FAQs on Balance Transfer Credit Cards
What are balance transfer credit cards?
Balance transfer credit cards offer low-interest rates for a limited time on transferred debt. Their purpose is to consolidate debt
and save you money on interest payments. The best balance transfer cards offer an introductory rate of zero percent for periods ranging from 12 to 21 months.
What is the best balance transfer card?
This list ranks balance transfer cards using a combination of filters against key differentating attributes for balance transfer cards, as well as the feedback of SuperMoney community members. There is no single best card. The best card for you will depend on the amount of credit card debt you plan to transfer, how quickly you can realistically pay it off, and your credit history.
What does 0% APR mean?
An introductory 0% APR period means that you will not be charged any interest duruing the 0% APR period, which can be as long as 21 months.
However, the first thing you need to understand about balance transfers is that a 0% APR does not mean a balance transfer is free. Most balance credit cards charge a transfer fee that ranges from 3 - 5% of the debt balance. On a $15,000 debt, that’s $450 to $750 in transfer fees. If you convert those transfer fees to an APR, they equate to a 5.5% to 9.1% APR if paid back over a 12 month zero interest period. If you pay it off in less than a year the APR of that transfer fee would be even higher.
Is it a good idea to do a balance transfer on a credit card?
If you are able to find a new credit card with a very low or no interest balance transfer rate, little or no balance transfer fee, a credit limit high enough to accommodate your previous balance and an introductory period long enough to pay off the balance before the rate increases, then a balance transfer may be a good idea.
How to use balance transfer credit cards?
Balance transfer cards have great teaser rates. It doesn’t get much better than 0% APR. The problem is once the introductory rate expires, their standard rates are actually higher than those of your average credit card. As of October 2016, the average rate for a balance transfer card was around 18.5%. That’s more than two percentage points higher than the average credit card rate. (Source
To make the most out of balance transfer credit cards follow these steps:
- Transfer all your high-interest debt to the balance transfer card with the longest introductory rate and cheapest transfer fee you can find.
- Pay off as much of your debt as you can within the teaser 0% APR period. Aim to pay the entire debt within the introductory period.
- If you still have a balance when the 0% APR expires, consider transferring your balance to a balance transfer card of another company. Don’t forget to include the cost of the balance transfer when working out whether a balance transfer makes sense for you.
Can you transfer credit card balance multiple times?
Yes, you can. Transferring your balance multiple times can make a lot of sense, but only if you can't afford to repay it in one 0% APR introductory period. However, extending the repayment of your existing debt just because you can or so you can buy more stuff is usually a bad idea.
Let's say you owe $8,000, and you get a 0% APR balance transfer card with a 12-month intro period. If you can only afford to pay $500 a month, you won't be able to pay off the full $8,000 in the 12 months. You'll be $2,000 short. In such a case, you could transfer the $2,000 to a new balance transfer card to keep the remaining debt at 0% APR.
What is most important - the balance transfer fee, intro period, or intro rate?
The intro rate and the balance transfer fee are the most important features when comparing balance transfer cards. If your priority is to pay off debt, shop for the 0% APR balance transfer card with the lowest balance transfer fee you can find. Most balance transfer cards with a 0% APR intro rate have an introductory period of 12 to 15 months, so the length of the intro period is not a huge consideration when shopping for a card.
Some 0% APR balance transfer cards offer a $0 balance transfer fee during the introductory period. Apply for those cards first. Balance transfer cards with a transfer fee of 3% or lower are the next best choice. Remember that a balance transfer fee will increase your debt by 3% to 5% of your current balance. So paying a balance transfer fee makes little sense if you can afford to pay the balance in a few months.
Can a balance transfer be denied?
Yes, there are several reasons a balance transfer can be denied. If you're applying for a new credit card, you may be rejected because you have a poor credit score, or because you've made too many transfer requests. Even if you are approved for the card, your balance transfer can be denied if you don't have enough credit to complete the transfer or if you're trying to transfer money between two cards from the same issuer.
How do you pay the balance transfer fee?
Balance transfer fees are added to the balance at the time of the transfer. This means you can pay it over time as you pay off the money you transferred. Let's say you owe $10,000 and you transfer it to a new 0% APR card with a 5% balance transfer fee. Once you make the transfer, you will owe $10,500 ($10K + $500 in fees).
What happens if I don't pay off my balance transfer?
You may forfeit your 0% balance transfer offer if you make a late payment, have a payment returned, or exceed your credit limit during the promotional period. If that happens you will trigger the higher regular balance transfer interest rate. With several late payments in a row, the credit card issuer can apply the penalty rate until you resolve the issue.
Can I have multiple balance transfers on the same credit card?
You can do multiple balance transfers to the same card, as long as the amounts transferred and any transfer fees do not exceed the card’s credit limit. Remember that a separate transfer fee applies to each balance that you transfer. Some issuers may also have their own restrictions.
Is there a limit on how many balance transfers you can do?
There's no hard-and-fast rule about how many balance transfers you can do. But individual issuers may have their own policies. For instance, you can request up to three balance transfers when applying for the BankAmericard Credit Card. Your credit line will also limit the number of balance transfers you're able to do.
However, the goal of a balance transfer credit card should be to become debt free. So, we also calculated what your monthly payments would have to be to repay $7,000 during the card's 0% APR period.
Do balance transfers hurt your credit?
Depending on several factors, balance transfers can either help your credit score or hurt it. Every time you apply for credit, a hard inquiry is made on your credit report. Each hard inquiry has the potential to lower your score by several points.
Who qualifies for a balance transfer credit card?
Balance transfer cards typically have large lines of credit and are only available to people with good to excellent credit. The eligibility criteria differ from card to card
, but credit card companies typically look for consumers with:
- A solid credit history
- High credit scores
- And regular incomes
How to qualify for a balance transfer card?
You may have to work a little before you qualify for a top balance transfer credit card. Here are three things you can do to improve your credit score
before you apply:
- Check your credit report and score. Don’t apply if you don’t meet the card’s minimum credit score requirement.
- Ask the credit bureaus to remove any negative items on your credit report that are not correct or accurate.
- Pay your bills on time.