How to Choose a Balance Transfer Credit Card

Big factors to consider include the length of the 0% intro APR window and the balance transfer fee. Here's what else to keep in mind.

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How to Choose a Balance Transfer Credit Card

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A balance transfer credit card allows you to move debt from a card or loan that's charging you interest to a card that charges no interest for a period of time. After that 0% introductory APR time frame ends, the card's ongoing interest rate kicks in.

Transferring your balance to a new card can help you save on interest payments while you pay down your debt, but there are a few things to keep in mind.

1. Understand how the 0% intro APR period works

In general, the longer the promotional period, the better. You’ll have more time to pay off the balance without interest, meaning you could make smaller monthly payments, which can be helpful when you have other financial obligations each month. Many balance transfer credit cards, like the U.S. Bank Visa® Platinum Card, give you a long time horizon — well more than a year of 0% interest.

But aim to pay your balance down completely before the 0% intro APR period is over. At that point, the card will begin charging you its normal ongoing interest rate on new and/or remaining balances, which will be significantly higher than 0%. For reference, the average credit card APR in Q2 2019 for accounts that incurred interest was 17.14%. Make sure you know exactly when your card's promotional APR period ends to avoid incurring interest on the balance you transferred to it.

Also, pay close attention to your billing statement's due date. You still have to make monthly payments on the balance you transferred, and a late payment can result in the loss of your promotional 0% APR period. You may even be charged a penalty APR that’s higher than the card’s usual rate.

A balance-transfer card should be a tool to help you pay off your debt — not a place to stash your debt and ignore it.

Nerd tip: Credit cards can have different APRs for different kinds of transactions. A card might offer a 0% intro APR on balance transfers, but new purchases might be subject to the card's ongoing variable APR. Should you decide to put new purchases on a card to which you've already transferred a balance, track those transactions separately.

2. Consider the balance transfer fee

Most balance transfer credit cards charge this fee, ranging from 3% to 5% of the balance you're transferring. That may not seem like a large number, but it adds $30 to $50 to every $1,000 you transfer.

Paying that fee can absolutely be worth it if:

  • The amount you'll save in interest during the 0% intro APR window outweighs the fee.

  • The card offers other features you find compelling.

For example, the Citi Simplicity® Card - No Late Fees Ever charges a balance transfer fee of 5%, which is on the high side. But it also offers an intro 0% on Purchases for 12 months and 0% on Balance Transfers for 21 months, and then the ongoing APR of 14.74% - 24.74% Variable APR. That's one of the lengthiest 0% intro APR periods on balance transfers on the market. Plus, the card charges no late fees or penalty APR if you make a late payment.

If you need a few extra months with no interest and you want the leeway on late payments, the higher balance transfer fee may be worth it to you. But if you know you’ll always pay on time, a card with a 3% fee could be a better fit.

You can find credit cards that charge no balance transfer fee, but their 0% intro APR periods are typically shorter — around six to 15 months.

3. Take note of your current credit card issuer

You typically cannot transfer debt between cards from the same issuer. For example, you can’t transfer a balance from a Citi card onto the Citi Simplicity® Card - No Late Fees Ever, or a balance from an American Express card onto the Amex EveryDay® Credit Card. On the plus side, this can help you whittle down the list of balance transfer cards that will work for you.

Other balance transfer considerations

There are other less apparent costs associated with opening up any new line of credit. Most new hard credit inquiries (like those that occur when you apply for a credit card) trigger a slight, temporary reduction in your credit scores. Reducing your average age of accounts with a new credit line can also pull your score down slightly.

However, having a larger pool of accessible credit may reduce your credit utilization ratio, which could raise your scores.

The point is, any time you open a new credit card, consider how it can positively or negatively affect your credit score over time. Beyond that, making a decision about a balance transfer card is a matter of running the numbers. If moving your debt to a new card will save you money, applying for a balance transfer card may be the right step for you.

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