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Credit card interest can feel like quicksand. It accrues even as you make an effort to pay down your balance, pulling you deeper into debt. If you want a break from paying that high APR and you have a good credit score, one option you might consider is a balance transfer credit card.
Many credit card companies offer 0% intro APR promotions for new cardholders that allow you to avoid interest for a period of time when you transfer your balances from your other credit cards to theirs.
We'll cover how the process works, the benefits of balance transfers, and some caveats to consider. We'll also include a few of our favorite balance transfer credit card offers.
How balance transfers work
To complete a balance transfer, you'll need to choose a credit card with a 0% introductory APR offer for new cardholders. Make sure to choose a card with a promotional APR period long enough for you to repay your current outstanding balances. If the credit card issuer offers a pre-approval process, you could enter your social security number to check whether you're likely to qualify before applying.
Once you're approved, check your credit card agreement for the balance transfer limit, the time limit for transfers, and the balance transfer fee. You can typically complete the transfer online. Make sure to have your existing account numbers on hand. If you're transferring multiple balances, start with the credit card that has the highest APR.
Paying down your transferred balance
After completing the balance transfer, it's important to make at least the minimum payment on time each month. If you pay more than 60 days late, the credit card issuer can raise your interest rate on the transferred balance.
Ideally, you should calculate a monthly payment that will allow you to pay down the balance before the APR increases. You should also avoid making new purchases with the balance transfer card so as not to increase your balance and make it more difficult to pay off during the promotional period.
While you could keep transferring the balance from card to card to maintain a 0% introductory APR, you'll be kicking the debt down the road, and there's no guarantee you'll be approved for another balance transfer card when the time comes. Plus, opening card after card could have a negative impact on your credit score.
Balance transfer pros and cons
A balance transfer card can help you save money on interest, which makes debt repayment more manageable. But there are some downsides and risks to consider. Depending on your financial situation, you may want to consider alternative methods of debt consolidation. Here's what you need to know.
Benefits
- Lower repayment cost: Though you'll likely pay a balance transfer fee, the interest savings typically outweigh the one-time cost. For example, transferring an $8,000 balance with a 3% transfer fee would cost $240, while paying off the balance over a year at a 22% APR would cost about $985 in interest.
- Streamlined payments: A balance transfer can make repayment more manageable, especially if you have outstanding balances on multiple cards. Once the transfers are complete, you'll only have one due date and one monthly payment to worry about.
- Get out of debt faster: Saving money on interest means you can devote more of your debt repayment budget to the principal balance. Therefore, you could get out of debt faster without paying more each month.
Drawbacks
- Typically requires good credit: To qualify for a balance transfer card, you typically need good to excellent credit (a FICO score of 670 or above).
- Relatively short 0% APR period: The introductory 0% APR period for a balance transfer credit card typically lasts between 12 and 24 months, depending on the card. If you have a lot of debt, you might have difficulty paying off the full balance before the APR increases. By comparison, personal loans for debt consolidation may offer repayment terms of up to seven years.
- Doesn't resolve the underlying issue: A balance transfer card may not correct the financial issue that caused you to rack up debt in the first place, such as insufficient income or overspending. If you're already struggling to pay more than the minimum, a balance transfer card may not help you. Consider working with a nonprofit credit counselor to develop a budget and repayment plan if you need support.
Choosing a balance transfer credit card
Before choosing a balance transfer credit card, check your credit score and add up the balances on your existing cards. It may help to start a spreadsheet with the account number, outstanding balance, minimum payment, due date, and APR for each credit card. Evaluate your budget to determine how much cash you can put toward your monthly credit card payment.
Next, narrow down your options to balance transfer cards you can qualify for. Note that you typically can't transfer your credit card balances to a new card from the same credit card company. Look for a card with a long intro APR period, a low balance transfer fee, and a high balance transfer limit, especially if you have a lot of debt.
Before making your final selection, look at the standard APR after the intro period and check how long you'll have to complete the transfer, whether new purchases accrue interest, and what might cause your rate to go up.
You should also pay attention to other fees, such as late fees and foreign transaction fees, and evaluate any other perks the card offers like statement credits, cashback rewards, and insurance coverage.
Some of the best balance transfer credit cards include:
- U.S. Bank Shield™ Visa® Card: This card offers 0% intro APR on purchases and balance transfers for 18 billing cycles (then 16.99% - 27.99% Variable), plus a $0 annual fee and 4% cash back on prepaid air, hotel and car reservations booked directly in the Travel Center. But you need to complete transfers within 60 days from account opening to qualify for the intro rate, and you'll pay a balance transfer fee of 3% of the amount of each transfer or $5 minimum, whichever is greater, for balances within 60 days of account opening (after that, either 5% of the amount of each transfer or $5 minimum, whichever is greater.)
- Chase Freedom Unlimited®: This card offers 0% intro APR on balance transfers and purchases for 15 months (then 18.49% - 27.99% Variable) plus, you can earn a $300 Bonus after you spend $500 on purchases in your first 3 months from account opening (limited-time offer). The card's balance transfer fee is $5 or 3% of the amount of each transfer, whichever is greater in the first 60 days.
- Wells Fargo Active Cash® Card: This card offers 0% intro APR for 12 months from account opening on qualifying balance transfers and 0% intro APR for 12 months from account opening on purchases (then 18.74%, 24.74%, or 28.74% Variable APR). While that's a shorter intro period than other cards, you'll also earn unlimited 2% cash rewards on purchases (among the highest flat rewards rates for a no-annual-fee card) and a $200 cash rewards bonus after spending $500 in purchases in the first 3 months. The card's balance transfer fee is 3% intro for 120 days from account opening, then up to 5%, min: $5.
- Citi Simplicity® Card: This no-annual-fee card features 0% intro APR on balance transfers for 21 months from date of account opening (then 17.74% - 28.49% (Variable)); balance transfers must be completed within 4 months of account opening), 0% on purchases for 12 months from date of account opening (then 17.74% - 28.49% (Variable)), and a balance transfer fee of 3% of each balance transfer ($5 minimum) within 4 months of account opening; then 5% of each transfer ($5 minimum) after the 4 month intro period ends. While the card doesn't earn rewards, there's no late fee or penalty rate, and you can pick your payment due date.
Balance transfers and your credit score
A balance transfer doesn't directly impact your credit score, and it won't show up on your credit report. But it could impact your credit score in other ways.
- Applying for a new credit card: A credit card application typically requires a hard inquiry, which could impact your credit score. For most people, the impact of one additional hard inquiry is typically less than five points. The new account will also decrease the average age of your accounts, but the effect on your score is usually minimal.
- Changing your credit utilization: Your credit utilization ratio is your outstanding balance divided by your credit limit on each card and also across all your cards. It's one piece of the "amounts owed" credit rating factor, which accounts for 30% of your FICO score. If the balance transfer raises your credit utilization, it may negatively impact your score. To avoid this, aim to get a new credit card with a high limit — though you won't know your individual limit until you apply.
- Paying off the balance: Your payment history accounts for 35% of your credit score, and a strong track record of on-time payments could do wonders for your score. On the other hand, if you miss payments or pay late, you may damage your credit score.
FAQs
What are the benefits of a balance transfer?
A balance transfer to a 0% intro APR credit card offers the benefit of a lower interest rate, which could allow you to pay down your debt faster. If you're carrying balances on multiple credit cards, a balance transfer can also consolidate those debts, so you'll only have to keep track of one monthly payment.
What is the downside of a balance transfer?
Balance transfer credit cards have relatively short promotional periods during which the 0% APR applies. Once the intro period ends, you'll be subject to the regular APR on the remaining balance. Debt consolidation loans offer longer repayment periods. Some balance transfer cards may charge interest if you make new purchases during the promotional period, and most credit card issuers charge a balance transfer fee.
Do balance transfers hurt credit score?
Applying for a balance transfer card could cause a slight decline in your credit score. Beyond the initial application, a balance transfer may affect your score positively or negatively, depending on your credit card balances, the credit limit on the balance transfer card, and your payment history.
Bottom line
A balance transfer could save you money on interest, consolidate your payments, and help you climb out of debt faster. But along with the benefits of a balance transfer, there are some downsides to consider.
Check your credit score to see if you're likely to qualify and estimate the impact of the transfer on your credit. If you're totally overwhelmed with debt, you may want to consider other alternatives. Talking with a credit counselor is a great place to start.
If a balance transfer seems right for you, decide which features are most important, like a long intro APR period (the U.S. Bank Shield Visa Card is a great option), a low balance transfer fee, or other perks.
For more options, check out the best balance transfer credit cards.
Benefits Card Details Intro Offer
Benefit from a long introductory APR period on purchases and qualifying balance transfers
Annual Fee $0 Why we like it
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