Published in: Credit Cards | Oct. 3, 2019
How to Pick the Right Balance Transfer Card
By: Christy Bieber
There are lots of different balance transfer credit cards. How can you make sure you find a good one?
If you have high-interest credit card debt, a balance transfer could save you a fortune. When you find a good balance transfer card, you can transfer your existing debt to a new card that will charge you a much lower interest rate. You can pay back your debt more quickly at the lower rate, saving yourself a fortune and becoming debt-free at a much faster pace.
But not all balance transfer credit cards are good credit cards that make debt repayment cheaper.
You need to make sure you find the right card for your situation. This can be easier said than done, but this guide will help you to select a balance transfer that makes sense for you. Just look out for these seven key things when selecting your card.
1. Compare the length of the 0% APR term
Different balance transfer cards have different 0% APR promotional periods. It's a smart move to choose a card that has the longest possible period with no interest. This will give you time to pay off what you owe before your interest rate jumps higher and your debt costs you more.
In some cases, it can even make sense to opt for a balance transfer card that charges a small fee to transfer a balance over one that doesn't -- if the card with the fee has a 0% promotional rate for a much longer time.
If a card with a 0% APR for 15 months charges you 3% to transfer a balance and you're comparing it to a card that charges no balance transfer fee but has a 0% promotional rate for only six months, the first card is likely a better fit -- unless you're sure you can pay off the card in only half a year.
With the no-fee card, you'd end up being charged interest on the entire outstanding balance after just six months. The other card would give you an additional nine months at 0%. Nine months of interest on a card's standard rate -- which is usually upwards of 15% annually -- is going to be a lot more expensive than a one-time 3% fee up front.
2. Look at the balance transfer fees you'll be charged
Speaking of balance transfer fees, as mentioned above, some cards charge them and others don't.
Since the fee is equal to a percentage of the amount transferred, it can add up to a reasonable chunk of change. If you're transferring a $5,000 balance and there's a 3% balance transfer fee, this would mean you're starting out with $150 more debt than you had before.
These fees can be worth paying if they buy you a longer 0% promotional APR period, as we've just seen. And paying a 3% fee to move a balance over is a lot cheaper than continuing to pay interest on your current cards at the standard credit card APR.
Still, if you're comparing two otherwise similar cards and one charges a fee but the other doesn't, opting for the free transfer is a no brainer.
3. Find out what the typical credit limit is
When you get a balance transfer card, chances are good you want to transfer all of your outstanding credit card debt to it. That would simplify your life because you'd have just one payment to make instead of multiple monthly credit card payments. It would also provide the maximum interest savings since you could deal with all your high-interest credit card debt. And you'd be able to devote all your money to paying off the balance transfer card so you could make much more progress quickly.
Unfortunately, if you owe a lot, you may not be able to get enough credit on a balance transfer card to handle all your debt.
To find out how much of a balance you're likely going to be able to transfer, try contacting the creditor to ask what their typical balance transfer credit line is. If the card issuer is unwilling to disclose, you can also look at cardmember agreements that they post online and read online reviews to find out how large the credit line typically is.
If you're choosing between two similar cards and one seems more likely to let you transfer the full balance than the other, opting for that account is usually a smart move.
4. Check if the card has an annual fee
You'll also want to know if you have to pay a fee just for becoming a card member. Some cards charge hefty annual fees of $100 or more. If you're not planning to use the card as a rewards card, but are only hoping to use it as a tool to pay down debt, paying a fee may not be worth it. Especially since the fee adds to what you have to pay at a time when your focus should be on getting out of debt.
5. Compare the card's standard APR
If you still owe money after the 0% rate expires, you're going to have to pay interest on the remaining balance. You need to know the standard rate you'll be charged. And you likely don't want a card with a higher standard APR than your current one, unless you're 100% sure you can pay off the balance before it kicks in.
Even if you have a plan to pay back what you owe while you're still at the 0% rate, things can sometimes go wrong. So it's important to consider the interest rate, even if you don't think it will matter to you. If two cards are otherwise similar and one has a lower standard rate, it makes sense to choose it, just in case any balance still remains.
6. Make sure you're allowed to transfer your balances to the card
Most credit card issuers will not let you transfer a balance from one of their cards to another. So if you want to transfer the balance from a particular brand of credit card, you'll likely need to go with a different card issuer.
7. Check how much time you have to complete the transfer
The 0% promotional APR that balance transfer cards offer usually only applies to transfers made within a short time after opening the account, such as the first 60 or 90 days. If you're not 100% sure you'll be able to get the transfer completed on time, look for a card that gives you longer to move your money.
One step closer to picking the best balance transfer card
Now you know what to look for in order to pick the right balance transfer credit card. You want a card with a long 0% promotional APR period, a low or non-existent balance transfer fee, and a reasonable standard APR in case you can't pay the balance off in full.
You also want to make sure you won't be restricted when you transfer the balances you're hoping to pay off, and that you'll have enough time to move your current card balance over.
If you look for these seven key things, you can find a balance transfer card that's perfect for your situation. Just be sure to make a diligent effort to pay off your transferred balance ASAP before the promotional rate expires, and not use your new credit line to run up more debt.
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