How To Compare 0% Balance Transfer Cards
1. Determine whether you qualify
In most cases, 0% balance transfer credit cards require good or excellent credit. Generally, that means a credit score of about 690 or better.
2. Look at the issuer that holds your current debt
In most cases, you can’t transfer balances among cards from the same bank from one Chase card to another Chase card, for example. This is important to know because it will save you from getting a card you cant use. Be especially careful with store-branded credit cards, which often do not clearly identify the issuing bank.
3. Compare 0% APR periods for balance transfers
The longer the 0% period, the better, since youll have more time to pay down your debt without interest. But know that longer periods might mean higher transfer fees
4. Compare balance transfer fees
Transfer fees on most credit cards range from 3% to 5%. Thats equivalent to $30 to $50 for each $1,000 you transfer. A handful of cards do not charge transfer fees or waive them for an introductory period. But those cards are few and far between, and most of them require excellent credit. Also, cards that dont charge a transfer fee generally have shorter 0% APR periods than balance transfer cards that do.
5. Say no to annual fees
A good balance transfer card will not charge an annual fee. Some rewards cards with annual fees do offer 0% introductory periods, but they’re a bad choice for getting out of debt.
Eligibility Criteria And Card Issuer
The balance transfer card you have your eye on might require a minimum annual income, decent , and a credit standing free of current bankruptcies or consumer proposals. Furthermore, the card issuer likely will not allow you to transfer a balance from one of its own credit cards, or the credit cards of its subsidiaries.
For instance, Tangerine is owned by Scotiabank and may therefore not allow the transfer of a debt owed to its parent company. Check with the bank before applying if youre concerned that you might not qualify for a card or that the debt may be ineligible for transfer.
How Do You Do A Credit Card Balance Transfer
1. Look at your current credit card debtBefore you apply for a balance transfer credit card, check how much credit card debt you have and which cards youre paying the highest interest on. Then think about how much time you need to pay off the debt. This will help you choose a 0% deal thats right for you.2. Compare your options
Now you can start comparing your options. Theres a lot of 0% balance transfer deals out there, each with different features, so spend time comparing.Here are some things to look out for:
- The length of the 0% introductory period this can be anywhere between six months to over 2 years. If you have a fair bit of credit card debt to transfer over, a longer period will give you more time to pay it off without being charged interest.
- The interest rate youll be charged once the 0% introductory period ends this can be high, so youll need to factor it in if you dont think youll be able to pay off the balance in full before the interest-free period ends.
- Balance transfer limit check if theres a limit on how much you can transfer over.
- Transfer fee are you planning to do a one-off transfer or several transfers? Most cards charge a percentage of the amount you want to transfer typically between 1% to 3%. A few cards dont charge a transfer fee, so you might want to consider one of these if youre planning several transfers during the 0% period.
- to qualify for most deals, youll need to have a good credit score.
4. Start paying off your debt
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Try To Keep From Racking Up Additional Debt
Most people open balance transfer credit cards in order to reduce their debt with a lower, more manageable interest rate. However, when you transfer a credit card balance, it’s important to avoid adding more debteither on the old card you’ve paid off or on the new card with a lower APR.
In some cases, the low APR may only apply to the transferred amount new purchases can be charged at a higher, non-introductory interest rate. And, if balances are carried over, your payments could be applied only to the new charges, resulting in an increased chance of the transferred amounts remaining at the end of the promotional period, when your rates could jump higher.
Pay Attention To Different Aprs
Look into cards that offer a 0% introductory interest rate period on balance transfers . But be aware that youll get a different APR on balance transfers after the intro period ends.
For example, say your card offers an intro 0% APR on balance transfers for 18 months from account opening. But after 18 months, your balance transfer APR changes to a variable 16% APR on balance transfers. Youll want to make sure to pay off your balance transfer before the intro period ends, otherwise that 16% APR will kick in for any remaining balance. This could negate the savings from transferring your balance if you dont pay it off during the intro period.
Theres another type of APR you should know about: penalty APRs. If you miss payments, the issuer may charge a penalty APR. And take note: As part of the penalty for late or missed payments during an intro APR period, the issuer may also cancel your 0% intro APR offer.
Take a look at the cards terms and conditions before applying for the card and transferring your balance, so that youre prepared for the different APRs that may apply to your balance and when theyd kick in.
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Repay At Least The Monthly Minimum Or You May Lose The Cheap Rate
Just because you grabbed a 0% deal DOESN’T mean you can get away with paying nothing you must pay at least the minimum monthly payments, preferably more. Otherwise you will be hit with penalties and some card providers will withdraw the deal, leaving you on an expensive rate. How much should I aim to pay?
Your aim should be to pay more than the minimum unless you’ve pricey debts elsewhere, in which case focus max repayments on them. Minimum payments are designed to make debts last as long as possible, which you should try to avoid see our for tips to beat this.
What Is Balance Transfer Apr
A balance transfer APR is the amount of interest youll be charged on your debt when you move it to a new card. Some cards offer 0% interest for an introductory period of time, other cards may offer a low ongoing interest rate. The main goal in doing a balance transfer is to save money on interest, so ideally the APR of the card youre transferring a balance to will be less than the interest rate on your current card.
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Decide How Much To Transfer
Check the on the new card a balance transfer can’t exceed the available credit line. Also, balance transfer fees count toward that limit. For example, if a cardholder has $10,000 in available credit, they wont be able to transfer a $10,000 balance with a 3% balance transfer fee. They’d need $10,300 in available credit to complete the transaction.
Us Bank Visa Platinum Card: Best For Large Purchases
Why we picked it: If youre looking to finance a major purchase, this card is one of the best options on the market for buying time until you can pay it off with its long 0% introductory interest rate on purchases, as well as a good interest-free period on balance transfers.
Pros: Cardholders get a full 20 billing cycles before they start accruing interest on new purchases . Plus this card offers cellphone protection in the case of covered damage or theft and does not carry an annual fee.
Cons: This card has limited long-term value as it has no rewards program to speak of. Plus, the card also charges a fee of up to $40 for late payments and 2% to 3% on each foreign transaction you make .
Who should apply? The US Bank Platinum card offers a generous amount of time to pay down new purchases. And while it does not carry an annual fee, youll likely see more long-term value from a card with a dedicated rewards program.
Who should skip? Anyone who wants to reap the long-term benefits of a dedicated rewards program.
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What Is A Money Transfer
A money transfer is like a balance transfer, but instead of the money going from one credit card to another, the money from the credit card goes into your chosen current account.
This allows you to pay off an overdraft, or cover an essential or unexpected bill using a credit card, which might charge you a lower interest rate.
How Do I Know If My Balance Transfer Was Approved
If your card provider sends transaction-related notifications via email or text messages, you may expect to receive one when your balance transfer is approved. You may also receive a letter confirming the balance transfer. Alternatively, you may log in to your card provider’s online platform and check the status of your balance transfer request at any time.
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Citi Diamond Preferred Card
Our pick for: Long 0% period for transfers
The Citi® Diamond Preferred® Card offers a super-lengthy 0% intro APR period on balance transfers, and there’s also a decent offer on purchases. But the balance transfer fee is pricey. It doesn’t have the late-fee forgiveness of Citi’s other balance-transfer card, but it’s still a great option. Read our review.
Will It Save You Money
Paying less interest on your credit card debt will, of course, save money. But depending on the deal and the fees, it may not save enough to be worth the trouble. Before you jump, do the math.
Say you have a $3,000 balance with a 30% annual percentage rate . That means youre currently paying $900 a year in interest. Sometimes you can find a promotion with no balance transfer fee and a 0% introductory period APR, but lets assume you have to pay a 3% balance transfer fee, which is common. In this case, it will cost you $90 to transfer your $3,000 balance. Transferring your balance to a card with a 27% APR means youd be paying $810 in interest a year add on the $90 balance transfer fee, and youd just about break even after a year.
In this example, youd need to look for a deal where the APR is less than 27% to come out ahead. Dont forget to factor your time frame into the equation: Transferring a balance isnt worth the hassle unless you save a meaningful amount of money. A free, online balance transfer calculator will help you do the math with the dollar amounts and interest rates specific to your situation.
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Will Applying For A Balance Transfer Hurt My Credit
Applying for a balance transfer card will likely result in a hard inquiry on your credit reports. This could cause your credit scores to drop by a few points. But it could also increase your available credit and lower your credit utilization, which could have a positive impact on your credit scores. Read more about how a balance transfer can affect your credit.
How Much Can I Save With A 0% Balance Transfer
A balance transfer makes financial sense only if the money you save on interest is more than any fee you’ll pay to carry out the transfer.
Moving debt to a card with an introductory 0% APR period for balance transfers will obviously save you money in interest. Those savings can add up to hundreds or even thousands of dollars depending on how much you owe.
According to NerdWallet’s American Household Credit Card Debt Study, the average household with revolving credit card debt that is, debt that was carried from one month to the next had a total of $6,741 in such debt in March 2019. Let’s say you had that much debt on a card with an APR of 17%, and you wanted to pay off the debt in equal amounts over 18 months:
If you left the debt on the 17% card, you’d pay more than $900 in interest over the course of those 18 months.
If you transferred the debt to a card with a 0% intro APR for 18 months, you’d pay no interest at all. Further, if you used the money you would have paid in interest and applied it to paying down the balance, you’d be out of debt a couple of months earlier.
Mind the balance transfer fee
A balance transfer isn’t always a slam-dunk solution to high-interest debt. Most cards with promotional 0% APR periods charge balance transfer fees, which typically range from 3% to 5% of the amount being transferred. Some cards don’t charge these fees, or waive them for a period of time when you first open your account.
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Is A Balance Transfer Fee Worth It
If you have a significant amount of credit card debt, the 3% balance transfer fee is absolutely worth paying when transferring your balance to a card that has a 0% intro APR offer, but only if you stillneed time to pay off a balance. The alternative option of paying high interest rates on your current card isn’t a financially sound decision.
However, if you can pay off your balance immediately and in full on your current card, that is more ideal. You’ll save on any new interest fees as well as a balance transfer fee.
But what do the numbers actually look like if you do decide to execute a balance transfer?
Using A Combination Of Both
Consolidating and repaying debt by getting a balance transfer credit card and a personal loan is an option. In such a scenario, you may get a balance transfer card with a 0% APR offer to repay high-interest credit card debt within the cards promo period. If you cannot transfer the entire amount you owe to your new card, or if you feel you might not be able to repay it completely before the end of the promo period, you may consider getting a personal loan with a low APR to cover the remaining amount. This way, you dont have to worry about paying high interest charges once your cards regular APR comes into effect.
Getting a personal loan to consolidate your debt may be the best option to improve your credit score. These loans lower your credit card utilization ratio immediately, and they ensure that your debt will be paid off at the end of the term. — Lee Huffman, credit card expert at BaldThoughts.com.
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Analyze Your Top Picks
Compare cards by calculating how much youll pay monthly to clear the transferred balance before the promotional APR period ends:
Take the total amount of debt youll transfer to the card and add the balance transfer fee to it. This is the total balance transfer cost.
Example: $5,000 debt + $150 fee = $5,150 balance transfer total cost
Next, divide the total balance transfer cost by the 0% balance transfer APR offer length in months. That gives you the minimum amount youll need to pay each month to eliminate the transferred debt interest-free.
Example: $5,150 / 12 months = $429.16 minimum monthly payment
If the minimum monthly payment is too high for your budget, find another card with a longer introductory APR offer to spread out and reduce the monthly payment.
If you dont pay down the balance on time, youll pay the standard balance transfer interest rate on the remaining balance.
Are There Other Options To Consolidate Credit Card Debt Or Help Pay It Off Without A Balance Transfer Credit Card
Getting a personal loan with a competitive interest rate is one way to consolidate your credit card debt. If you feel youre having trouble handling your debt, consider seeking advice from a nonprofit credit counseling organization. On the other hand, if you have access to adequate funds, you might be able to negotiate your way into paying less than what you actually owe on your credit card through a one-time payment. Using a home equity loan to consolidate your credit card debt is typically best avoided, as defaulting on it brings with it the risk of losing your home.
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Is A Balance Transfer Worth It
A balance transfer can be an excellent way to temporarily reduce your interest rate and pay off your debt quicker. You could easily save hundreds of dollars in interest charges by taking advantage of a balance transfer. Balance transfers are almost always worth it if youâre transferring a balance that youâre confident you can pay off during the promotional period, and at the same time, youâre sure that you wonât charge new purchases to the card. That said, there are some scenarios when a balance transfer may not be worth it. If you have a low credit score, for example, you may not be approved for a balance transfer credit card in the first place. Second, while some rewards credit cards come with balance transfer offers, their interest rates will increase sharply to 19.99% after the promotional period ends. So, if your transferred balance is larger than you can pay off during the promotional period, you should avoid rewards cards with balance transfer offers and instead consider a low interest card that has a low regular interest rate even after its balance transfer offer ends.