Considering a Balance Transfer Credit Card? What to Know Before Applying

May 3, 2019

By Sherry Keyles

If you find yourself with credit card debt, a balance transfer credit card can help you tackle it. With a balance transfer card, you can by transfer your high-interest balances to a card with a 0% APR introductory period, enabling you to save money while eliminating your debt faster.

Of course, balance transfers aren’t right for everyone. If you can’t pay your debt over the no-interest period (ranging from 12-21 months), a personal loan with a low interest rate might be a better option. Also, depending on your debt amount, balance transfer fees could cost you more than paying a regular interest rate.

If you are thinking about a balance transfer card, there are a few steps you can take to determine if a balance transfer is right for you.

Check your credit score. Most balance transfer card issuers require very good to excellent (FICO score at 670 or above) in order to qualify for a 0% APR card. Knowing your score can give you an idea as to whether you are likely to get approved.  

In addition to your score, you should review your credit report annually (you are entitled to one report from each of the three credit bureaus every year) to correct any errors or fraudulent accounts. The credit report will also help you understand what areas you need to work on to improve your score.

If you don’t have the right credit score to get a balance transfer credit card, spend some time working on improving it by bringing your accounts up-to-date, paying your bills on time and avoiding any additional debt.

Know Your Debt. Do a complete inventory of your debt from credit cards and loans. You can transfer multiple credit card debts as well as debt from car or personal loans to one balance transfer card.

Determine the debt amount you want to transfer. To take full advantage of a balance transfer card, you need to pay down the debt you transfer within the 0% APR period. Most introductory, no-interest offers range from 12-18 months. Calculate how much you can reasonably afford to pay each month and multiply the amount by the number of months in the promotional period. Only transfer the resulting amount to avoid having to pay higher interest if you don’t pay down the debt by the end of the introductory offer period. 

Only apply for one card at a time. You may be tempted to apply for several cards at once in case you get rejected from one but you should resist. Every time you apply for a credit card, a hard inquiry is performed on your credit. A hard inquiry can temporarily lower your credit score, which reduces the chances of being approved for additional cards. Having several new credit cards can also have a negative impact on your credit card because you are adding new credit. In addition, new cards can shorten your credit history and lower your credit score.

Compare offers to find the best card for you. Don’t settle for the first balance transfer offer you see - review different options. The best card for you is the one which matches your financial goals. Some factors to consider when comparing the offers include length of the 0% APR offer, balance transfer fees and regular APR rate. Some cards offer benefits waiving late fees or penalty APR, free credit reports and no foreign exchange transaction fee.

When you are comparing offers, you should keep in mind which issuers you can transfer balances too. Balance transfers from accounts with the same issuer are restricted. You will need to apply for a balance transfer card with an issuer not affiliated with your current issuer.

Ignore rewards. Many balance transfer cards offer points, miles or cash back on purchases but it’s better to avoid the rewards. Even if the card offers a 0% APR introductory offer on purchases, you don’t want to add to your debt. Otherwise, you’ll end up back in the same situation again, needing to pay down your debt. Focus on paying off your balance before the end of the introductory period.

Have a backup plan in case you don’t get approved for the card you want.It’s a good idea to have some alternative plans in case you don’t get approved for the card you selected or the credit limit you needed. Keep a list of the other cards you were considering. Every card issuer has their own standards for approving credit card so getting rejected from one card issuer doesn’t mean you won’t get approved by another issuer.

In addition, you might want to consider a card with a low APR or a personal loan may be a better alternative. Another balance transfer card is an option but you may end up with the same problem if you can’t pay off the debt within the introductory period.

Don’t Delay.Most balance transfer offers expire after a certain date so make sure you apply before the offer’s end date. To expediate approval, complete the application online at the card issuer’s website.

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