Some credit cards have introductory balance transfer offers to entice customers with existing credit card debt to switch over. New cardholders can transfer their existing credit card debt over to a new card with a, usually, limited-time low-interest rate. This, in theory, allows you to avoid interest and pay off debt quicker.
But not all balance transfer offers are created equal. While the cards you can qualify for depends on your credit, it’s a good idea to search for the card that gives you the best chance at successfully paying off your existing debt.
Here’s what to look for in a balance transfer credit card.
1. The Intro APR
Credit cards with balance transfer offers have introductory interest rates (intro APR) that are usually much lower than what cardholders typically pay. These intro APRs are good for a limited time and can allow you to reduce interest – or eliminate it entirely – when you transfer your balance over.
Start by looking for cards with 0% interest rates, which render your balance interest-free. If you can pay off the balance in full before the intro APR period expires, you can avoid paying interest entirely.
Even if you can’t qualify for a card with a 0% intro APR, you may be able to find a card with a much lower APR than you’re currently paying. This can still save you money in the long run and help you pay off your balance faster.
2. The Intro Payback Period
The intro APR for balance transfers is only good for a limited time. The timeline can vary between cards from a matter of months to more than a year. If you don’t pay off your balance within that time, the normal interest rate can be applied to any balance that remains.
Look for a card that gives you enough time to pay off the balance in full within the introductory payback period. Before you apply for a card, calculate how much you need to pay off your balance in full before the interest kicks in. For example, if you have a $1,200 balance and a six-month introductory period, you need to pay $200 per month toward the balance to pay it off before interest hits.
If you can’t find a long enough intro period to pay off your balance in full, look for one that allows you to reasonably pay down most of it.
3. Balance Transfer Fees
Many credit cards charge 3% to 5% of the balance amount as a fee for moving the balance to a new card. It may not sound like a lot, but for high balances this percentage can be significant. Some cards offer free balance transfers, but you may need to transfer the balance quickly to get that benefit. Look for a card with a lower, or nonexistent, balance transfer fee.
4. Annual Fees
Some credit cards charge annual fees, simply for the benefit of using the card, that are tacked on top of your balance. If you’re trying to pay down debt, it’s a good idea to avoid any added fees. Look for cards with no annual fee.
The Best Way to Use a Balance Transfer Credit Card
Make your balance transfer as soon as your card is active. This gives you the most time to take advantage of the intro APR period. It also helps you avoid balance transfer fees if your card offers free balance transfers for a limited time.
Budget to pay your balance off in full by the time the intro APR expires. If you don’t, you can end up paying interest on your balance.
Finally, you should avoid making purchases on your card while you focus on paying down your balance. Making regular purchases adds to your balance and makes it more difficult to make progress on paying down your debt.