Is Credit Card Balance Transfer Right For You?

A credit card balance transfer allows you to move debt from one card to another with a cheaper interest rate. 

Many credit card companies offer 0% or low introductory APRs on debt transfers. With a 0% APR, all of your monthly payment goes toward your accumulated debt rather than the interest that is accruing, allowing you to pay off your balance faster than you would on the original card.

Like any financial vehicle that you are considering, be a smart consumer and investigate all the terms and conditions of a credit card balance transfer in order to determine if it is right for your particular situation. 

Look for the following:

Interest rate

The most attractive balance transfer offers have a 0% APR. 

However, these are only available to clients with the greatest credit ratings. According to MagnifyMoney, such offers are often made to consumers with credit scores of 740 or higher.

Those with credit scores between 670 to 739, i.e., solid credit, are also likely to find some good deals.

Money Under 30 warns, however, that “when you have bad credit, your alternatives for a debt transfer can be very limited.” But don’t give up without a fight. 

You may still be able to qualify for a card that offers a debt transfer offer with a lower APR than your existing card. 

Just don’t expect it to be 0%. 

Introductory Period and Beyond

One of the most crucial aspects of a balance transfer offer is that the 0 or low APR does not persist indefinitely. 

It is only valid during the credit card company’s introductory term. 

This is usually between six and 18 months, and the best deals, i.e., those with the longest introductory periods, go to individuals with the highest credit scores.

When the introductory deal ends, the card resumes its standard APR on your balance, which is why you must be aware of that rate before doing a balance transfer. 

If the regular APR is greater than your current card’s, it may not be worth it, especially if you can’t pay off your debt within the introductory period.

Transfer Fees

Another factor to consider is the transfer fee that may be charged on the transaction. According to Credit Card Insider, “most credit card issuers charge between 2% and 5% of the balance” for this fee.

Find out the actual amount of the transfer fee before applying for or accepting a balance transfer offer. 

You can also request that the issuer waive the transfer cost. Some cards automatically provide such a waiver if “the transfer is made within a specific number of days of opening the card. 

Rate of Interest on New Purchases

The 0% APR on a balance transfer is a terrific deal, however, it only applies to the transferred balance. 

Any new purchases charged to the card will be subject to the card’s standard APR. To achieve your goal of paying off your debt faster, avoid making any new purchases on either the new or old card. 

Otherwise, you risk becoming much more in debt than you already are.

Penalties

According to Credit Karma, some issuers punish late or missed payments on a balance transfer by charging a penalty APR. 

The penalty may even involve the cancellation of the 0 or low introductory APR rate entirely. Check ahead of time to see if such is the case with the balance transfer you are considering. If this is the case, try setting up a regular automatic payment of at least the monthly minimum due.

Do Your Homework Before You Apply

Now that you understand how credit card balance transfers function, use an online balance transfer calculator to see if a specific deal is good for you. 

Both creditcards.com and Bankrate provide them for free, allowing you to determine whether a debt transfer will save you money in minutes.

If you find that a balance transfer is not the best option for you, you may want to explore a personal loan, which frequently has fixed terms and rates so you know precisely how long it will take to pay off your debt.