How To Choose A Balance Transfer Credit Card?
There are many types of credit cards to choose from, and some offer more rewards and perks than others. One type — a balance transfer credit card — is even designed to help you pay off existing balances on other credit cards.
Ideally, you’d lock yourself in at 0% APR for a limited time and then pay off the debt as quickly as possible. Balance transfer cards have different introductory periods and subsequent APRs, as well as various perks (or not), so take the time to compare options before applying.
If you’re wondering how to choose a credit card for money transfers, here are the main considerations we’ll discuss below:
Learn how balance transfers work
Don’t stop reading after “0% Interest”. There are two important things you need to know about how credit card balance transfers work.
The first is that 0% discounts are always time-limited. While they won’t last forever, some introductory offers can be long. The best balance transfer credit cards offer interest-free periods of up to 21 months. After the introductory period, any balance on your card will be charged at the regular APR. Therefore, the ideal is to cash out your entire balance before the introductory period ends.
Another important consideration is transfer fees. Most balance transfer cards charge 3% to 5% of the transferred balance (minimum $5). For example, if you transfer $1,000 of debt to a card that charges a 5% transfer fee, you will owe $50 in transfer fees. Use Bankrate’s transfer calculator to make sure the interest savings are worth the fee.
Find out how much debt you owe and consider alternatives
Take the time to figure out exactly how much debt you have, and remember that it’s possible to consolidate debt from multiple credit cards onto a new balance transfer card.
How much debt you have can also affect how long your debt repayment process will take. After all, paying off $5,000 of credit card debt at 0% APR will take a lot less time than paying off $10,000, $25,000, etc.
While many people mistake balance transfer cards for just credit card debt, you can actually transfer different types of debt to consolidate your payments and take advantage of the 0% APR. It varies by card and issuer, but you can transfer personal loans, student loans, auto loans, and even home equity loans.
If you have a lot of debt to pay off, you should also consider whether a balance transfer card is the right vehicle. After all, personal loans can also be used to reduce and pay off debt, and many are guaranteed low fixed rates for five to seven years. Personal loans also come with fixed monthly payments and repayment schedules, making them easy to budget and plan.
Compare Card Offer Details
Here are the top factors to consider when transferring debt from one card to another:
- Length of Introductory Period: The best balance transfer credit cards offer 0% introductory APR on transferred balances for up to 21 months or more.
- Regular APR: Pay attention to the rate at the end of the introductory period, as this can affect your balance and future balances. Compare that to the current average credit card interest rate of over 19%.
- Fees: Transfer fees are typically 3% to 5% of the transfer amount. You should also consider any other fees, even if the card comes with an annual fee.
- Introductory APR on purchases: Some balance transfer cards also offer 0% introductory APR on purchases, but if you’re focused on paying off existing debt, this may not matter much.
Choose a card with rewards and benefits
If you want a balance transfer card worth keeping for the long term, you can also compare based on the rewards and cardholder benefits the cards offer. Many of the top balance transfer credit cards offer cash back, and some also offer insurance or shopping discounts that can give you better value on anything you buy.
Keep in mind that the rewards for spending and moving money don’t always complement each other. If you’re using a credit card to make purchases while trying to pay off debt, you’ll slow down progress and may end up making things worse.