How to choose a balance transfer credit card

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You have many types of credit cards to choose from, some offering stronger rewards and more perks than others. A balance transfer credit card is a type of card designed to help you pay down existing balances you have on other credit cards.

With these cards, you secure a 0 percent annual percentage rate (APR) for a limited time, and then you quickly pay down as much debt as possible within that window — if not your entire balance. Balance transfer cards come with different introductory periods and a range of APRs you’ll pay after the intro period, so it’s important to compare various offers before signing up. Rewards can also be a factor in determining long-term value after you’ve paid down your debt.

Here’s what to know when choosing a balance transfer credit card, including important considerations:

1. Understand how balance transfers work

Don’t stop reading after “0 percent interest.” There are two key caveats you need to know about how credit card balance transfers work.

The first is that 0 percent APR offers are always for a limited time. But even though they don’t last forever, some introductory offer periods can be quite long. The best balance transfer credit cards typically offer up to 21 months without interest. After the intro period ends, whatever balance you have on the card will start accruing interest at the card’s regular APR.

Let’s say you have $1,000 left on your credit card at the end of your introductory offer. If the regular APR is 24 percent, and you decide to pay $100 per month until your balance is $0, it will take you 12 months to get there. That’s because in addition to the $1,000 you borrowed, you will pay $127 in interest. This is why it’s ideal to pay off your entire balance before the intro period expires.

The other key consideration is the balance transfer fee. Most balance transfer cards charge a fee between 3 percent and 5 percent (often with a $5 minimum) of the transferred balance. For example, if you transferred $1,000 of debt to a card with a 5 percent balance transfer fee, you would owe a $50 balance transfer fee. Use Bankrate’s balance transfer calculator to ensure that paying the fee is worth it compared to how much you’ll save on interest.

2. Know how much debt you have and consider alternatives

Take the time to figure out exactly how much debt you have, and remember that it’s possible to consolidate debt from several credit cards onto one new balance transfer card.

The amount of debt you have will also affect how long your debt repayment process will take. After all, it will take considerably less time to pay off $5,000 in credit card debt at 0 percent APR than it would to pay down $10,000 in debt, $25,000 in debt and so on.

While many people think of balance transfer cards as exclusively for credit card debt, you can often transfer different kinds of debts in order to consolidate your payments and take advantage of a 0 percent APR for a limited time. The specifics vary by card and issuer, but you may be able to transfer personal loans, student loans, auto loans and even home equity loans to your new balance transfer card.

Just be sure that you’ll be able to pay these debts off before your promotional period is up if their original interest rates are lower than the regular rate on your new balance transfer card. Otherwise, you could end up stuck with a higher interest rate that accrues more interest than your original debt would have in the first place.

Further, if you have a considerable amount of debt to pay down, you may also want to evaluate whether a balance transfer card is the right tool for you in the first place. Personal loans can also be used to consolidate and pay down debt, and many let you secure a low fixed interest rate for five to seven years. Personal loans also come with fixed monthly payments and a predetermined repayment timeline, making them easy to budget and plan for.

3. Check your credit score

The best balance transfer cards are typically available only to consumers with very good or excellent credit — or those with a FICO score of 740 or above. However, you may also be approved with a good credit score in the 670 to 739 range.

Also, note that balance transfer cards for poor credit exist — though they typically come with less attractive terms and conditions for paying down debt.

Either way, it’s wise to see where you stand in terms of your credit score before you apply. Check your credit score for free to gain a better understanding of the cards you might qualify for.

4. Compare card offer details

When it comes to transferring debt from one card to another, here are the most important factors to consider.

• Length of the intro period. The best balance transfer credit cards offer a 0 percent intro APR for up to 21 months on transferred balances.
• Regular APR. Be aware of the interest rate that will kick in at the end of your introductory period, as this will impact any remaining balance and future balances. Compare it to the average credit card interest rate right now, which is above 20 percent.
• Fees. Balance transfer fees are typically 3 percent to 5 percent of the transfer amount. You should also consider any other fees, including if the card comes with an annual fee.
• Intro APR on purchases. Some balance transfer cards also offer a 0 percent intro APR on purchases, although this is likely less important when you’re focused on paying down existing debt.
• Rewards and perks. Many of the top balance transfer credit cards offer cash back on purchases, while others feature insurance protections, purchase benefits and more. Keep in mind, however, that attempting to earn rewards while paying down your debt can lead to additional problems down the road.

Balance transfer comparison example

If you’re hoping to maximize a balance transfer offer, take the time to put together a comparison that takes balance transfer fees and the length of an intro APR offer into account. These factors can help you save the most amount of money possible, get out of debt faster or both.

Imagine you have $5,000 in credit card debt you want to pay off completely, and that you’re considering the Wells Fargo Reflect® Card and the Citi Double Cash® Card. On top of that, you’re dead set on paying off all your debt during the card’s intro offer period.

• The Wells Fargo Reflect® Card offers a 0 percent intro APR on purchases and balance transfers for 21 months, followed by a variable APR of 18.24 percent, 24.74 percent or 29.99 percent. A 5-percent balance transfer fee (minimum $5) applies.
• The Citi Double Cash® Card offers a 0 percent intro APR on balance transfers for 18 months, followed by a variable APR of 19.24 percent to 29.24 percent. A 3-percent balance transfer fee (minimum $5) applies.

With the Wells Fargo Reflect® Card, you would pay an upfront balance transfer fee of $250, bringing your total starting balance to $5,250. Assuming you were approved for this full amount, you would have 21 months to pay off this debt at 0% APR, which means you would need to pay $250 per month toward the debt for the duration of the intro APR offer.

With the Citi Double Cash® Card, on the other hand, you would pay an upfront balance transfer fee of $150, bringing your total starting balance to $5,150. You would have 18 months to pay off this debt with zero interest, which means you would need to pay just under $287 per month for 18 months.

As you can see, the Wells Fargo Reflect® Card lets you secure a lower monthly payment to get out of debt interest-free, but you’ll pay more for your balance transfer fee. Meanwhile, the Citi Double Cash® Card allows more interest savings overall and gets you out of debt faster — but with a higher monthly payment required.

The bottom line

A balance transfer can be a great step toward debt management. The best balance transfer credit card for you depends on the amount of debt you have and how quickly you’re able to pay it off. Before you apply, weigh the pros and cons of using a balance transfer card — including any additional fees that come with the card and its rewards structure — as well as potential alternatives to paying down your debt.