Balance transfer credit cards are valuable financial tools for people with debt. They allow you to transfer high-interest credit card debt to a card with a 0% annual percentage rate (APR) promotion, offering much-needed interest relief.
“Credit cards that offer an introductory 0% balance transfer APR can save money on existing credit card debt and help you pay down balances faster than a card with a higher rate,” says Matthew Goldman, credit card expert and founder of Wallaby.
Before you choose one, however, there are a few questions you should ask yourself about your creditworthiness, desired features, and whether it’s worth it.
What’s your credit score?
Balance transfer credit cards generally require good or excellent credit. If you have poor or fair credit — typically a score from 300 to the mid-600s — you likely won’t qualify for one.
If you do have poor or fair credit, consider a personal loan to consolidate debt. Note, however, that you may not find a personal loan with a lower interest rate than what you’re currently paying.
What’s your top priority?
If your credit score is in the good to excellent credit range, the next question to ask yourself is what you want most in a card. Balance transfer credit cards come with several different features, and there’s no one-size-fits-all card. Here are the key features you will want to consider:
The longer the balance transfer period, the more time you have to pay off the debt interest-free. The best balance transfer cards offer periods of 15 to 21 months, with some on the low end offering other benefits to make up for the shorter period.
The Citi Simplicity Card has one of the longest 0% APR promotions at 21 months. It also charges no penalties for late payments. The card does charge a 3% balance transfer fee, though.
No or low balance transfer fee
Most balance transfer cards charge a 3% to 5% fee. So, if you’re transferring $5,000 to the new card, the bank will add an extra $150 to $250 to your balance. There are some credit cards, however, that offer the unique combination of a 0% APR period and no or low balance transfer fees.
The Chase Slate, for example, offers a 0% APR for 15 months and no balance transfer fee as long as you make your transfer within 60 days of opening the account. After that, the fee is 5%. While you won’t get a super-long 0% APR promotion like with the Citi Simplicity, the Chase Slate is worth it if you can pay off the debt within the timeframe provided.
If you’re planning on keeping the balance transfer card after the 0% APR promotion is over, you may want to consider a card that offers rewards in addition to a balance transfer promotion.
The Citi Double Cash offers 1% cash back on every purchase and another 1% cash back when you pay off your bill — one of the highest rewards rates in the industry. The card also offers an 18-month 0% APR promotion on balance transfers. It does charge a 3% balance transfer fee, though. And keep in mind that you’ll earn rewards only on new purchases; the balance transfer doesn’t count.
Should you do a balance transfer?
Balance transfers are a great way to help you pay down debt without the sting of interest. But if you’re just using them to keep your interest rate low while you accrue more debt, you may be setting yourself up for failure in the long run. Always have a payoff plan in place before applying.
To make sure a balance transfer is right for you, do the math. Take the time to calculate how much interest you’ll pay if you continue with the original card. Then calculate the balance transfer fee on the new card (if there is one).
In most cases when it’ll take you longer than six months to pay off the debt, paying the balance transfer fee will be a better option. If, however, you have an accelerated payoff schedule and will be done in less than six months, you may be better off sticking with what you have.
Also, note that banks don’t allow intrabank transfers. For example, if you have debt on the Chase Sapphire Preferred credit card, you can’t transfer that debt to the Chase Slate. Don’t make the mistake of learning this after applying for the card.
The bottom line
As you’re reviewing SuperMoney’s top balance transfer credit cards, make sure you understand what your needs and preferences are. To find the best one for you, you’ll need to do a little research and determine whether you’d qualify and what your priorities are.
“Not all balance transfer offers are created equal, so it pays to read the details,” says Goldman. “Some cards offer the 0% introductory rate for a longer period of time than others, and some cards charge a balance transfer fee when you move the balance.”
Once you find one, have a payoff plan, preferably one that concludes at the same time as the promotional period. Doing so will provide you with a solid foundation to avoid going into credit card debt again.
Ben Luthi is a personal finance writer and a credit cards expert who loves helping consumers and business owners make better financial decisions. His work has been featured in Time, MarketWatch, Yahoo! Finance, U.S. News & World Report, CNBC, Success Magazine, USA Today, The Huffington Post and many more.