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If you only make the minimum payment on your credit card balance, your account will quickly accrue interest and this can create spiraling debt. Before you know it, you could be stuck paying hundreds or thousands of dollars in interest. That’s where a balance transfer comes in. While a balance transfer credit card can be a great way to save on interest payments, it isn’t always the solution to every debt problem. Before getting this type of card, you’ll want to consider if it’s worth it for you.
What's in this guide?
- How do I know if it’s worth getting a balance transfer credit card?
- Who are balance transfer credit cards best for?
- What are the pros and cons of a balance transfer credit card?
- Compare balance transfer credit cards
- Balance transfer repayment calculator
- How to calculate your balance transfer repayment
- When shouldn’t you get card a balance transfer credit card?
- Bottom line
- Frequently asked questions
How do I know if it’s worth getting a balance transfer credit card?
To figure out whether this type of card will be a good option for you, consider the following:
Do you want to pay off your debt with 0% interest?
Most balance transfer credit cards come with a long 0% intro APR period on balance transfers that can last anywhere from 12 to 21 months. Once the intro period expires, you’ll accrue interest on the remaining balance.
This feature can be a life-saver if you have an outstanding balance on another credit card account that accrues high interest. By moving that balance to your new credit card with 0% intro APR period, you can save money on interest while you pay off your debt.
Balance transfer limitations
Keep in mind, to get the 0% intro APR period, you must make your balance transfer within a certain time frame, usually between 60 and 120 days from the date you open your credit card account. Other limitations include the amount — which is either a fixed number, such as up to $15,000 or up to your credit limit — and you can’t make a balance transfer from accounts within the same bank.
Are you planning to make a large purchase?
Most balance transfer cards also offer a long 0% intro APR period on purchases, although it’s rarely the same length as the intro APR period on balance transfers if the latter is 18 months or longer. No matter how long the intro APR period, you get to make large purchases and pay them off while the interest-free period lasts.
Do you want to earn rewards on your purchases?
It’s not uncommon that a balance transfer credit card comes with a rewards program. Actually, most cashback credit cards offer a 0% intro APR period as a secondary feature. If you’re shopping for a balance transfer credit card, consider applying for one with a rewards program because that will give you value once the intro APR period is up.
Are you looking to earn a signup bonus?
Another rewarding feature of balance transfer credit cards is that most of them let you earn a bonus when you sign up. This can be anywhere from $50 do $200 as long as you meet the spend criteria. However, not all cards of this type come with a signup bonus, so be sure to compare your options before you apply.
Watch the annual fee.
Most balance transfer credit cards have no annual fee. This is good news, considering you want to pay off your debt and minimize expenses, not get into more debt. Keep this in mind in case you stumble upon a card with an annual fee.
Balance transfer fees
Know that transferring your balance to another card often comes with fees of either 3% or 5% of the amount transferred, with a minimum of $5 to $15. Some credit cards have 0% balance transfer fees, which makes them ideal option if paying off your debt is your only objective.
Who are balance transfer credit cards best for?
Balance transfer credit cards are ideal for anyone looking to lower their debt. When comparing cards, take the amount you owe and divide it by the months of the intro APR period to know how much you’ll need to pay each month to pay off your balance.
Suppose you want to make a balance transfer of $10,000. Here’s what to do:
$10,000/12 months = $833 per month
$10,000/15 months = $666 per month
$10,000/18 months = $555 per month
$10,000/21 months = $476 per month
A card with 21 months of 0% intro APR period will let you pay off your $10,000 balance with a $476 each month. But if you’re looking to earn rewards after the intro APR period is up, you’ll need to settle for a higher monthly payment as these cards often have shorter interest-free period.
What are the pros and cons of a balance transfer credit card?
There are two types of balance transfer credit cards — rewards credit cards and cards with a long 0% intro APR period on balance transfers. The benefits and drawbacks will vary based on your card choice.
- Lower debt. Avoid paying interest on your debt, so you can pay it off faster.
- No annual fee. Pay off your debt faster by minimizing fees. Most credit cards with 0% intro APR period on balance transfers have no annual fee.
- Potential rewards. If you go with a rewards credit card, you can earn cash back on your purchases after you pay off your balance transfer. You’ll often have a shorter intro APR period, however — between six and 18 months.
- Potential signup bonus. Earn a bonus upon signup if you get a rewards credit card. Balance transfer cards without rewards don’t come with a signup bonus of any kind.
- Balance transfer fees. Pay between 3% and 5% of the amount you transfer. But you can find some credit cards with no balance transfer fee.
- Balance transfer amount limits. Card issuers limit your balance transfer amount either up to the size of your credit line or up to a certain amount, typically between $7,500 and $15,000.
- Balance transfer restrictions. You can’t make balance transfers from accounts within the same bank or within affiliated financial institutions.
- Interest on unpaid balances. Fail to pay off your balance during the 0% intro APR period and you’ll accrue interest on your outstanding balance. Making a repayment plan is paramount to avoid paying interest.
Compare balance transfer credit cards
Balance transfer repayment calculator
Our pick for a balance transfer card
Citi Simplicity® CardRead more
How to calculate your balance transfer repayment
Here’s what the calculator is doing behind the scenes:
- First, it adds all your existing card balances.
- Then, it adds the fee you’ll pay for a balance transfer to the new card, as well as the new card’s annual fee.
- Finally, it takes that total and divides it by the length of your new card’s intro APR.
If you were to do the math by hand, you’d use this formula:
When shouldn’t you get card a balance transfer credit card?
Balance transfer credit cards are a poor choice if you want to earn rewards on travel purchases. Not only do they lack solid rewards on airfare, hotels and cruises, but they’ll likely come with a 3% foreign transaction fee.
Also, if you don’t have any debt, you’re better off applying for a credit card with a rewards program.
If you’re looking to pay off your debt faster and without interest, a balance transfer credit card could be worth considering. You can choose between rewards credit cards with a shorter intro APR period and cards with a longer intro APR period but without a rewards program.
If you’re still not sure whether a balance transfer credit card is what you need, compare other credit cards until you find the right fit for your needs.
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