by Christy Bieber | Aug. 16, 2019
What are the key features of a good balance transfer card? Find out here.
Balance transfer credit cards can help you get out of high-interest debt. When you take a balance transfer, you move debt from one credit card to another. The goal is to reduce the interest rate you’re paying so more of your money goes towards principal and you become debt-free faster.
While balance transfers can be a helpful financial tool, you’ll need to make sure you find the right balance transfer credit card. Here are five key things you should look for when deciding if a balance transfer card is a good one.
Some credit card companies charge you a fee when you do a balance transfer. This fee is usually a percentage of the transferred balance -- often around 3% to 4%. Paying a big fee reduces the savings that you get by transferring your balance to a card at a more favorable rate. The fee is also charged to the card, reducing the credit line available for transferring debt.
The good news is, there are balance transfer cards that don’t charge any fee for moving money over. If you can find one, you can move over your debt balances without paying the credit card company for the privilege.
The point of a balance transfer is to move high-interest credit card debt to a card with a low interest rate. And you can’t get lower than 0%.
While good balance transfer credit cards offer a low promotional 0% rate, this is usually available only if you transfer your balance within a short time after opening the account. For example, you may have 60 days from account opening to transfer a balance and qualify for the promotional 0% rate.
Unfortunately, this 0% promotional APR doesn’t last forever either. Creditors limit the time your transferred debt is at 0%. It’s common for card issuers to give you just 12 to 15 months at this 0% rate. After that, your interest rate can jump up dramatically to the standard rate on the card.
It can take time to complete the balance transfer and to pay off what you owe, so look for a card offering a long time to transfer the debt and a long 0% promotional period. That way, if something goes wrong and you can’t transfer the debt right away, the offer will still be available to you. The long 0% promotional period will give you ample opportunity to pay off what you owe before you start incurring high-interest costs again.
Some balance transfer cards are open only to people with good or excellent credit. If you’re in a lot of debt and your credit isn’t great, applying for these cards would be a waste of time because you probably wouldn’t get approved. Be sure to check your credit score before you apply in order to know where you stand and look for a balance transfer card open to people with your score.
When you transfer a balance, you likely want to move as much of your existing credit card debt over as possible. If a card offers a very low limit, such as $1,000 when you have $10,000 in credit card debt, it isn’t going to do you a whole lot of good.
It can be hard to know what credit line you’ll get approved for unless you apply, but you can ask the card issuer about typical credit lines or do a little research online to find out what amount most applicants get approved for.
Some credit cards charge annual fees. Paying them can make sense if the card comes with lots of perks or a generous rewards program. But when your goal isn’t to score cardholder benefits but instead is just to pay off debt ASAP, the last thing you need is to incur an additional annual cost just for having the card open. So look for a no-annual-fee card when picking a balance transfer card to use.
Knowing what to look for can be a big help when choosing a balance transfer credit card. Check out our picks for the best balance transfer cards to find one that has the key features you’re looking for so you can use the right card to help you get your debt paid down as quickly and efficiently as possible.
As long as you pay them off each month, credit cards are a no-brainer for savvy Americans. They protect against fraud far better than debit cards, help raise your credit score, and can put hundreds (or thousands!) of dollars in rewards back in your pocket each year.
But with so many cards out there, you need to choose wisely. This top-rated card offers the ability to pay 0% interest on purchases into 2022, has some of the most generous cash back rewards we’ve ever seen (up to 5%!), and somehow still sports a $0 annual fee.
That’s why our expert – who has reviewed hundreds of cards – signed up for this one personally. Click here to get free access to our expert’s top pick.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2021 The Ascent. All rights reserved.