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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.
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.
Is a balance transfer worth it?
A balance transfer may be worth considering if you’re stuck paying high interest on your credit card account.
Compare balance transfer credit cards
Who are balance transfer credit cards best for?
A balance transfer could help you consolidate your debt and pay it off faster while saving money at the same time.
Balance transfer repayment calculator
Our pick for balance transfers
Capital One® Quicksilver® Cash Rewards Credit 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:
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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