Best Credit Card for Balance Transfer: Managing high-interest credit card debt can be overwhelming. One effective strategy to alleviate this burden is utilizing balance transfer credit cards.
These cards allow you to move existing debt to a new card with a lower or 0% introductory Annual Percentage Rate (APR), providing a window to pay down your balance without accruing additional interest.
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. This process can simplify payments and reduce the amount of interest paid over time. However, it’s essential to understand the terms, such as the duration of the introductory period and any fees associated with the transfer.
Key Features to Look for in a Balance Transfer Card
When selecting a balance transfer credit card, consider the following features:
- Introductory APR Period: Look for cards offering a 0% APR for an extended period, allowing more time to pay off your balance without interest.
- Balance Transfer Fees: Many cards charge a fee (usually 3% to 5% of the amount transferred). Calculate if the interest savings offset this cost.
- Regular APR After Introductory Period: Know the standard APR post-introductory period to avoid unexpected interest charges.
- Annual Fees: Opt for cards with no annual fees to maximize savings.
- Additional Benefits and Rewards: Some cards offer rewards or perks that can provide added value.
Top Balance Transfer Credit Cards
Here are some of the leading balance transfer credit cards available:
Citi® Diamond Preferred® Card
- Introductory APR Offer: 0% for 21 months on balance transfers completed within the first four months.
- Balance Transfer Fees: 5% of each transfer (minimum $5).
- Additional Benefits: No annual fee, access to Citi Entertainment, and free FICO® score.
The Citi® Diamond Preferred® Card offers one of the longest 0% introductory APR periods, making it ideal for those needing extended time to pay off balances. However, the balance transfer fee is on the higher end, so calculate potential savings accordingly.
Citi® Double Cash Card
- Cash Back Rewards Structure: Earn 2% cash back on all purchases—1% when you buy and 1% when you pay.
- Introductory APR Offer: 0% for 18 months on balance transfers.
- Balance Transfer Fees: 3% of each transfer (minimum $5) if completed within the first four months; after that, 5% (minimum $5).
This card combines a generous cash back program with a substantial introductory APR period, appealing to those who want to earn rewards while paying down existing debt.
Wells Fargo Reflect® Card
- Length of Introductory APR Period: 0% intro APR for 21 months on qualifying balance transfers made within the first 120 days.
- Balance Transfer Fees: 5% of each transfer (minimum $5).
- Additional Features: No annual fee, access to My Wells Fargo Deals, and cell phone protection.
The Wells Fargo Reflect® Card provides one of the longest introductory APR periods available, offering nearly two years to pay off transferred balances without interest. Be mindful of the balance transfer fee and ensure the savings outweigh the cost.
U.S. Bank Visa® Platinum Card
- Introductory APR Details: 0% intro APR for 20 billing cycles on balance transfers and purchases.
- Balance Transfer Fees: 3% of each transfer (minimum $5).
- Additional Benefits: No annual fee, access to the U.S. Bank Mobile App, and free TransUnion® credit score.
This card offers a lengthy 0% APR period for both balance transfers and new purchases, making it versatile for managing existing debt and new expenses. The balance transfer fee is relatively standard, and there are no rewards programs associated with this card.
BankAmericard® Credit Card
- Introductory APR Offer: 0% for 18 billing cycles on balance transfers made within the first 60 days.
- Balance Transfer Fees: 3% of each transfer (minimum $10).
- Additional Features: No annual fee, free access to FICO® Score, and overdraft protection for Bank of America checking account customers.
The BankAmericard® Credit Card is straightforward, focusing on helping cardholders reduce debt without the distraction of rewards programs. The 18-month 0% APR period is competitive, but ensure you complete transfers within the specified timeframe to take advantage of the offer.
Chase Freedom Unlimited®
- Rewards Program: Earn 5% cash back on travel purchased through Chase Ultimate Rewards®, 3% on dining and drugstore purchases, and 1.5% on all other purchases.
- Introductory APR Offer: 0% for 15 months on purchases and balance transfers.
- Balance Transfer Fees: 3% of balance transfers (minimum $5).
The Chase Freedom Unlimited® card is a great option for those who want both a solid balance transfer offer and ongoing rewards. While its 0% APR period is shorter than some competitors, the ability to earn cash back can offset some costs in the long run. However, if your main goal is debt repayment, a longer 0% APR card might be a better choice.
Factors to Consider Before Applying
Before applying for a balance transfer credit card, take these factors into account:
1. Your Current Credit Score
- Most of the best balance transfer cards require good to excellent credit (typically 670+ FICO score).
- Check your score beforehand to improve approval chances.
2. Total Amount of Debt to Transfer
- Many issuers have a credit limit that may not accommodate your full balance transfer.
- Ensure the new card can handle your debt amount before applying.
3. Ability to Pay Off Debt Within the Introductory Period
- If you can’t clear your balance before the 0% APR expires, you may end up paying high-interest rates.
- Create a repayment plan to eliminate debt within the promotional window.
How to Maximize Benefits from a Balance Transfer Card
Once you have the right card, here’s how to make the most of it:
1. Make Payments on Time
- A missed payment can cancel your 0% APR offer and lead to high penalty APRs.
- Set up automatic payments or reminders to stay on track.
2. Pay More Than the Minimum Due
- Minimum payments won’t clear your balance before the 0% APR ends.
- Calculate the amount needed to pay it off in full before the promotional period ends.
3. Avoid New Purchases
- Some balance transfer cards also offer 0% APR on new purchases, but any new spending adds to your debt load.
- Focus on repaying existing debt before charging new expenses.
4. Monitor Your Credit Score
- A new balance transfer card can temporarily lower your credit score due to a hard inquiry.
- As you pay down debt, your credit utilization decreases, improving your score over time.
Potential Pitfalls to Avoid
Even with the best intentions, common mistakes can cost you money. Here’s what to watch out for:
1. Misunderstanding Terms and Conditions
- Some cards require transfers within a specific time (e.g., first 60 days) to qualify for the 0% APR offer.
- Read the fine print before applying.
2. Ignoring the Balance Transfer Fee
- A 3%-5% fee may not seem like much, but on a $10,000 balance, that’s $300-$500 upfront.
- Ensure the savings in interest outweigh the transfer fee.
3. Missing Payments
- Late payments may trigger penalty APRs (up to 29.99%) and negate the 0% offer.
- Stay consistent with payments to avoid costly penalties.
4. Not Paying Off the Balance Before the 0% APR Expires
- Once the promotional period ends, your balance starts accruing interest at the regular APR.
- If you still owe a significant amount, your debt can grow quickly again.
Alternatives to Balance Transfer Credit Cards
If a balance transfer card isn’t the right fit, consider these other debt reduction options:
1. Personal Loans
- A fixed-rate personal loan can consolidate high-interest debt into one manageable payment.
- Typically offers lower interest rates than standard credit cards.
2. Debt Consolidation Programs
- Work with a credit counseling agency to negotiate lower interest rates and set up a structured repayment plan.
3. Negotiating with Creditors
- Call your credit card issuer and request a lower interest rate or a hardship plan.
- Some banks offer temporary reduced APRs to customers struggling with payments.
FAQs about Best Credit Card for Balance Transfers
1. 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. This can be a strategic move to save on interest and pay down debt faster.
2. How do I choose the best credit card for a balance transfer?
Look for cards that offer a 0% introductory APR on balance transfers, low or no balance transfer fees, and a sufficient introductory period to pay off your debt. Also, consider the card’s regular APR after the introductory period ends.
3. What should I consider before doing a balance transfer?
Evaluate the transfer fees, which typically range from 3% to 5% of the total transferred amount. Ensure that the total cost of transferring the balance doesn’t outweigh the savings from the lower interest rate.
4. Can a balance transfer affect my credit score?
Initiating a balance transfer can impact your credit score temporarily. It may increase your credit utilization ratio or lead to a hard inquiry on your credit report. However, if managed wisely, it can help improve your credit score over time by reducing your overall debt.
5. Are there limits to how much I can transfer?
Yes, credit cards will usually have a maximum limit on balance transfers that cannot exceed your credit limit on the new card. Some cards also set a specific limit for balance transfers that might be lower than your total credit limit.
6. How long does a balance transfer take to process?
A balance transfer can take anywhere from a few days to several weeks. It’s important to continue making payments on your old card until the transfer is confirmed to avoid late fees and penalties.
7. Can I earn rewards on a balance transfer?
Typically, balance transfers do not earn reward points or cash back. Rewards are usually earned through purchases, so it’s important to read the card’s terms and conditions.
8. What happens if I don’t pay off the balance during the introductory period?
If you don’t pay off the transferred balance during the introductory period, the remaining balance will start accruing interest at the card’s regular APR. Planning to pay off the balance before the introductory period ends is crucial to maximize savings.
Conclusion
Balance transfer credit cards can be an excellent tool for reducing high-interest credit card debt—if used wisely. With the right card, a solid repayment strategy, and discipline, you can save hundreds or even thousands in interest while improving your financial future.
Before applying, carefully evaluate your financial situation, credit score, and repayment ability. The goal isn’t just to transfer debt but to pay it off completely before interest kicks in again.
If you’re considering a balance transfer, choose a card that best fits your needs, whether that’s the longest 0% APR period, the lowest transfer fees, or added benefits like cash back rewards.
