Introduction to balance transfers
What is a balance transfer?
Balance transfers can be an excellent debt-elimination tool when used correctly. By consolidating credit card debt from one card to another, you can take advantage of a promotional 0% APR or lower interest rate and get out of debt faster. However, there are some drawbacks associated with balance transfers, including transfer fees and the potential for increased debt if your balance isn't paid in full by the end of the promotional period.
How balance transfers work
To complete a balance transfer, you move an outstanding balance from one credit card to another card, typically one with a lower interest rate or a promotional 0% APR offer.
It's essential to understand the terms, such as transfer fees and the duration of the low-interest period, to ensure a balance transfer actually makes sense for your financial situation. Knowing when and how to manage debt with balance transfers can help you pay down debt faster and save on interest charges in the long run.
Common reasons for using a balance transfer
Balance transfers give you a temporary grace period where interest does not accumulate on your credit card. These transfers are great for people who have a big expense coming up or want to consolidate their debt. For example, balance transfers can be a great way to finance an engagement ring.
Receiving an intro 0% APR can save you plenty of interest in the long run, especially if you can only make the minimum monthly payment. You can get out of debt faster with a balance transfer.
Benefits of balance transfers
There are many advantages to balance transfer cards. They include consolidating debt, saving on interest, and improving your credit score. Consolidating debt can make it easier to keep track of payments and reduce the interest you pay overall. Additionally, balance transfers can help improve your credit score by lowering your debt-to-credit ratio. Finally, balance transfers can reduce high interest rates on existing debts and help you save money in the long run.
Lower interest rates
Balance transfers are great if you need time to pay off debt without incurring interest fees. With the average credit card interest rate topping 20%, a balance transfer can save you a lot of money on interest.
Years ago, I took on some unexpected debt but was able to save hundreds of dollars over a year by taking advantage of a Citi credit card balance transfer offer. Instead of paying an APR of over 25%, I paid a 3% transfer fee and avoided interest for the next 12 months. In my case, it worked out favorably, but that's because I made more than the minimum payment every month, paying off the full balance before the 12-month promotional period ended.
Debt consolidation
0% balance transfer credit cards are a great way to consolidate debt because they allow you to move all of your debt onto one card with a 0% interest rate. This means you can pay off your debt without incurring any additional interest charges, saving you a lot of money. Additionally, many 0% APR credit cards offer an intro period of up to 21 months, giving you plenty of time to pay off your debt without worrying about accruing more interest.
Potential savings on interest payments
Interest accrues quickly on credit card balances due to the high APR. In some cases, the amount of interest that goes on your balance can be close to your minimum monthly payment.
Without a temporary reprieve, it can feel difficult to get out of credit card debt. However, 0% APR balance transfers allow interest to stop growing. You can then put more money into paying off your credit card debt so your interest payments are much lower after the promo period concludes.
Drawbacks and risks of balance transfers
While 0% intro APR balance transfer offers can be tempting, they often come with fees and costs that make them a bad deal. They can also trap you in debt. You might feel tempted to stick to the minimum monthly payment, only to end up barely making a dent in your balance when the promotion period is up.
Lastly, most 0% APR balance transfer offers are limited to those with good credit or better, so not everyone will qualify for them.
Balance transfer fees
Most credit card companies charge a balance transfer fee of 3% to 5% of the amount transferred. This means that you'll pay $30 to $50 for every $1,000 transferred.
Depending on how long your 0% APR offer is for and how high your balance is, this could be a good or bad deal. For example, if your credit card carries a 23% APR, you'll pay $230 interest on an average $1,000 daily balance over a year. A 0% balance transfer APR with a 3-5% fee makes sense.
However, if you can pay your $1,000 balance off within a month or two, you'll incur $19 to $38 in credit card interest. In this scenario, paying the interest might be more favorable than incurring $35 to $50 in balance transfer fees.
Promotional APR limitations
Most balance transfer offers are only good for a limited time. If you don't pay off your total balance before the end of the promotional period, you may incur interest on the remaining balance at a high APR. It's easy to fall into this trap by only making the minimum monthly payment and thinking you have plenty of time to pay the rest at the end of the promotional period.
You can avoid this obstacle by sticking to a plan to pay off your total balance. Divide your balance by the number of intro APR months to determine the payment you'll need to make every month. Setting up autopay can keep you on track to pay your card off on time and avoid incurring interest.
Risk of accumulating more debt
Balance transfers can offer a false sense of security since interest payments temporarily go away. While this setup presents an opportunity to pay off debt, some people may continue to rack up credit card debt without making more than the minimum monthly payment.
Falling into this bad habit can set cardholders for an unpleasant surprise once interest payments resume. Balance transfers can put consumers deeper into debt if they do not change their spending habits or opt to buy more stuff because interest isn't accumulating.
Are balance transfers worth it?
Balance transfers can be a great way to save money on interest payments and consolidate debt, but they're not always worth it. Depending on the balance transfer terms, you may be charged a fee of up to 5%. Additionally, if you don't pay off the balance transfer within the promotional period, you may end up paying a high interest rate.
It's easy to fall into the trap of making just the minimum payment and getting no closer to paying off your balance when the promotional period ends. It's important to consider all of these factors before deciding whether or not a balance transfer is worth it for you.
When to consider a balance transfer
Anyone looking to make a large purchase or consolidate debt should consider 0% APR offers. These offers can provide a great way to save money on interest and pay off the balance faster.
However, it's important to understand the terms of the offer before signing up, as some offers may have restrictions that could limit your ability to take advantage of the offer. Additionally, make sure you can pay off the balance before the promotional period ends, as any remaining balance will be subject to regular interest rates.
Situations where balance transfers might not be ideal
0% intro APR offers should only be considered by those who are able to pay off the balance within the promotional period. If the balance is not paid off before the promotional period ends, any remaining balance will begin to accrue interest at a high rate.
Additionally, those with poor credit scores should avoid 0% APR offers, as they may be denied due to their credit history.
Balance transfers also don't make as much sense for people who have low credit card balances. If you have less than $1,000 on your balance, you can potentially save money by paying it off sooner instead of incurring the balance transfer fee.
Popular intro 0% APR balance transfer credit card offers
$0
0% intro APR for 21 months from account opening on purchases and qualifying balance transfers made within 120 days
17.24%, 23.74%, or 28.99% Variable
N/A
Good to Excellent
- Extra-long intro APR on purchases and qualifying balance transfers
- No annual fee
- Cell phone protection
- No rewards
- Foreign transaction fees
If you're looking for the best Wells Fargo credit card for balance transfers, the Wells Fargo Reflect® Card is a great choice. And it offers an extra-long interest-free period on new purchases, too.
Wells Fargo Reflect Card- Apply Now to take advantage of this offer and learn more about product features, terms and conditions.
- 0% intro APR for 21 months from account opening on purchases and qualifying balance transfers. 17.24%, 23.74%, or 28.99% variable APR thereafter; balance transfers made within 120 days qualify for the intro rate, BT fee of 5%, min: $5.
- $0 annual fee.
- Up to $600 of cell phone protection against damage or theft. Subject to a $25 deductible.
- Through My Wells Fargo Deals, you can get access to personalized deals from a variety of merchants. It's an easy way to earn cash back as an account credit when you shop, dine, or enjoy an experience simply by using an eligible Wells Fargo credit card.
The best balance transfer credit card for you depends on how long of a promotional period you're looking for and whether or not you want to earn rewards for spending on your new credit card. Some cards extend their 0% APR offers to both balance transfers and new purchases, so that's another factor to consider.
Great rewards credit cards with balance transfer offers include:
Wells Fargo Active Cash® Card: 0% intro APR on purchases and qualifying balance transfers for 12 months from account opening, then a 19.24%, 24.24%, or 29.24% variable APR
Chase Freedom Unlimited®: 0% intro APR on purchases and balance transfers for the first 15 months, then a 18.99% - 28.49% Variable APR
Blue Cash Everyday® Card from American Express: 0% intro APR on purchases and balance transfers for 15 months from account opening, then a 18.24% - 29.24% Variable APR
You don't necessarily have to get a new credit card to receive a balance transfer offer. Many banks will target existing customers in good standing with 0% balance transfer offers. Citi often sends out balance transfer offers with attractive 0% intro APR terms. These checks function just like a credit card balance transfer, except you can make the check out to yourself, deposit it into your checking account, and use it to pay off a credit card balance.
To receive promotions like these, you'll want to opt in to receive targeted promotions from your bank. Once you agree to receive email and mail communications, you might receive balance transfer offers if you remain in good standing with the bank.
Tips for successful balance transfers
A balance transfer can aid individuals who want to get out of debt sooner and temporarily avoid interest accumulation. These best practices will make it easier to initiate a successful balance transfer.
Choosing the right credit card for a balance transfer
You can choose from many 0% APR balance transfer credit cards. While it's good to have many options, it also creates a problem. How do you choose the optimal credit card for your needs? These are some of the things to look for:
- Intro APR duration: Some credit cards have 0% APR for 12 months while others have it for more than 18 months.
- Annual fee: Many balance transfer credit cards have no annual fee.
- Rewards program: Reviewing how much cash or points you will receive back from every purchase can help you plan accordingly.
- APR after the promo period concludes: Make sure you aren't stuck with an excessive APR after the intro period concludes.
It's a good idea to compare several balance transfer credit cards before choosing one.
Managing your payments during the promotional period
Balance transfers are more useful for people who pay off their balances during the promotional period. You should make more than the minimum monthly payment and capitalize on the 0% APR intro period.
It may be worth picking up an extra side hustle just to make higher monthly payments. Credit cards have high interest rates, and the balance transfer presents your best opportunity to get out of debt fast.
Understanding the fine print
The fine print gives you details on the card's APR for penalties, cash advances, balance transfers, and your accumulated debt. It also covers various fees you may incur, such as an annual fee or a penalty fee for late payments.
Late payments are a big one to check out, since some credit card issuers immediately end the promo period if you don't pay on time. Then, you'll be stuck with a high penalty APR. The fine print isn't all bad, though. It also contains details about your rewards and how much you receive back from every purchase.
FAQs about balance transfer pros and cons
What is the typical fee for a balance transfer?
Most credit cards have balance transfer fees that range from 3% to 5%.
How long does it take for a balance transfer to process?
The balance transfer processing time varies for each credit card issuer. The entire process can take anywhere from two days to six weeks.
What should I consider before doing a balance transfer?
Before doing a balance transfer, consider the balance transfer fee, the introductory interest rate period, the standard interest rate after the intro period, and how it fits into your overall debt repayment plan.
Can I transfer balances from multiple credit cards?
Yes, many balance transfer credit cards allow you to consolidate debt from multiple cards, subject to the credit limit of the new card.
Are all credit cards eligible for balance transfers?
Most credit cards accept balance transfers, but there are exceptions. Additionally, you usually cannot transfer a balance between cards from the same issuer.
Editorial Note: Any opinions, analyses, reviews, or recommendations expressed in this article are the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any card issuer. Read our editorial standards.
Please note: While the offers mentioned above are accurate at the time of publication, they're subject to change at any time and may have changed, or may no longer be available.
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