Everything You Need to Know About Balance Transfer Cards

If you are struggling with credit card debt and high interest rates, a balance transfer may be able to help. A balance transfer credit card can help you transfer your debt from one credit card to another credit card in an effort to make debt more manageable.

Typically, people will transfer a balance from a high-interest credit card to one with a lower interest rate, as the whole point of a balance transfer is to save money. Many credit card companies will also offer special promotions to transfer the balance of a credit card.

If you’re looking for a way to manage your debt effectively, a transfer balance credit card might be the best option for you.

What is a balance transfer credit card?

Many cards market themselves as balance transfer credit cards by offering free balance transfers to new cardholders. This means that you can transfer a balance from another credit card account to this new one without paying any additional fees.

These cards also usually offer low or zero-percent interest rates for the first year that you hold the card. These terms benefit you by:

  • Saving users money. If you transfer your credit card balances to a card with no interest rates during the first year, you don’t have to worry about paying any interest on your outstanding balance during that time. This will save you money, especially if you pay off your remaining balance during that promotional period.
  • Helping cardholders to pay down their debt more easily. This is especially true if you frequently forget to pay your credit card bills on time because you have so many accounts to keep track of. When you transfer all of your balances to one card, you only have one payment you need to make each month.

You can use a free online balance transfer calculator to determine how much you will save monthly and annually by switching cards. You can also use these calculators to compare your potential savings between different cards and companies to decide which is the best balance transfer card for you.

Questions to Ask Yourself Before You Get a Balance Transfer Card

  1. How high is my credit score? In order to apply for a balance transfer card, you usually need to have a decent credit score. This is because you need to be approved for the card in order to obtain one. If you have a score that’s less than ideal, you may want to try and raise it before you apply for a new card.
  2. Do I have a debt payment solution? Balance transfer credit cards can be a useful tool when it comes time to reduce your debt, but they only work if you have a plan for how you’re going to get out of debt. If you transfer all your debt onto a new card with no plan for how you’ll pay it off, it’ll wind up accumulating interest like your previous debt did.
  3. Do I have a budget that makes sense for me? If you’re like many, you’re in debt because you have struggled to keep track of your finances recently. By coming up with a budget, you can better monitor how much you earn and spend to help ensure you don’t find yourself in debt again after you take out a balance transfer card.
  4. Can I transfer my current debt to a balance transfer card? The debt you have might not even be transferable to a balance transfer card, so it’s important that you confirm this information beforehand. Generally, balance transfer cards can only help you with credit card debt.
  5. Will a balance transfer card affect my credit score? Before you apply for a balance transfer card, it’s important that you know whether this new credit card will affect your credit score. Applying for several cards at one time, for example, can have a negative impact on your overall score. Furthermore, every time you apply for a new credit score, this will likely impact your score. Keep this in mind if you apply.

Balance Transfer Cards vs. Consolidation Loans

While balance transfer cards and debt consolidation loans can both help consumers address credit card debt, there are important differences between the two.

Balance transfer cards:

  • Are active credit cards consumers can use to purchase new items as desired, increasing their total debt over time.
  • Typically offer special terms, such as low or zero-percent interest, for a limited amount of time only. After that period of time has passed, they revert to market-standard rates, increasing cardholders’ costs if they have not completely paid off their balances by that time.
  • Give cardholders an essentially unlimited amount of time in which to repay their debt, so long as they meet minimum monthly payment requirements.

Consolidation loans:

  • Are loans that borrowers take out from banks, credit cards or other financial institutions to pay off their existing credit card bills.
  • Generally offer borrowers fixed interest rates for the duration of the loan that are much lower than those imposed by credit card companies.
  • Must be repaid within a pre-determined amount of time, such as three or five years.  

In some cases, choosing the loan can improve your credit score because it shifts your debt from the revolving debt category to installment debt, which is counted differently when your score is calculated.

What are the best balance transfer credit cards available?

On most balance transfer cards no fee is charged to transfer a balance from your pre-existing account to your new card. However, you may need to call your balance transfer card company to request the transfer.

In some cases, you may not be able to transfer the whole of your balance from one card to another. This can happen when the new card has a lower credit limit than the old one, for example. Credit card companies may also refuse to allow you to transfer balances between cards issued by the same company. So, for instance, while you could transfer a balance from your Discover card to your Chase balance transfer card, Chase would not allow you to transfer your balance from another Chase card to that same balance transfer card.

As a result, when considering your options, it is important to take into account not only which cards are ranked as the best balance transfer cards of 2018 or 2019, but also:

  • What credit card companies you already hold cards from.
  • Which balances you need to transfer.
  • Your current credit limits and the credit limits available to you from different companies.
  • Whether or not you will be required to pay balance transfer fees.
  • Whether or not you will be required to pay an annual fee for the new card.
  • If you will realistically be able to pay down your credit card debt during the promotional period before the card reverts to higher rates.

While your personal results will vary based on these factors, in general, the following cards are considered the three best balance transfer cards on the market.

  • The Discover Balance Transfer card. Discover offers no annual fee and you can transfer your balance here at 0% interest rate for 18 months or on new purchases for the first six months. After the introductory period, the card’s APR jumps to a variable market rate between 14 and 26 percent. You must have a credit score of at least 650 to qualify and balance transfer fees of between three and five percent apply.
  • US Bank Visa Platinum card. This US Bank card carries no annual fee and offers you option to transfer your balance here with a 0% interest rate and on new purchases for 20 months. After the introductory period, card balances are subject to a variable APR between 14 and 26 percent. You must have a credit score of no less than 690 and a three percent balance transfer fee applies. The card is not eligible for any rewards programs.
  • Wells Fargo Platinum Visa Card. Designed with balance transfers in mind, this card offers zero percent interest on both purchases and transferred balances for 18 months.  After that, it reverts to a variable APR between 13 and 28 percent. You must have a credit score of 690 or better to qualify. A three percent balance transfer fee applies and the card does not include any rewards programs or similar benefits.

Other highly-ranked cards include:

All of these cards offer online application options for your convenience.

Can I get a balance transfer card if I have a low credit score?

Balance transfer cards for bad credit holders are available. However, they may be slightly more difficult to find and may be subject to terms and conditions that do not apply to cardholders with better credit.

Fortunately, in many cases, these restricted terms are temporary and may be relaxed or eliminated once the cardholder establishes a strong record of making their monthly payments on time and in full on the new card.

Top Ways to Improve Your Credit

  • Pay off any credit card balances you have.
  • Make sure you pay your bills on time.
  • Become an authorized user on a relative’s card.
  • Order your free credit report every year and make sure it is accurate.

Can balance transfer cards or consolidated loans save me money?

Balance transfer credit cards and consolidation loans can assist you in becoming debt free more quickly and often for less. If you currently have high interest rates on your credit cards and other qualifying loans, you can actually save money. By reducing your interest rates, you not only reduce the amount that you would have to pay each month, but also the interest charges that occur on each statement. 

However, in some cases, you could potentially end up paying more money over the life of your debts with a balance transfer card or consolidation loan. If your new loan or credit card includes interest rates that are higher than your current loans, you will likely end up paying more.

Additionally, most balance transfer credit cards include a promotional period in which interest rates are at zero percent or quite low compared to other cards. However, once the introductory period is over, it is not uncommon to find balance transfer cards with exceedingly high interest rates. In cases such as these, you may end up spending more if you are unable to pay off the entirety of your debts before the introductory period ends. 

Once You Get Your Balance Transfer Card

  • Be patient. You didn’t accumulate your debt in one day, so it’ll take some time to get out of debt, too.
  • Make your monthly payments on time. If you fall behind in your payment plan, you’ll have lower chances of paying off your debt.
  • Tell your friends and family you’re working on your finances right now. One of the hardest parts of sticking to a budget is saying “no” to social invitations. By notifying your friends and family that you’re in the process of fixing your finances, they won’t be surprised if you need to decline their invitation every now and again.
  • Treat yourself once in a while. While it’s important to be frugal when you’re paying off debt, that doesn’t mean you need to be miserable. Treat yourself to a coffee or a new item of clothing once in a while to reward yourself for being faithful with your debt repayment plan.

Related Sources:

WalletHub’s Balance Transfer Credit Cards

U.S. News’ Best Balance Transfer Credit Cards