Best Balance Transfer Credit Cards: Managing credit card debt can be challenging, especially with high-interest rates that make it difficult to pay down balances.
Balance transfer credit cards offer a strategic solution by allowing you to move existing debt to a new card with a lower or 0% introductory Annual Percentage Rate (APR).
This approach can significantly reduce the amount of interest you pay, enabling you to pay off debt more efficiently.
Understanding Balance Transfer Credit Cards
A balance transfer involves moving debt from one or more credit cards to another card, typically offering a lower interest rate or a 0% introductory APR for a specified period. This strategy aims to consolidate debt and reduce interest payments, making it easier to manage and pay off balances. Key features to consider when evaluating balance transfer credit cards include:
- Introductory APR: The temporary interest rate applied to transferred balances, often 0%, lasting for a set period.
- Balance Transfer Fees: A fee charged for transferring a balance, usually a percentage of the amount transferred.
- Promotional Period Duration: The length of time the introductory APR applies, ranging from several months to over a year.
Top Balance Transfer Credit Cards
Citi Rewards+® Card
- Introductory 0% APR Period: Offers a 0% introductory APR on balance transfers for 15 months, providing ample time to pay down transferred balances without incurring interest.
- Rewards Structure: Earns 2 ThankYou® Points per $1 spent at supermarkets and gas stations (up to $6,000 per year) and 1 point per $1 on all other purchases. Additionally, it rounds up to the nearest 10 points on every purchase.
- Balance Transfer Fees: Charges an introductory fee of 3% of each transfer (minimum $5) completed within the first 4 months of account opening; after that, the fee increases to 5% (minimum $5).
Citi® Diamond Preferred® Card
- Length of 0% APR on Balance Transfers: Provides a 0% introductory APR on balance transfers for 21 months, one of the longest durations available.
- Regular APR After Promotional Period: After the introductory period, a variable APR of 17.24% – 27.99% applies, depending on creditworthiness.
- Additional Benefits: No annual fee, access to Citi Entertainment for special event tickets, and compatibility with digital wallets for convenient payments.
Citi Double Cash® Card
- Dual Cash Back Feature: Earns 1% cash back on purchases at the time of purchase and an additional 1% as you pay for those purchases, totaling up to 2% cash back.
- Introductory APR Details: Offers a 0% introductory APR on balance transfers for 18 months, allowing substantial time to pay off transferred debt interest-free.
- Balance Transfer Specifics: Balance transfers must be completed within 4 months of account opening to qualify for the introductory APR. A balance transfer fee of 3% of each transfer (minimum $5) applies if completed within the first 4 months; thereafter, the fee is 5% (minimum $5).
Wells Fargo Reflect® Card
- Duration of 0% APR for Balance Transfers: Features a 0% introductory APR on balance transfers for 21 months from account opening, providing an extended period to manage debt without interest.
- Conditions for Extending the Introductory Period: The 0% APR can be extended up to 21 months if minimum payments are made on time during the introductory period.
- Fees and Regular APR: Charges a balance transfer fee of 5% (minimum $5) for each transfer. After the promotional period, a variable APR of 17.24% – 29.24% applies.
Factors to Consider When Choosing a Balance Transfer Card
Selecting the right balance transfer credit card involves evaluating several factors to ensure it aligns with your financial goals:
- Length of the Introductory 0% APR Period: A longer promotional period provides more time to pay off the transferred balance without incurring interest.
- Balance Transfer Fees: While some cards offer no balance transfer fees, others may charge between 3% to 5% of the amount transferred. Calculate whether the interest savings offset the cost of the transfer fee.
- Regular APR After the Promotional Period Ends: Understand the standard APR post-introductory period, especially if you anticipate carrying a balance beyond the promotional timeframe.
- Additional Benefits: Consider rewards programs, cashback offers, annual fees, and other perks that may enhance the card’s value.
How to Maximize Benefits from a Balance Transfer Credit Card
To effectively utilize a balance transfer credit card:
- Develop a Repayment Plan: Calculate the monthly payments required to pay off the balance before the introductory APR period ends, ensuring you avoid interest charges.
- Avoid New Purchases: Refrain from adding new charges to the balance transfer card, as purchases may not have the same 0% APR and can lead to additional debt.
- Set Up Automatic Payments: Schedule automatic payments to avoid missed due dates and potential penalties that could nullify the introductory APR.
- Monitor Your Credit Score: Balance transfers may temporarily impact your credit score due to changes in credit utilization. Keep an eye on your credit report to ensure your score remains stable.
- Understand the Terms and Conditions: Read the fine print to ensure you comply with the card issuer’s policies and don’t accidentally lose your promotional interest rate.
Potential Pitfalls to Avoid
While balance transfer credit cards offer great benefits, there are some common mistakes to watch out for:
1. Misunderstanding Terms and Conditions
Many people assume that all transactions, including purchases, enjoy the 0% APR. However, some balance transfer cards only offer 0% APR on the transferred balance and not on new purchases. If you start spending on the card, you may be charged interest on those new purchases, depending on the card’s terms.
2. Missing Payments and the Consequences
Even one missed or late payment can trigger the loss of the 0% APR offer. Once the promotional period is revoked, you may be subject to a significantly higher interest rate, making repayment more difficult. Setting up automatic payments or reminders is a smart way to avoid this issue.
3. Accumulating More Debt During the Promotional Period
Some people transfer their balances and then continue using their old credit cards, resulting in additional debt. A balance transfer card should be part of a debt repayment strategy, not a means to free up space for more spending.
4. Ignoring Balance Transfer Fees
Balance transfer fees typically range from 3% to 5% of the transferred balance. While these fees may be worth it for a long interest-free period, you should calculate whether the savings outweigh the cost of the transfer.
FAQs about Best Balance Transfer Credit Cards
What is a balance transfer credit card?
A balance transfer credit card allows you to transfer high-interest credit card debt to a card with a lower interest rate, often with a promotional period of 0% APR. This can be a strategic move to save on interest and pay down debt faster.
How do I choose the best balance transfer credit card?
When selecting a balance transfer card, consider the length of the 0% APR period, the balance transfer fee, and the regular APR after the promotion ends. Also, look for cards that offer additional benefits like rewards programs or no annual fees.
What is a balance transfer fee?
Most balance transfer credit cards charge a fee for transferring a balance, typically between 3% to 5% of the total amount transferred. This fee is added to your balance on the new card.
Can I transfer a balance from any credit card?
Generally, you can transfer balances from multiple credit cards, as long as the issuer of the new balance transfer card is different from the issuer of the card(s) from which you are transferring the balance.
How does a 0% APR period benefit me?
A 0% APR period allows you to pay down your balance without accruing additional interest for a set period, often 12 to 18 months. This can significantly reduce the total cost of your debt and help you pay it off faster.
Are there any risks to using a balance transfer credit card?
The main risks include the potential to accumulate more debt if you continue to use both the new and old credit cards without paying off the balances. Additionally, if you don’t pay off the transferred balance within the promotional period, the remaining balance will be subject to the card’s regular APR.
How can I make the most out of a balance transfer credit card?
To maximize the benefits, aim to pay off the entire transferred balance before the end of the 0% APR period. Also, avoid making new purchases with the card until your balance is fully paid, as new purchases might attract higher interest rates.
Conclusion
Balance transfer credit cards can be an excellent financial tool for those looking to reduce interest payments and pay off credit card debt efficiently. Choosing the right card depends on factors such as the length of the 0% APR period, balance transfer fees, and post-promotional interest rates.
To maximize benefits, ensure you have a repayment plan in place, avoid new purchases, and never miss a payment. By using these cards strategically, you can take control of your debt and improve your financial health.
