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A balance transfer credit card is a credit card with particularly low rates and fees on balance transfers.
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Balance transfer credit cards are particularly useful when you’re consolidating debt, such as when you want to move a balance from a credit card with higher interest rates.
Acquiring a balance transfer credit card can be an effective way to consolidate your debt and save money on interest. Many balance transfer credit cards offer a 0% APR rate for a set introductory period (including the cards we’ve included in our list). This benefit can help you save money by allowing you to pay off some or all of your debt interest-free.
If you’re in the market for a balance transfer credit card, we’ve included a list of our favorites below.
Benefits:
Drawbacks:
Benefits:
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When shopping for a balance transfer credit card, you specifically want to consider the following details:
Length of introductory period: Many balance transfer credit cards (and most of the cards in the list above) allow you to transfer balances without fees as part of an introductory offer. The length of time in the introductory offer will vary between cards, but you want to pay close attention to when this time period ends so you aren’t surprised by new fees and interest.
Balance transfer fees: Even if you’re only planning on doing a one-time balance transfer during the introductory period, make sure you take note of what the regular fees are for balance transfers once the period is over – some of them can be quite high.
Ongoing APR rates: Like with the ordinary balance transfer fees, you want to pay attention to what the regular APR is going to be once the introductory period ends. The last thing you want is to transfer a balance to an account where you’ll be charged a higher interest rate.
Annual fees: Annual fees are inconvenient, but they’re not always a deal breaker. If you can make up the cost of the annual fee through the benefits of the card, then it might be worth it.
Credit limit: If you’re looking to use a credit card to consolidate debt with a balance transfer, you want to make sure that the credit limits are greater than the balance you want to transfer. Most credit cards don’t advertise what the credit limits are on their credit cards – often your credit limit is determined by the health of your credit.
Credit application requirements: Many credit cards will advertise the general range of credit they’re looking for (good, excellent, etc.). It’s a good idea to apply for a credit card that you are confident that you’ll be approved for.
Other costs and fees: Interest rates, balance transfer fees and annual usage fees are just a few of the more common costs of a credit card. Make sure to consider the other costs of a card that may affect you – like late payment fees and overdraft fees.
Balance transfers can absolutely impact your credit score, but most of the time the impact is positive. There are a few ways a balance transfer can affect your overall score:
Your credit utilization can have a big impact on your credit score.
In fact, this ratio can account for up to 30% of your overall credit score. Depending on your specific situation, balance transfers can account for a large percentage of the available balance on your new credit card. Keeping your older credit card open but rarely using it can help keep your credit utilization ratio under the ideal 30%.
For example:
Second, consolidating debt may help you manage monthly payments better. If you’re struggling to make your monthly payments on time – maybe due to high interest rates – then transferring some or all of your debt to a credit card with a 0% APR intro period may help. Missed payments can have a huge impact on your credit score – as much as 35%.
Third, if you close your old credit card when transferring the balance to a new one, you’ll lose the age of that account. This is something that could negatively affect your credit. The length (“age”) of your credit accounts for up to 15% of your overall credit score.
You don’t necessarily have to close your old credit card account when transferring its balance. However, if you’re worried about overspending by having multiple credit cards to use, this might be a good option.
Advantages and Disadvantages of a Credit Card Balance Transfer
Sometimes applying for a balance transfer credit card makes sense, and other times it may not be the best solution to the problem that you’re facing. Before you apply for that new credit card, consider the following:
Pros
Cons
Before applying for any balance transfer credit card, we recommend checking up on your credit score and credit history. The best deals for balance transfer credit cards typically require very good or excellent credit scores, and you don’t want to be surprised by a rejection. If your credit score is less than good at the moment, that’s okay – you have options.
You can find out your credit score right now with Credit.com’s free Credit Report Card.
Advertiser Disclosure: Credit.com has partnered with CardRatings for our coverage of credit card products. Credit.com and CardRatings may receive a commission from card issuers.
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