Here’s how to compare and then choose a balance transfer credit card
Managing to pay down high interest debt or debt from several places can be daunting. Balance transfer credit cards create a chance to get ahead of your debt by offering you a temporary period of low or no interest, during which time you can work on paying down just your balance without accruing interest.
Not all balance transfer credit card offers are created equal. Some cards have more enticing terms than others, and you’ll want to consider several factors as you compare cards. Further, the terms you receive and the amount of debt you’ll be able to transfer onto your new card may be determined by your credit history and therefore your offers will be based on what you qualify for.
Top considerations of a balance transfer card
If you know you want a balance transfer card and you’re ready to start comparing, here are the factors you’ll want to look for to make the best decision:
- Balance transfer APR: This is the APR that will be charged to the balance you transfer to the new card, and it’ll be determined by your creditworthiness. With most balance transfer cards, you’ll get a low or 0% APR on the balances you transfer.
- Length of promotional period: Usually, the promotional interest rate will last between 6 and 21 months, though you might even see cards that offer the rate for as long as 24 months. Usually, the longer the introductory period, the better — but weigh other factors like the revert rate and perks you might receive from the card.
- Balance transfer fee: With most cards, you’ll be charged a one-time balance transfer fee of 3% to 5% when you make a transfer. However, there are some cards that let you transfer balances without paying any fees. Be on the lookout for cards that cap their balance transfer fee, and understand how to calculate what your fee might be, especially if you are transferring a large balance.
- Other fees and rates: Unfortunately, the balance transfer fee might not be the only fee to consider. Check out other potential fees such as annual fees and foreign transaction fees.
- Other benefits: It’s usually best to use a balance transfer card solely for consolidating debt, but card perks may tip the scales when you’re torn between a few cards. Does the card come with a rewards program? How about interest-free days or travel discounts? Perks can be very useful, as long as their value outweighs the costs of a card.
Types of debtYou may not be able to transfer just any kind of debt to your new card. If you are looking to transfer something other than credit card debt, for instance, a payday loan or auto loan, be sure to check with the lender to see what types of debt they will allow you to transfer.
What exactly can I do with my balance transfer card?
With balance transfer cards, the name of the game is debt consolidation. Here are some other things you can do with your balance transfer card:
- You can transfer as many balances as you’d like to your card, as long as you pay applicable fees and stay within your credit limit.
- Some people move their debt from one balance transfer card to another, continually taking advantage of low-interest-rate promotions.
- You may be able to transfer someone else’s debt to your card (if, say, you need to help out a struggling friend or relative).
There’s actually more to balance transfers than meets the eye! Try to find out all of the balance transfer options your card offers — you might be able to do some cool things you hadn’t thought of before.
Comparison of Balance Transfer Credit Cards
What to avoid with balance transfer cards
Balance transfer cards can be incredibly helpful as long as you know what you’re doing with them. Avoid these pitfalls, and it’s smooth sailing for you:
Not making the minimum payments
Some people think that “0% APR” means they don’t have to make any payments on their balances. The 0% APR means your balance won’t accumulate interest within the promotional period. You’ll still need to make at least the minimum payment each month (though we recommend paying more than that to make sure you can repay the debt during the intro period).
Overlooking the revert rate
Once the promotional interest rate ends, your remaining balance (if you still have one) will be hit with a much higher interest rate. Regarding revert rates, strongly consider two options:
- Pay off your balance fully before the revert rate strikes.
- Apply for a card with a lower revert rate than your old card’s interest rate. This way, even if you don’t repay your balance by the end of the promotional APR period, your debt will grow at a slower rate.
Getting hit with APR penalties for late payments
This is one of those stipulations that is buried in the fine print: You can lose that great 0% intro APR if you pay late even once. To avoid this, apply for a card that doesn’t charge a penalty rate for late payments or set up automatic payments so you’ll never pay late.
Using the card for purchases
Because you’re primarily using your balance transfer card to repay debts, it is recommended that you not purchase anything with the card and add more to your balance. Many cards also charge interest on your purchases, and this can start accumulating, which defeats the purpose of taking out a balance transfer credit card. If you need to make an emergency purchase, consider using another card with a low APR.
Paying high interest rates on cash advances
Most cards won’t give you the same attractive 0% interest rate on cash advances. In fact, the APR on cash advances can actually be very high. Before taking out a cash advance, check out your card’s terms and conditions carefully.
Being assessed late fees on old cards
It can take a while for a balance transfer to be completed — usually within 7 to 10 days. To avoid being assessed late fees on your old card, continue to make timely payments until the balance has been successfully transferred to your new card.
Balance transfer credit card calculator: How much can you save?
Your current credit cards:
Card that you are transferring to:
Intro Term (months)
Balance Transfer Fee
Your monthly repayment
At this rate, you will not pay off your debt.
At this rate you will pay off your debt during the card's intro period
At that rate you will not pay off your debt. You will need to make higher repayments.
Months that it will take you to pay off your debt:
With a balance transfer
Without a balance transfer
Money saved transferring debt to a balance transfer card:
Savings = $1,000