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4 Ways to Know if a Balance Transfer Credit Card is for You

Dec. 16, 2014
Balance Transfer Credit Cards, Credit Cards
4 Ways to Know if a Balance Transfer Credit Card is for You
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Is the interest rate on your credit card debt sinking you deeper into a financial hole? A 0% APR balance transfer credit card offer can provide a ladder to help climb out of the abyss.

Simply put, these balance transfer offers can help save on interest payments that make it tough to pay down credit card debt quickly. But, like all tools in your financial arsenal, they must be treated with care. Will a balance transfer help or simply kick the can on your credit woes further down the line? Here are some questions you need to ask:

Do you have a good credit score?

Most cards that offer 0% promotions require a FICO credit score of 690 or higher. In fact, the best offers are usually only available to those with a score of over 720. A lower FICO score will greatly limit your options for balance transfer credit card offers. That’s just the way it is.

So know where your credit score stands before you begin.

Does the cost of balance transfer make sense?

Even with a “0%” offer, most balance transfer cards charge a one-time balance transfer fee. Typically, this fee is 3% of the total charges you’re moving onto the card.

In general, if it will take you less than six months to pay off your credit card balance, doing a balance transfer doesn’t make sense. Otherwise, price out the offer carefully against what you’re paying in interest on your current card to see how much you’re really saving. Or, use NerdWallet’s tool to figure out the true cost of your balance transfer. This will help you decide if moving forward with this refinancing option is right for you.

Nerd note: There is one card on the market that waives its balance transfer fee under certain conditions. If you have excellent credit, be sure to check it out.

How long can you take advantage of 0% interest payments?

All good things come to an end. If you get a 0% interest credit card, the first move you should make is to note on your calendar when the promotion ends; it’s often somewhere between six and 15 months.

Let’s be honest: Credit card issuers are betting that the bulk of your debt won’t be repaid before the 0% APR period ends. Prove them wrong. Plan to use the 0% period to double-down on paying off as much of the balance as possible.

Also, read the fine print once the card arrives. Have they given you 0% rates on both the transfer balance and future purchases on the new card? No matter the advertised rate, be vigilant about what the company actually sends you in the mail.

Can you make your payments on time?

Once you make the switch to a 0% card, it’s crucial that you make your payments on time. Many cards have penalties that void the 0% deal the moment you miss a payment. This could cause your APR to spike to a rate that’s way higher than what you were paying before, so proceed with caution.

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