“How Do I Choose the Best Balance Transfer Offer?”
The opportunity to enjoy zero interest while you pay down credit card debt is one of the many perks promised by balance transfer offers. But with a bevy of these credit card offers competing for your undivided attention, how do you shop for the one that will give you the very best deal? (And no hidden surprises.)
Here are a few helpful tips on things to look out for and important details to note, when you’re weighing your options to bank the best balance transfer deal around.
Choose a Card with a Long Introductory Special Rate
The prospect of paying zero interest sounds like a dream come true, but keep in mind it’s only a temporary rate for a predetermined length of time based on that particular offer and variables such as your credit score and salary. As a general rule of thumb, most transfer offers have a promotional APR of anywhere from six to 18 months. The new Discover it® card for example offers a generous 14-month, zero interest on balance transfers.*
In order to take full advantage of zero interest offers, it’s a good idea to budget ahead. Sit down and figure out a smart strategy to pay down your debt in the coming months. Decide on a set amount you can reasonably afford to pay every month, above what your monthly minimum will be. Then, think about which months you anticipate having extra expenses: summer vacations, camps for the kiddos, car or home repairs. During the other months when your cash flow is in the black, pay larger chunks against your balance.
Choose a Card With Low Transfer Fees
Credit Karma explains that one of the secrets to saving more with balance transfer offers is to take into account balance transfer fees. The fees are there for a reason; to make sure you don’t “credit card balance transfer-surf,” which simply means continuously shifting balances over to new cards to avoid paying interest charges.
On average, credit cards typically charge a 3% balance transfer fee (on each transfer) with a maximum of $75 or $90. The fees are minimal compared to what you’ll save over a 12 or 18-month period while you’re paying down your balances and not incurring additional interest.
Choose a Card With No Annual Fee and a Low APR After the Introductory Rate
You’re trying to pay down your debt, not accumulate additional charges. So choose a credit card that doesn’t charge an annual fee. The Discover it® card for example has no annual fee, no overlimit fee and no late fee for your first late payment. Plus, if you occasionally do pay late, your APR will never go up.* While cards with no annual fee aren’t the right choice every time, when you’re looking at transferring balances, they make more sense.
Another point to note about balance transfer offers is to find out what your regular APR will be, after the introductory period, in case you don’t get your entire balance paid off in time.
Check-in On Your Spending
Credit cards with balance transfers provide the welcome opportunity for a fresh start. Just remember, if you’re transferring balances to free up credit on that old card, you’re defeating the purpose and putting yourself in a position to do more financial harm than good. The whole reason to do a balance transfer to begin with is to have the chance to pay off what you owe.
Now you know how to make the most of credit card balance-transfer opportunities when they come knocking. Keep your spending in check, stick to a budget and before you know it, you’ll watch your balance dwindle down to $0.