limit.
It's important to note that you can't earn rewards on balance transfers since they're not purchases. This also applies to signup bonuses that require a certain amount of purchases. Balance transfers won't count for that.
Another thing to note is that a balance transfer card can have two interest rates. There's one for the balance transfer and one for purchases. The purchase APR is often higher and could skew your payments if you're not careful. It's best not to buy anything with a balance transfer card. Instead, use it as a debt payoff tool only.
4 Tips for Making a Seamless Balance Transfer
The best balance transfer isn’t always 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
If you're not careful, a balance transfer could harm your credit and cause you to go deeper into debt.
With these cards, it's imperative that you make at least your minimum payments on time every month. If not, you could be charged a penalty APR for missing your payment. If that happens, you will just lose the value of your low-interest balance transfer.
Another thing to note is transferring your balance is just the first step to paying off debt. You also need to create a plan to pay it off. If you pay only the minimum, your debt will not be paid off at the end of the introductory period. What's worse, you could be charged the new interest rate retroactively on the remaining balance. That alone could ruin any progress you made up until then.
As soon as you get your balance transfer card, calculate the balance owed by the amount of months you have in the introductory period. That number should be your new monthly payment. If you can't make that every month, get as close as you can. And if you have a balance at the end of the introductory period, apply for a new balance transfer card and repeat these steps.
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. As 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 3-5%. That means if you have a balance transfer of $7,500, you may be stuck with a fee somewhere between $225 and $375. Gauge how much you’ll pay in balance transfer fees when shopping for cards.
If your interest rate and annual fee are too high, you’ll only be adding to your financial burden.
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. That’s what credit cards are for, right?
Not balance transfer credit cards.
Racking up a balance on a card designed to transfer an existing balance will only compound the debt you’re trying to pay down. Use the card strictly for what it’s intended for: paying down the balance migrated from your other credit card(s).
Also, don't immediately close the credit card your balance was transferred from. Closing the card will negatively impact your credit score. Instead, keep it open and cut the card up. Then you can benefit your score without giving yourself temptation to further debt.
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.
Balance Transfer Credit Cards
|Credit Cards||Notable Features||Who It's Best For|
|Citi Simplicity||Lengthy 0% APR intro period on purchases and balance transfers.||People who need to finance a major purchase or consolidate debt.|
|Chase Slate®||Introductory offer tends to include 0% APR on balance transfers for an extended period of time. Also, balance transfer fees are waived during the first 60 days||People who are trying to pay down their high-interest debt quickly through the use of debt consolidation.|
|Barclaycard Ring||A very low regular APR combined with free balance transfers.||People who want to avoid paying as much interest as possible.|