CardRates.com Guide: Balance Transfers
When I left college, my credit history was essentially nonexistent, and my credit score was a joke. True to the college student stereotype, my younger self had little interest in real-world skills, like personal finance. As far as I was concerned, if it wouldn’t help me do well on my next thermodynamics exam, I didn’t have time to think about it.
Unfortunately, we all have to graduate eventually, and I quickly learned that my education wasn’t quite as useful in the real world as I hoped. It turns out that everyday life has few opportunities to use kinetic energy equations — and a lot of times you need to know about credit and budgeting.
My first credit card was certainly proof of that. Due to my lack of a credit history, the APR on that card was so high it was nearly in orbit. While that would have been fine if I’d avoided carrying a balance, not keeping a proper budget meant I almost always had a balance. But if I lacked other important knowledge, I was at least wise enough to make my minimum payment by the due date each month.
So, although I was often stuck paying fees for my astronomical APR, I was also building credit — and it eventually paid off. A year later, I was able to qualify for an awesome balance transfer credit card with an introductory APR a lot more down to Earth. Without those high interest rates dampening my spending, I had the cash to pay down that high balance, once and for all.
1. How does a balance transfer work?
Unlike many things in life, balance transfers are exactly what they sound like: you transfer a balance from one credit card to another credit card. Ideally, the card to which you transfer your balance is a low-interest credit card (or, at least, lower-interest). Reducing your interest rate allows a larger portion of your payments to go toward paying that balance down.
The actual process of making a balance transfer will depend on the cards involved. If you want to transfer your balance to a new credit card, you can typically indicate the balance and amount during the application process. If you wish to transfer to an existing card, you’ll need to contact the issuer of the card you wish to make the transfer to. This can generally be done by phone or online.
For those who qualify, the best way to maximize the savings of a balance transfer is often to apply for one of the many balance transfer credit cards that come with an introductory APR offer. The best balance transfer cards have intro APR offers that provide a 0% interest rate on balance transfers for 12 months or more, with some introductory periods extending for up to 21 months.
Be sure to pay off your balance before your promotional period ends to ensure you aren’t stuck with interest charges. Once your intro terms expire, the remainder of your transferred balance will be subject to the default balance transfer rate, which is generally the same as (or higher than) the APR charged for new purchases.
Another thing to keep in mind is that nearly every balance transfer credit card charges a balance transfer fee, which usually runs between 3% and 5% of the transferred balance. While this can be pretty steep, it may also be worth it, depending on your balance and current interest rate. Even a 5% fee is still significantly less than the average credit card APR, so there’s still plenty of savings to be had.
2. Can you transfer part of a balance on a credit card?
A common hurdle faced by consumers looking to make a balance transfer is not receiving a high enough limit on the target balance transfer card to accommodate their entire balance. For any given credit card, the credit limit you are given will depend on both your credit profile and your income — and this applies to balance transfer credit cards, as well.
In some cases, well-qualified consumers have had success contacting a credit card issuer and requesting a higher initial credit limit, particularly when a balance transfer is the specific intent. However, many credit card issuers prefer you to have some history of on-time payments with your card before they’ll consider a credit limit increase for other reasons. This means the credit limit you’re offered at approval may be the one you’ll need to work with for your balance transfer.
Thankfully, you may still be able to salvage some savings from the situation. You can instead perform a partial balance transfer, rather than trying to transfer your entire balance. This can be done with balance transfers that are initiated at the time you apply for a new card, or with balance transfers you make to an existing card.
While a partial balance transfer is obviously not as ideal as transferring your full balance, since the portion that remains on your old card will continue to be charged interest, it can still be worthwhile. You can use the breathing room you obtain from lowering your rate on some of your balance to put more toward paying off the higher-interest portion.
3. What do I do with a balance transfer check?
Every once in awhile, your credit card issuers may send you what’s known as a balance transfer check in the mail. Given that paper checks are somewhat of a rarity these days, this practice isn’t quite as common as it once was, as many offers are now extended online.
Balance transfer checks are a simple way to transfer a current debt to your credit card, and balance transfer checks don’t limit you to just credit card debts. You can transfer the balance of just about any kind of debt to your credit card with a balance transfer check, including personal or student loans, up to your allowed transfer amount (typically up to 90% of your credit limit).
Although balance transfer checks can be used on nearly any kind of debt, some debts shouldn’t be transferred to a credit card unless you have a particularly low interest rate or 0% intro APR offer. This is because most credit cards charge much higher interest rates than other forms of debt. Don’t transfer a balance to your credit card if the transfer doesn’t afford you a lower interest rate on your debt.
Additionally, balance transfer checks also come with all the costs associated with any other method of balance transfer. This includes balance transfer fees, which often equal up to 5% of your transferred balance.
4. Can I do a balance transfer to the same card twice?
While not true of all credit cardholders, many who carry a balance on one card carry a balance on multiple cards. Not only can this mean high interest rates all around, it can also mean keeping track of multiple due dates, minimum payments, and APRs, potentially leading to late or missed payments when something slips your mind.
To solve this problem, qualified consumers can turn to balance transfers. That’s because you can actually make several balance transfers to the same card, provided your credit limit can accommodate the total amount of transferred debt. With a good balance transfer offer, you can lower your interest rate and consolidate your credit card debt, simplifying your payments.
5. Can I transfer a balance to an existing credit card?
As valuable as introductory balance transfer offers can be, the best balance transfer cards typically require you to have good to excellent credit to qualify for approval. Thankfully, these offers aren’t the only way to enjoy the cost-saving benefits of a successful balance transfer.
Indeed, you may have the means to reduce your interest already in your wallet, as the majority of credit card issuers will allow you to transfer a balance from one existing card to another. This requires contacting your issuer, either online or by phone. You may also transfer a balance to an existing card using a balance transfer check sent through the mail by your card company.
In fact, you may even score an interest rate deal from your existing card. Some credit card companies will reward cardholders of long standing with introductory APR offers good on new purchases and/or balance transfers that can be activated on your existing card without needing to fill out an application or open a new account.
One thing to consider when looking to perform a balance transfer is that you often can’t transfer balances between two cards from the same credit card company. For instance, if you have a balance on your Chase Sapphire Preferred card, you can’t transfer it to the Chase Freedom card.
6. Can you transfer a credit card balance if the account is closed?
A common misconception in the credit card world is that a closed credit card account with a remaining balance will stop accruing interest once it’s closed. Sadly, this is not the case. If your credit card account has any sort of balance after your grace period ends, you will be charged interest on that balance, regardless of whether the account is considered to be “open” or “closed” by the issuer.
On the plus side, closing your credit card account doesn’t close off all of your repayment options. Just as you can — and are legally obligated to — still make payments on the account after it’s closed, you can also still transfer that balance to another credit card if you like. This can typically be done through your online credit card account or by calling your issuer.
7. Can you transfer money from your credit card to your bank account?
Something that seems to almost inevitably come into the mind of every new cardholder is the question of whether they can borrow from their credit card to put cash into their bank account. After all, credit cards are a form of credit, just like personal loans, so they should operate the same way, right? Wrong.
In fact, the only direct way to add money to a bank account using a credit card is to perform a cash advance, which is essentially a loan from your credit card, then deposit that cash into your account. But while cash advances are a simple way to use your credit card to obtain cash, it is most definitely not an affordable one. Not only will you likely be charged a cash advance fee, but most credit cards charge APRs upwards of 25% for a cash advance — and that interest starts accruing immediately.
Although credit cards have a lot of similarities with other forms of debt, like personal loans, each credit product is intended to serve a particular purpose. Thus, each product operates in a different manner. Cash loans are typically issued in the form of a check or direct bank deposit, and once you pay off your loan, the agreement ends, and you and the lender are splitsville.
Credit cards, on the other hand, utilize revolving credit lines, which can be used, repaid, then used again over months or years. While revolving credit lines can be excellent for financing purchases on a regular basis, they aren’t actually intended to be used in place of cash — so they charge you fees for the privilege.
8. How long does it take to do a balance transfer on a credit card?
When you’ve made up your mind to transfer a balance, you generally want to get it over and done with, particularly in light of the fact that you’re probably paying significant interest rates with your current card. Happily, balance transfers don’t tend to take very long, and are often completed within seven to 10 days, if not sooner.
In some cases, however, your balance transfer may take longer. Either way, remember to make any necessary payments on your initial card while waiting for the transfer to complete. Until the balance transfer has gone through both the initial card issuer and the new issuer, you are still legally required to make at least the minimum payment on your initial card before your due date to avoid late fees and/or credit damage.
9. Do balance transfers affect your credit score?
With the right balance transfer offer, you can not only consolidate your credit card debt onto one card, but do so at a much lower interest rate. To make a good deal even better, balance transfers aren’t (inherently) bad for your credit score.
Indeed, when you open a new balance transfer card, you may even potentially improve your credit score by reducing your overall utilization rate (how much of your available credit you are using), as well as the utilization rate on the cards from which you transfer balances. Balance transfers can be especially good for your credit score if transferring certain balances allows to you free up any credit cards that have been maxed out.
That said, there are some conditions under which transferring a balance can have negative credit score impacts. For instance, if you transfer multiple balances (or even a single balance) to one card and utilize a large portion of that card’s available credit, you may see negative credit consequences due to an increased credit utilization rate.
What you do with a card after you transfer the balance can have impacts, as well. For example, if you were to transfer a balance from Card A to Card B, then close Card A, you could see credit repercussions from closing your credit card. The same thing can occur if you use a balance transfer check to pay off a loan or other debt.
Your FICO score is calculated using five different factors. While the most impactful of those factors is your payment history (worth 35% of your FICO score), your credit utilization can be worth up to 30% of your score. Additionally, the length of your credit history and the average age of your credit accounts contribute to 15% of your credit score calculation.
So, if Card A was an older card and/or had a high credit limit, closing that card may impact both your credit utilization and your average account age, decreasing your credit score as a result. In most cases, unless a particular credit card charges an annual fee, you’re better off leaving the credit card account open after your balance transfer finalizes to avoid potential credit impacts.
10. Is it bad to pay off a credit card balance?
Many things in the credit card world can be very counter-intuitive, such as the fact that a lender checking your credit score (which is what it’s made for) can actually negatively impact your credit. Similarly, many people are perplexed by the idea that closing a credit card account can damage your credit score.
Thankfully, there’s a world of difference between closing a credit card account and simply paying off your balance. So long as you leave your account open, paying off your credit card is pretty much always a good idea, particularly if you can do so within the card’s grace period (i.e., before the due date of your current billing cycle) to avoid paying interest.
11. Do balance transfers require monthly payments?
Perhaps one of the most important things to understand about balance transfer cards with 0% intro APR deals is that “zero interest” doesn’t mean “zero payments.” Whether you are being charged interest on your credit card balance, you are legally obligated to repay that balance, regardless of its origin. That means making at least your minimum payment every month before your billing due date.
On the plus side, if you’re enjoying a low-interest or 0% APR deal on your transferred balance, the bulk of that minimum payment will go toward your principal balance, rather than being wasted on interest fees. This allows you to make more headway on repaying your debt, instead of simply paying your issuer.
12. What is the best way to pay off credit card debt?
In the simplest terms, the “best” way to pay off credit card debt is to, well, pay it off. Pay more than your minimum payment every month and, depending on the size of your balance, you can expect your debt to slowly disappear over months or years. The key here is to pay more than the minimum amount, as that minimum payment may barely cover the interest fees if you have significant debt (or a particularly high APR).
Of course, it isn’t always that simple — but, sadly, neither is the solution. The best way to pay off your credit card debt will likely depend on your personal situation, rather than any hard-and-fast formula. For example, your options may vary based on your individual credit score, how many cards you are carrying a balance on, and how much total credit card debt you need to repay.
One popular method used to pay down debt more efficiently (and affordably) is to obtain a lower interest rate. When less of your payment goes toward paying interest, more of it is available to pay down the principal, helping you get debt-free faster.
Since the best interest rate is no interest rate (i.e., 0% APR), balance transfer credit cards are a popular option among those who can qualify. Consumers with good to excellent credit will typically qualify for intro APR offers providing interest-free balances for 12 months or longer. Applicants with fair credit can still often find lower-APR deals, but may not qualify for a 0% APR offer.
Balance transfers can also be helpful for those who carry balances from higher-interest transactions, like cash advances. Most credit card issuers will apply your minimum payments to the portion of your balance with the lowest APR, meaning your higher-APR balance keeps accruing fees. A balance transfer will treat all balances the same, so your payments will go toward your whole balance, rather than the least profitable portion.
Remember that balance transfer offers may help you obtain an interest-free balance, but that doesn’t mean you’ll be payment free, as well. No matter what your interest rate, you’re still obligated to make monthly payments — of at least your minimum required payment amount — to avoid late payment fees and potential credit damage.
13. Is it better to get a loan to pay off credit cards?
When it comes to paying off credit card debt in the most efficient way possible, often the name of the game is to obtain the lowest interest rate you can. The lower your APR, the less of your money goes toward interest— and the more money you have to put toward paying down your debt.
Keeping that in mind, the choice of taking on a loan to pay off credit card debt will likely depend on the potential interest rate reduction from the move. For instance, if you can qualify for a credit card with an intro APR offer that gives you 0% APR for 12 months on balance transfers, you’ve reduced your APR as low as it can go.
On the other hand, if you don’t qualify for a good balance transfer offer or need to pay off more than you can transfer, you may be better off with a personal loan. For the majority of consumers, loans offer much lower interest rates than the average credit card, and you can often obtain personal loans that extend up to 60 months, giving you plenty of time to repay your debt.
That said, if you do choose to go with a loan, you’ll need to consider more than just the interest rate; the length of your loan will also contribute to your monthly payment. The longer you extend a loan, the lower your monthly payment will be, but the more you’ll pay in interest. The best personal loans are those that balance cost effectiveness with an affordable monthly payment.
14. Do balance transfers have fees?
Balance transfers can be great ways to lower the interest rate charged on your credit card debt and make paying off that debt much more affordable. At the same time, few good things come without strings, and balance transfers have a big one: the balance transfer fee.
For the vast majority of credit cards, each balance transfer will come with a balance transfer fee, charged by the card to which you are transferring your balance. Balance transfer fees are typically 3% to 5% of the transferred balance, and will apply to each individual balance transfer you perform to that card.
There are a small handful of no-fee balance transfer cards on the market, but they are few and far between. Currently, on the BankAmericard® Credit Card and the Barclaycard Ring™ Mastercard® are the only cards offered by the top issuers that don’t charge a balance transfer fee. Some smaller credit card issuers, community banks, and local credit unions may also provide fee-free balance transfer options.
In addition to the specific balance transfer fee, transferred credit card balances are subject to many of the same fees as new purchases. This includes late fees for making late payments (and yes, one day late is still late in the eyes of the average credit card company), as well as any applicable interest fees.
At the same time, there are some common credit card fees, such as foreign transaction fees, that you likely won’t need to worry about when making a balance transfer because they apply only to new purchases. (Of course, if you use your balance transfer credit card to make purchases abroad, foreign transaction fees may be applied to those purchases.)
15. Can I find balance transfer offers with no balance transfer fee?
Despite the huge range of options for cards that come with an intro APR balance transfer deal, the number that offer both no balance transfer fee and a low APR on balance transfers are surprisingly few. In fact, the only options from the top major issuers are the Barclaycard Ring™ Mastercard® and the BankAmericard® Credit Card. Neither option will offer rewards for new purchases, but the BankAmericard has an extensive promotional period.
That’s not to say those are your only options altogether, however. With some careful research, you can likely find a local credit union or community bank with a no-fee balance transfer card. Keep in mind that many regional financial institutions will have residency requirements for membership, meaning you may need to live in a specific city or county to join the bank or credit union.
16. What are the best balance transfer credit cards?
All in all, the best balance transfer credit card for you will depend on what you need it to do. The top options provide intro 0% APR offers of at least six months — and often more than 12 months — with low (or no) annual fees. Some of the best balance transfer cards will even offer rewards on new purchases, plus extra benefits, like free FICO score tracking.
But great intro APR deals typically require great credit. In fact, the majority best balance transfer cards will require good to excellent credit (a FICO score of 700+) to be approved. Those consumers with fair credit may still find lower-APR options, but you may not receive a 0% APR credit card offer.
The Barclaycard Ring™ Mastercard® and BankAmericard credit card are two of the most popular options offered by top issuers, as neither card charges a balance transfer fee on balances transferred within the first 60 days. Balances transferred to the BankAmericard beyond the promotional period will incur balance transfer fee of 3%.
Another popular option is the Citi Simplicity Card, which has one of the longest promotional periods available. As good a deal as the card offers, though, keep in mind that the Citi Simplicity Card charges a 3% balance transfer fee on all transferred balances, no matter when you make them.
17. Is the Chase Slate card good for balance transfers?
In the balance transfer realm, the coolest card at the party tends to the one that has the fewest fees — which makes the Chase Slate card practically made of ice. The Chase Slate card is one of the most popular balance transfer credit cards, thanks in large part to the fact that it’s one of the few cards on the market that offers a 0% APR introductory rate and doesn’t charge a balance transfer fee.
However, the only fee-free balance transfers are those made within the first 60 days after opening your account; transfers made after the promotional period will incur a 5% balance transfer fee. Additionally, you won’t be able to transfer a balance from one Chase credit card to another Chase card.
Furthermore, the Chase Slate card is really only good as a balance transfer credit card. You won’t earn any cash rewards, points, or miles on new purchases (or any purchases, for that matter).
18. Is the BankAmericard Cash card good for balance transfers?
Although Bank of America has one of the smaller stables of credit card options, what it does have makes a fairly good impression, including two of its more popular balance transfer cards, the BankAmericard credit card and the BankAmericard Cash credit card. But while both cards provide a great promotional rate (who doesn’t want 0% APR?), each has secondary offerings that may swing your vote.
In particular, the BankAmericard credit card makes a popular balance transfer choice because, in addition to its intro APR rate, the BankAmericard credit card doesn’t charge a balance transfer fee on balances transferred within the first 60 days of account opening (3% on balances transferred after the first two months). On the downside, the BankAmericard credit card doesn’t offer any kind of rewards on new purchases.
The BankAmericard Cash credit card, on the other hand, also offers an attractive intro APR deal on balance transfers, but it charges a 3% balance transfer fee for the service. On the plus side, the card offers rewards on new purchases, including bonus rewards for purchases made at gas stations, grocery stores, and wholesale clubs.
So, if you’re looking for a balance transfer card that will save you the most money on your current balances, the BankAmericard credit card may be your better option. If you’d like to find a nice rewards card that happens to have a solid balance transfer introductory APR offer, the BankAmericard Cash card may be for you.
19. Do balance transfer credit cards have annual fees?
Since the entire point of a balance transfer is to reduce the amount of money you’re putting toward interest fees, the number and size of additional fees you pay are probably at the top of your list of concerns. But while the balance transfer and interest fees tend to get a lot of attention, the annual fee your card charges should also be considered when selecting a balance transfer credit card.
For the most part, balance transfer cards have the same costs as any other credit card. So, whether you have an annual fee — and the size of it, if you do — will depend on the credit card company and/or the specific card. For instance, all Discover cards come without annual fees, while the annual fee of your Chase credit card will vary by the specific card you select.
Cards that offer rewards on new purchases often have the highest annual fees as a way to compensate for the cost of the rewards to the issuer. Depending on how you intend to use the card, it may be worthwhile to pay an annual fee. You’ll come out ahead if the value of your rewards earned each year outweighs the cost of your annual fee. A lucrative sign-up bonus can also sway the math in your favor.
20. What is APR on balance transfers?
A feature of nearly every credit product, the annual percentage rate, or APR, is the interest rate you are charged for any debt you borrow. In terms of credit cards, any balance carried on your credit card from month to month is subject to being charged interest, regardless of its origin. While most consumers focus on their new purchase APR, other transaction types can have individual APRs, including balance transfers and cash advances.
In many cases, the APR charged on transferred balances will be the same as that charged for new purchases — but “many” doesn’t mean “always.” You can consult your cardholder agreement to determine the interest rate you’ll be charged for a transferred balance.
One thing to remember is that most credit cards use a variable APR, which means your APR can change over the course of your cardholdership as the US Prime Rate fluctuates. In general, when the market is good, the Prime Rate tends to increase, and when the market is poor, it tends to decrease.
Another important thing to keep in mind regarding balance transfer APRs is that credit card balance transfers don’t have the same grace period to avoid interest as new purchases typically provide. In other words, as soon as your balance transfer is complete, you could start accruing interest on that balance. The only exception is if you have an intro APR offer that provides 0% APR on balance transfers.
Be sure to consider the representative APR range of the default balance transfer APR when comparing balance transfer offers. The representative APR range will give you an idea of what APR you’ll be charged when your introductory period ends, which will depend on your individual credit score.
21. What does it mean if a credit card has 0% APR?
It seems like nearly every product category has its elite options, those special products that outshine the competition. When it comes to balance transfer credit cards, the leaders of the pack are cards that come complete with a solid introductory 0% APR offer.
Essentially, 0% APR credit card offers provide an introductory rate on your transferred balance for a set period of time, with the best balance transfer cards providing intro APR offers with introductory periods of 12 months or longer. What this means is you can transfer a balance to the new card and pay no interest on the transferred balance for the entire promotional period.
While most introductory APR deals are offered to new applicants, existing cardholders aren’t necessarily out of luck. Many major issuers will provide cardholders in good standing with periodic low- or no-interest offers that can be applied to an existing card, no new application necessary. Make sure to read each term and condition carefully before accepting an offer so you aren’t caught unawares by unexpected fees.
What’s vital to understand about intro APR offers is that they are just that: introductory. Once your introductory period ends, you will be charged the default balance transfer APR. You’ll want to be familiar with each term and condition so you know when your introductory period ends — and what your new APR will be when it does. The default balance transfer APR will likely be similar to (and often the same as) the variable APR you’re charged for new purchases.
Another thing to be aware of is that you aren’t free from making payments simply because you aren’t being charged interest. Be sure to make at least your minimum monthly payment to avoid being charged late fees or suffering potential credit damage.
22. What is a balance transfer “promotional period”?
In an effort to attract new customers (or simply new debt), many major credit card issuers will provide introductory balance transfer offers that provide 0% APR on transferred balances for a set period of time. The length of the promotional period will vary by card and company, but deals lasting 12 months or longer are common for those with good to excellent credit scores.
The key thing to remember about promotional periods is that they are temporary. Once the term ends, you’ll be charged the default balance transfer APR on any remaining balance, so make sure you know each term and condition of your offer to ensure you aren’t stuck paying interest fees after it ends.
You’ll also need to avoid making any late payments during your promotional period. In addition to the requisite late fees, late payments can cause incur a penalty APR. Depending on the card, the penalty APR may simply be the default balance transfer APR, while other cards have a specific penalty APR (often much higher than the card’s regular APRs).
23. How much can you transfer from one card to another?
One of the key questions on the mind of most consumers looking to make a credit card balance transfer is whether they can actually transfer all of their debt. Unfortunately, there’s no one-size-fits-all answer to the question, as the amount you can transfer will depend solely on the credit limit you have available.
As a general rule of thumb, most credit card issuers will only allow you to transfer up to 90% of your available credit limit. In other words, if the card to which you want to transfer a balance has a credit limit of $10,000, you will likely only be allowed to transfer up to $9,000 to that card from other cards.
If the amount you wish to transfer exceeds your current limit, you can try requesting a credit limit increase to accommodate the full balance. You’ll usually have the most luck receiving a credit limit increase on cards you have maintained in good standing for several years. Be aware that most issuers will check your credit before granting a credit limit increase, which may result in a hard credit inquiry.
24. Do all credit card issuers allow balance transfers?
Overall, the vast majority of credit cards will allow you to transfer balances to and from your card. The most notable exceptions to the general balance transfer eligibility are closed-loop store cards — credit cards you can only use for store-branded purchases — and most secured credit cards. Many subprime credit cards (those designed for cardholders with poor credit) will also be ineligible to receive balance transfers.
One of the easiest ways to determine if your credit card is eligible for balance transfers is to check your cardholder agreement. If you don’t see a separate balance transfer APR specified in your credit card terms (usually listed right after your APR for new purchases), chances are good the card doesn’t support that type of transaction.
You should also note that you don’t necessarily need a card specifically advertised for balance transfers to get a good deal on one. Nearly any low-interest credit card can be a good option, particularly if you don’t qualify for an intro APR balance transfer offer. Even an interest rate reduction of just 5% can mean big savings over the long term (provided the balance transfer fee is less than 5%).
25. Do you get points for balance transfers?
When it comes to saving money on your balances, you really can’t beat a great balance transfer intro APR offer — or can you? For many credit card users, the only thing better than paying no interest on a transferred balance would be earning rewards on that balance, too. Unfortunately, you don’t get rewards simply for transferring a balance.
In general, only new purchases will qualify for credit card rewards, including cash rewards, points, and travel miles. Credit card rewards programs are designed to reward cardholders who use their credit cards frequently to make purchases, as each swipe typically means processing fees paid to your credit card company. Balance transfers, on the other hand, represent purchases you’ve already made, so they don’t qualify for rewards.
And along that vein, since balance transfers don’t qualify for rewards, your transferred balance won’t count toward sign-up bonus spending requirements, either. If you want to earn a credit card sign-up bonus, you’ll need to reach that requirement the old-fashioned way: by making purchases. If your balance transfer card offers rewards, new purchases made with that card can qualify for those rewards.
26. Are balance transfers worth it?
Between the balance transfer fees, the process of finding and applying for balance transfer intro APR offers, and the delicate credit limit dance that can sometimes make or break your transfer, it’s easy to wonder — is it all even worth it? The answer is almost always a resounding, “Yes.”
While it can seem like a lot of trouble to go through, a successful balance transfer can save you a significant amount of money in interest fees alone, not to mention the opportunity cost gained by paying down your debt at a faster rate. And that applies to nearly anyone, as the average credit card charges a two-digit interest rate, and a good intro APR offer can cut that down to zero.
Let’s put some numbers to it. Consider a hypothetical debtor, Hank, who has $10,000 in credit card debt. Hank’s currently being charged a typical 16% APR for his credit card debt, which costs him around $1,600 a year in interest fees. If Hank were to transfer his balance to a credit card offering an intro 0% APR for 12 months, that $1,600 could go toward paying down his balance, rather than padding his issuer’s pockets.
For many people, like Hank — and me — getting rid of interest fees can make all the difference in your ability to pay down your credit card debt once and for all. Balance transfers are often a great way to obtain lower interest rates, particularly if you have the good to excellent credit necessary to qualify for the best balance transfer credit cards.
If your credit is at least fair, you can typically find lower-interest introductory offers or low ongoing APR credit cards that can give you a break on any high-interest credit card debt. About the only group who may not benefit from a balance transfer is those with poor credit who can’t qualify for a lower APR credit card. In this case, a lower-APR personal loan may be a better option.
Photo source: wisebread.com
Editorial Note: Opinions expressed here are author's alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.