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Credit card balance transfers have been around for awhile – but they remain as useful as ever. In fact, the best balance transfer credit cards will often include a 0% promotional rate for up to twenty-four months, with some of these balance transfer credit cards offering promotions with no balance transfer fees attached or modestly low balance transfer fees.
Is all of this too good to be true? Let’s take a closer look at credit card balance transfers and discuss some of the best balance transfer credit cards available in the marketplace.
What is a Balance Transfer Credit Card?
A balance transfer credit card allows you to transfer high-rate credit card debt from an existing credit card account to another credit card account at a lower promotional interest rate for a specific period of time. In the best of circumstances, the promotional interest rate on the credit card balance transfer will be as low as 0% for a period as long as twelve to twenty-four months.
These 0% balance transfer credit cards are highly sought after and often considered the best balance transfer credit cards available, and therefore are generally reserved for those individuals possessing strong FICO credit scores well into the 700’s or higher. However, it is not uncommon for individuals with good to very good FICO credit scores to still qualify for some of the best balance transfer credit cards available.
How Do Credit Card Balance Transfers Work?
Credit card balance transfers are relatively easy. Simply provide customer service of the balance transfer credit card account with the account number of the credit card from which you wish to transfer higher interest rate credit card debt, along with the balance transfer amount. Of course, your balance transfer credit card account will have a credit limit, so make certain that the amount of your desired balance transfer is within your credit line – as well as within any stipulated allowable limit of balance transfers.
Next, pay close attention to a few important details. Be absolutely clear as to the length of the promotional interest rate period on your balance transfer credit card. You should realize that following the expiration of this promotional rate period, the interest rate on your balance transfer can climb substantially higher – often to as high as the interest rate for credit card purchases – which can be 15%-25%. You should also be clear about the balance transfer fee.
Only the best balance transfer credit cards have no balance transfer fee – most balance transfers will involve additional fees of 3%-5% of the amount of the transfer. After you have submitted your balance transfer, be certain to keep current with any payment due on the credit card from which you transferred, as it can still take up to two weeks for a balance transfer to fully process.
How Much Can You Save With a Credit Card Balance Transfer?
The amount an individual can save through a credit card balance transfer is largely determined by the difference between the original credit card interest rate and the promotional interest rate on the balance transfer credit card. For example, if someone were to transfer $5,000 from a credit card with a 14.99% APR to a balance transfer credit card with a promotional 2.99% APR for twelve months, the amount of interest expense savings computes to $600 (or more – depending on the frequency with which the original credit card compounds interest expense).
However, there are a few additional details to consider that can eat into these savings. Some balance transfer credit cards come with annual fees – though the better ones don’t. As previously mentioned, many balance transfers will involve fees. In the above example, a 3% balance transfer fee will reduce interest expense savings by $150. Finally, consider your monthly budget and cash flow, and determine whether you will actually be able to pay off the balance transfer completely before the promotional interest rate period expires.
If you can’t, you must be clear about where your interest rate is eventually headed, and when. At the very least, have a plan in place for this possibility, and be certain that the post-promotional interest rate – after accounting for all fees – will not be higher than the interest rate on the original credit card.
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The Best Balance Transfer Credit Cards
Many of the major credit card issuers offer their own version of attractive balance transfer credit cards to qualified individuals with healthy to strong credit profiles. The Discover 0% balance transfer credit card offers a promotional rate for 18 months with no annual fee, while the Citi Simplicity and the Capital One Quicksilver also offer 0% balance transfers with lengthy promotional periods and no annual fees.
Meantime, the Chase Freedom Unlimited and Amex Every Day Credit Card both offer 0% balance transfers for fifteen months with card member bonuses such as cash back on purchases and Membership Rewards Points. The landscape for the best balance transfer credit cards is always evolving, but a quick look at any of these five cards listed above can get you on the right track toward a credit card balance transfer that can save you money.