"Debt is one person's liability, but another person's asset."
-- Paul Krugman
If you're deep in credit card debt, that's bad for you, but it can be terrific for the company you're paying lots of interest to. Clearly, getting out of debt as quickly as possible is a smart move, and ironically, one tool that might help is a certain type of credit card -- the balance-transfer card. Here's a look at some of the best balance-transfer credit cards out there, along with some guidance for using them.
Balance-transfer card basics
Not all balance-transfer cards are created equal. Each has its own terms and features. Most will try to draw your interest -- and money -- with an ultra-low initial interest rate, typically 0%. That rate will be in effect for between about six and 21 months, after which a more standard interest rate applies. That's an important detail to know, because that more standard rate is likely to be in the double digits and may very possibly be in the high double digits.
Thus, it's smart to seek cards with relatively low interest rate ranges following your teaser-rate period. An exception would be if you will get your debt all paid off during the teaser-rate period, but it's hard to know for sure that you'll succeed at that goal. Note, too, that your credit score will probably influence the interest rate you're given after the 0% rate expires. The higher the score, the lower the rate you might get.
Fees and rules
Most balance-transfer cards will also charge a balance-transfer fee that's typically between about 3% and 5% of the sum you're transferring or $5 to $10 -- whichever is greater. Thus, if you're transferring $10,000 in debt and paying a 4% balance-transfer fee, it will cost you $400. That's a lot, but it can be worth it if you were previously paying, say, 17% on the card, which could amount to $1,700 in a single year.
Look into the fine print of any balance-transfer card you're considering to find out what your credit limit will be with the card. Many times, you won't be able to know until you get approved for the card. You won't be able to transfer more than that limit (less the balance-transfer fee, if there is one), and if you exceed the limit you might face a fee.
Find out if there's a penalty APR, too. That's when the card company jacks your interest rate up to 25% or even 30% if you pay a bill late or commit some other transgression. Many cards don't feature them, and that's preferable. It's worth only signing up for cards with no penalty APR.
The best balance-transfer cards
So, what are the best balance transfer cards? As you might have guessed, they're ones with good terms -- with relatively long teaser-rate periods and/or relatively low interest rates after that period ends. Following are some strong balance-transfer cards to consider. Note that each is generally best for many people who seek low rates -- but each will vary in how perfect it is for you. Read up, to see which one(s) make the most sense for you, given your needs and your preferences. Each offers a suite of other benefits as well.
Barclaycard Ring MasterCard: This card charges no balance transfer fee ever, and its initial APR is 0% for the first 15 months for purchases and for balance transfers made within 45 days of opening the account. After the introductory period, the APR will be variable, tied to the prime rate. Its rates are quite competitive -- and it doesn't levy a penalty APR, either. The Barclaycard Ring MasterCard also offers online access to your FICO credit score, which can be handy if you're working hard to pay off debts and increase your score -- perhaps in preparation for getting a mortgage or taking on other debt. It doesn't charge foreign transaction fees, either, which is nice if you travel outside the United States. There's also no annual fee. (Read our full Barclaycard Ring MasterCard review.)
Citi Simplicity Card -- No Late Fees Ever: This card features no annual fee, along with "no late fees ever" and "no penalty rate ever." For balance transfers, it charges a fee of 3% of the value of your transfer or $5, whichever is greater. Its initial APR is 0% for a generous 21 months for both purchases and balance transfers. After that, a relatively low variable APR applies. (Read our full Citi Simplicity Card review.)
Discover it Card: This card doesn't have the lowest interest rates around, but its rates are still relatively low -- plus it offers some cash back. That makes for a very appealing combination. (Although if you're deeply in debt, you shouldn't be spending very much and should be aiming to be charged as little interest as possible.) It charges a 3% balance-transfer fee and features a 0% APR on purchases and balance transfers for the 14 months following the opening of the account or the transfer being made. The Discover it Card charges no annual fee, and it includes your FICO score on each statement. The cash-back feature pays you 5% back on purchases in rotating categories (such as restaurants, gas stations, or Amazon.com) and 1% back on all other purchases. (Read our full Discover it Card review.)
Chase Slate: This card is ideal if you're saddled with credit card debt that you're trying to pay off. It offers a 0% initial APR for the first 15 months on balance transfers and purchases. Better still, there's no balance-transfer fee on transfers made within the first 60 days. Chase Slate also offers Blueprint financial plans to its card holders to help them with debt-reduction strategies, and it makes your FICO score available, too. Once the 0% teaser rate expires, the APR it charges isn't among the lowest you'll find, so aim to get a lot of debt paid off in those first 15 months. There's no annual fee and no penalty APR, either. (Read our full Chase Slate review.)
Credit cards may look very similar, but they can be quite different in how helpful or harmful they can be. Find and use the ones that will serve you best. Remember that the higher your credit score, the better terms you'll likely get, so it can be worth spending some time increasing your score if it's not where it could be.