There is no question, Americans have a habit of spending too much on their credit cards. And, once they do, it just may be time to consider a balance transfer credit card. A balance transfer credit card allows a customer with a high-interest credit card balance to move that debt over to a card that features a 0% introductory annual percentage rate (APR) for a certain period of time.
The best balance transfer credit cards, essentially introductory 0% interest credit cards, provide ample time to pay that balance down sans interest and don’t charge an astronomical fee to make the move. Let’s break down balance transfer credit cards further.
How to Pick a Balance Transfer Credit Card
The two most important factors in a promotional balance transfer credit card offer are the length of the promotional financing, and any balance transfer fee. By law, these promotional financing offers must last at least six months, but the best offers currently last as long as 21 months. You can receive interest-free financing on your balance during this period, and the standard interest rate will only apply to the remaining balance after the promotional rate expires.
The next most important factor is the balance transfer fee. Nearly all credit cards with 0% APR promotional financing offers impose a 3% fee on the amount transferred, but there are currently a few exceptions, so it’s a good idea to read the fine print on any cards you’re considering.
Other factors to consider include the standard interest rate, which will ultimately apply to any remaining balance you haven’t paid during the promotional period, in addition to any new purchases. Many credit cards offer a range of standard interest rates, with the rate you receive being based on your creditworthiness at the time you applied. (You can check your credit scores, updated every 14 days, for free on Credit.com to see where you stand.)
You can also consider any rewards that the credit card offers, but just keep in mind that rewards credit cards will invariably have higher standard interest rates than similar cards that don’t offer rewards. Plus, it’s best to avoid rewards credit cards with balance-transfer offers if you think the ability to earn points, miles or cash back will ultimately cause you to overspend.
Finally, it’s always worth considering the various fees that can be imposed. You should be aware of a card’s annual fee, any foreign transaction fees or cash-advance fees.
How to Use a Balance Transfer Credit Card
Just transferring your balance won’t automatically lead to your debt being paid off. What’s important about a balance transfer is what you do after the transfer is complete. Cardholders should create a plan to pay their debt off before their promotional financing offer expires and the standard interest rate begins to apply. And when 100% of your payments goes to the principal, with no interest charges, the balance will fall quickly with each payment. You can use this nifty credit card payoff calculator to help you create a debt payoff plan and to see how much you’ll save in interest charges.
And — drumroll please! — here are our picks for the best balance transfer credit cards, based on length of their introductory period, cost of transferring the balance and overall terms and conditions.
Our Picks for the Best Balance Transfer Credit Cards
Why We Picked it: New cardholders receive 15 months of interest-free financing on both new purchases and balance transfers, with no fees imposed on transfers completed within 60 days of account opening. After those first 60 days, a 5% balance transfer fee (with a minimum of $5) will apply. The standard interest rate of a variable 15.49% – 24.24% will apply (rate depends on creditworthiness).
Pros: There is no annual fee or penalty APR for this credit card. Slate cardholders can use Chase’s Blueprint program, which allows you to avoid interest charges by paying off some purchases in full while carrying a balance on others.
Cons: Remember, if you don’t transfer a balance within 60 days of opening the account, you’ll pay a 5% fee of future balance transfers — which is higher than the standard 3% most balance transfer cards charge. There is a 3% foreign transaction fee imposed on all charges processed outside of the U.S.
Why We Picked It: The Citi Simplicity (read a full review of the card here) offers an industry leading 21 months of interest-free financing on both new purchases and balance transfers, with a 3% balance transfer fee (or $5, whichever is greater). When the promotional financing offer expires, the standard rate will be a variable 14.24% – 24.24%, based on your creditworthiness. (Full Disclosure: Citibank, as well as Chase and Discover, advertise on Credit.com, but that results in no preferential editorial treatment.)
Pros: This card has no annual fee, late fee or penalty interest rate.
Cons: There is a 3% foreign transaction fee imposed on all charges processed outside of the U.S.
Why We Picked it: Cardholders get 18-months 0% introductory financing on balance transfers for a 3% balance transfer fee. They also get a 6-month 0% introductory APR on purchases. After that, a variable interest rate between 11.49% and 23.49% will apply.
Pros: The Discover it carries no annual fee, no foreign transaction fees, no penalty APR and no late payment fee for your first late payment. The Discover it also happens to be a rewards credit card. It offers 5% cashback on purchases in revolving quarterly categories up to $1,500 and 1% cashback on everything else. Plus, as a signup bonus, Discover is currently matching all the cash back you earn for your first year at the end of the year.
Cons: That signup bonus and rewards program sound sweet, but they’ll only prove fruitful if they don’t deter you from paying down that balance you’re transferring. In fact, it can work against you if you rack up more debt trying to score rewards.
Why We Picked it: The card features a 0% introductory APR on balance transfers for 18-months for a 3% (or $5) balance transfer fee. After that, there’s a variable APR between 14.24% and 24.24%. Balance transfers must be completed within four months of opening an account.
Pros: The Citi Double Cash Card is also a rewards card — you get 1% cashback on purchases and 1% cash back when you pay those purchases off, for a total of 2% cash back. You won’t earn cash back when paying down the balance that you transferred, but given the card is designed to reward you for paying down debt, it’s an alternative for someone who ultimately wants a card with rewards, but is wary they’ll overspend.
Cons: There a 29.99% penalty APR, so this is not the card to opt for if you think there’s an outside chance you’ll miss a payment. There’s also a 3% foreign transaction fee.
At publishing time, Chase Slate, Citi Simplicity, Discover it — 18-month Balance Transfer Offer and Citi Double Cash credit cards are offered through Credit.com product pages, and Credit.com is compensated if our users apply for and ultimately sign up for any of these cards. However, this relationship does not result in any preferential editorial treatment.
Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.
Additional reporting was contributed by Jeanine Skowronski.