If you are looking to pay down your credit card debt, a balance transfer credit card can help you save money and eliminate your debt faster - as long as you choose the right one.
With a balance transfer card, you move your credit card debt from one or more high-interest credit cards to another card with a with an introductory 0% APR offer. You are your pausing interest payments while you pay off your debt during the introductory period.
Many card issuers offer balance transfer credit cards so you will have many to choose from. What’s good for one person is not the best option for another. before transferring a balance and applying for a card, you need to consider your specific financial circumstances Each offer comes with a unique 0% promotional period and its own fees and terms and those should be evaluated against your financial goals.
Considerations for Choosing a Balance Transfer Credit Card
When choosing a balance transfer credit card, your goal is to find a card to minimize your costs. You don’t want a card, which end up costing you more money. To help you find the best card, make sure you consider the following factors when comparing card offers:
1. Current Card Issuer
Generally, debt cannot be transferred between cards from the same issuer. For example, if you have a Chase credit card now, you will not be able to transfer your current balance to a Chase balance transfer credit card. Review card options at other issuers instead.
2. Credit Score
Typically, you need good or excellent credit to qualify for a balance transfer credit card with many requiring a FICO score of at least 700.. Issuers also consider other factors such as your income, credit history and debt levels so even if you have good credit, there’s still a possibility your application will not be accepted. If you do not know your credit score, find out before choosing a card.
3. Debt Amount to Transfer
You will want to ensure you qualify for enough credit on the card to cover your existing credit card debt. In addition, your minimum payment may be higher than you are paying with your current cards. Generally, 2% of outstanding balance is the common formula for minimum payments but not all issuers follow this guideline.
4. Introductory 0% APR
Balance transfer cards give you a certain amount of time to pay off the transferred amount without interest. Typical 0% APR periods are 12 to 18 months; some cards go even longer. Once the introductory period is over, the APR will go up.
Before transferring a balance, make sure you know whether you’ll be able to pay off the debt before the 0% introductory rate expires. For example, if you can pay off the debt in 15 months, you’ll want to look for offers 15 months or longer to give you enough time to reduce your debt without paying interest.
5. Balance Transfer Fee
Most balance transfer cards — but not all — charge you a fee to move a balance from another card. The average balance transfer fee is 3% of your balance although some cards will charge up to 5%. If you were to move a balance of $5,000 to a card with a 3% balance transfer fee, it will cost you $150 or $250 for a 5% fee. The difference between no balance transfer fee, 3%, and 5% may not seem like much but if you have a large balance, it can have a big impact. Also, remember the fee is added to your balance.
6. Transfer Time Requirements
Many card issuers only offer 0% APR on balances transferred within 45 or 60 days of account opening. Make sure to check your card’s rules so you understand when you need to transfer your balance. If you transfer it past the specified deadline, you will have to pay interest.
7. Interest Rate After Introductory Period
The introductory period does not last forever. Read your card’s terms and conditions to find out the interest rate you will pay if you still have debt remaining once the introductory period is over.
8. Credit Card Terms
Make sure you take the time to read the fine print and understand the card’s terms, For instance, many introductory 0% APR offers can be voided with a single late payment, leaving you with a much higher interest rate for the remainder of the promotion and a late fee. Before using a new card, take note of the terms, introductory offer expiration dates, payment due dates and the minimum payment requirements. One late payment can erase any cost savings you hoped to gain.
While not as important as the factors listed previously, there are some other criteria which can help in your decision-making.
• Introductory 0% APR on purchases - while it’s better to only use your card to transfer your balances, if you have a big purchase you need to make, you may want to consider whether there is a no-interest offer on purchases and how long it lasts. Not all match the balance transfer introductory period.
• Rewards - you can’t earn rewards for transferred balances but if you plan to use your card for purchases, you may want to consider a card you can earn rewards - airline miles, cash back or reward points.
• Annual fee - You don’t want to pay extra fees when you are trying to save money so review the card terms to determine whether the card charges an annual fee.
• Foreign exchange transaction fee - If you travel internationally and plan to use your card, make sure you find out if there are fees for international purchases.
Balance transfer cards can help you lower your interest rate while paying off your debt but no card off is the same. Before selecting a card, you need to evaluate your financial situation against the card features to ensure you pick the best card for you.