The balance transfer – it's probably one of the most successful credit card promotions ever invented. Maybe you have a credit card from way back in the day when you made next to no money, had no credit history and were happy to get a $500 credit limit with a 20-something-percent interest rate.
Today, you're older and more established. You're proud of your credit score, and you're in a position to pick from any of the attractive card offers on the market. However, you still have a balance on that old high-interest-rate credit card.
Or maybe you're just tired of having interest tacked on every month to the money you still owe on your card. These are all reasons people respond favorably to balance transfer promotions.
If you transfer a balance to a card that comes with one of these offers, you'll receive at least six months (generally more) with 0% interest. Federal law requires these offers to have a period of at least six months.
There's no doubt that the promotions offered by card companies are attractive, but they vary widely. What's out there right now and is it a good idea to sign up?
Current Promotions
The chart below outlines top balance transfer promotions offered by card companies, based on the length of the 0% APR offer period and the sizes of the transfer fee and post-promotion transfer APR. Look at the table and review the questions below.
Best Balance Transfer Credit Card Offers | Credio
[Note: This is an interactive chart, so you can click on an individual card to get more details. Or, click on "View Full Comparison" to get even more information about how the cards compare.]
Balance Transfer Offer – Look at the introductory APR and how long it lasts. Because there are so many credit cards on the market, companies now routinely offer a 0% APR for more than a year. If an important part of your shopping criteria includes an attractive balance transfer offer, look for the lowest introductory APR for the most amount of months.
Promotional Balance Transfer Fee – Card companies may not charge you interest at first, but that doesn't mean they won't find a way to get some money somehow. The balance transfer fee is what companies charge you to make the actual balance transfer. Standard rates are around 3% of the transfer or a set dollar amount – whichever is higher. The higher the balance, the more significant small differences in the transfer fee become. Some offers, however, include a promotional transfer fee for a limited time period. It can be as low as 0%, a significant benefit.
Regular Balance Transfer Fee – All good things come to an end. If you signed up for a card with a promotional balance transfer fee, try to make all your transfers before the deadline because later balance transfers will incur the higher, regular rate. Some balance transfer cards don't have a promotional rate; their transfer fee won't rise when the introductory APR ends.
Regular Transfer APR – Once the dust settles and the introductory APR has ended, what will your interest rate become? Setting a goal to pay off your credit card before the introductory APR expires is great, but credit card companies know that statistically most people won't achieve that goal. One hopes you will, but evaluate offers based on not meeting it. A lower interest rate with a few less months of the introductory APR is probably a good tradeoff.
The Truth About Promotions
Balance transfers are attractive, but do they make good financial sense? If you're already paying down debt at an aggressive pace and you're in a financial situation that will allow you the same or higher payment amounts, a single balance transfer of a high balance makes a lot of sense.
If you're not aggressively paying the debt and you just want a break from interest being added to your balance, the math probably won't work out in your favor. Once you add the transfer fee to the transfer APR after the introductory period, you won't save much money – if any. (See 0% Balance Transfers: Who Really Benefits?)
Also, when you apply for a new credit card, the company will do a hard inquiry on your credit. Hard inquiries will temporarily lower your credit score, making it more difficult to secure the best rates for some period of time. That's why you want to think hard before going after a balance transfer offer, however generous. See Credit Score: Hard Vs. Soft Inquiry.
The Bottom Line
Balance transfers make sense if you're aggressively paying down debt. The chart above changes as card issuers update their terms, so bookmark this page and check it next time you're in the market for a balance transfer. For more, see Understanding Credit Card Balance Transfers and The Pros And Cons Of Balance Transfers.
