Balance Transfer Credit Cards - Compare & ApplyBy Joe Taylor Jr.
Imagine taking a year-long break from paying interest on your biggest credit card balance. If you're like most Americans, you could use that extra cash to cover other bills or to pay for a major household purchase. If you're especially focused on getting out of debt, you can reinvest your usual monthly payment into clearing your balance even faster. Low interest balance transfer deals give you the freedom to chase your goal of becoming debt-free.
Finding credit cards with balance transfer promotions
Depending on your credit history, you may not have to pay any money to bounce debt from a high interest account to a low introductory APR balance transfer credit card. Over the past decade, most banks have moved away from offering free balance transfers to charging a flat fee of 3 to 5 percent for new accountholders.
Still, banks have faced unusual pressure to please shareholders and regulators since 2008's financial crisis. Where critics once chided banks for using balance transfer offers to keep consumers in debt, industry analysts applaud credit card issuers for using short-term promotions to promote low-risk lending.
Banks save money and delight Wall Street when they can keep cash out of their vaults, and they're more eager than ever to find new cardholders who intend to pay down their transferred balances. Prospective cardholders with high FICO scores and demonstrated income can qualify for a handful of fee-free balance transfer offers.
Good things to know about balance transfer credit cards
Few zero introductory APR balance transfer credit cards crow about their "go-to rate," the APR you'll pay on any balance you carry beyond your promotional period. By design, these high rates will earn back some of the revenue banks stand to lose by floating you a line of credit at no interest. The best zero introductory APR credit cards justify these double-digit APRs by including access to rewards programs or cash back rebates on new purchases.
If you think you're likely to carry a balance from month to month, shop for a low interest balance transfer with few perks and a very low go-to rate. Otherwise, a credit card rewards program that aligns with your shopping habits can help you get more than just a low monthly payment on your existing debt.
Watch out for balance transfer backfires
Before you think banks run balance transfer deals just to be helpful, remember that they're counting on turning a profit from the handful of customers who handle credit poorly. Follow these tips before you respond to a new credit card offer:
- Find out if you'll need to "churn" your new card. Some lenders charge you a penalty or even cancel your zero introductory APR credit card promotion if you fail to make any purchases with your account. Use your balance transfer credit card for a routine expense, like a utility bill, that can keep your status current.
- Look for exceptions to the promotional period. Pay attention to terms and conditions that could cancel your no-interest offer, like making a late payment or exceeding your credit line.
- Keep an eye on your credit limit utilization. Credit reporting bureaus measure how much of your available credit limit you're using across all of your accounts. A balance transfer that looks like it would save you money on finance charges could cause you to pay more for a new mortgage or car insurance if your credit score drops.
Most of all, try to find a balance transfer credit card with terms you'll be happy with over the next few years. Surfing the same balance from card to card over a short time can wreck your credit score, especially if your overall debt keeps rising. Use the information on this page to help you decide whether a low interest balance transfer can help you build some money-saving habits.