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How to Choose the Best Credit Card for Balance Transfers

Last Updated: January 13, 2022
3 min read

If you carry a balance on a high interest rate credit card, you may occasionally ask yourself where your money is going. Even though you diligently make payments every month, one day you realize that it will take years to pay off your debt because so much of the payment is going toward interest charges.

Then you remember you’ve heard about something called balance transfer and how it can help you pay off your debt faster. Transferring a balance to a low-interest card can be a great way to tackle an overwhelming debt. However, despite the apparent simplicity, choosing a balance transfer credit card is not always so straightforward. You will want to consider several factors, including your short- and long-term goals.

When and why to consider balance transfers

Many people transfer their high-interest balances for one reason — to save on interest, thanks to the proliferation of Balance Transfer credit card offers with no or low introductory interest rates.

However, there are other reasons why balance transfers can make good sense. One benefit is potentially simplifying your financial life. For instance, instead of having several credit cards and installment loans (yes, you can consolidate those as well) you’ll only have one bill to pay every month, which can make managing your finances easier.

Do not overlook the fees

  1. Balance Transfer Fees. Even though you might be getting a lower introductory annual percentage rate, it doesn’t mean that the service is completely free. In most cases, you will have to pay a 3-5% Balance Transfer Fee. Of course, the smaller the fee, the better.
  2. Annual Fee. Your balance transfer card might carry an annual fee, so you’ll want to do a bit of research prior about the fees associated with each offer. You might find balance transfer cards with no annual fee, but it’s not a guarantee, so be sure to read the fine print on your agreement prior to completing the balance transfer.

Other balance transfer considerations

  1. Introductory Annual Percentage Rate Period for Balance Transfer. The introductory Annual Percentage Rate (APR) is usually for a period of up to 12-18 months, and your APR will increase as soon as the intro period is over. For paying down a debt, if you take advantage of a low introductory offer, then it’s ideal to have a longer intro period to allow more time to pay down the balance.
  2. Introductory Annual Percentage Rate Period for Standard Purchases. In some cases, new purchases on cards with an active balance transfer offer will incur interest at the standard purchase APR, unless the introductory APR applies to new purchases on the card, as well. Know whether the introductory APR applies to both the transferred balance and any new purchases you might make with that card.
  3. APR. Pay attention to the standard APR that applies after the introductory offer expires on the card, as this will be the new APR that applies to the balance remaining on the card. If you want to pay down your debt, a good goal is to pay it off your debt within the introductory period before the standard APR applies.

You may or may not be able to replicate it

Don’t count on being able to repeatedly roll over debt to another balance transfer offer, as over-utilizing credit could lower your credit score and make you less likely to qualify for another balance transfer offer.

In addition, you’ll pay balance transfer fees for each transfer. While 3% may not sound like much, you would pay $300 for transferring $10,000. While it can be better than paying off your balance over time on a higher interest rate card, this is not small change.

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