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Bankrate’s guide to reducing debt with a balance transfer credit card
Author: Barry Bridges | bbridges@bankrate.com
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Debt and high interest go together like heat and humidity — together, they can make unpleasant conditions almost intolerable. Although you can’t do anything about the weather, you can help your financial situation with a balance transfer credit card.
A balance transfer provides an easy and effective way to reduce debt while avoiding interest charges, either temporarily or altogether. Many banks and other financial companies offer credit cards designed specifically for balance transfers. It’s important to use them for that purpose rather than treating them like any other credit card.
The best balance transfer cards offer an introductory period of 0% APR that lasts anywhere from 12 to 21 months. During that time, you have the chance to pay off the money you’ve borrowed (the principal) without having to pay for borrowing it (the interest).
To learn more about how balance transfer credit cards work and how they can help you free yourself from debt, keep reading. To go ahead and start comparing offers, skip down to Bankrate’s recap of the best balance transfer credit cards.
The scoop on balance transfer credit cards
Survey finds balance transfer credit cards might be underused
Potential solutions to credit card debt include one in particular that is both widely accessible yet disproportionately under-utilized: the balance transfer credit card.
Results from a recent Bankrate.com survey found that less than half of U.S. adults who owe credit card debt have applied for a balance transfer credit card. Of the people who did apply, however, more than three-quarters were approved.
This type of card allows you to move existing high-interest debt to a new credit card account with a low introductory interest rate, frequently 0% APR, that can last 18 months or longer. The strategy calls for paying off the money you’ve transferred during the introductory period before the card’s APR switches to its regular rate.
The survey results on balance transfer cards are part of a larger inquiry into the way credit card users prioritize debt vs. rewards. According to the survey, 68% of credit card debtors make an effort to maximize credit card rewards, including 27% who say they make “every effort” and 41% who make “some effort.”
Personal finance experts recommend focusing on debt ahead of rewards. The basic arithmetic of interest makes the pursuit of rewards financially inadvisable.
“The current national average credit card rate is 17.82%,” says Ted Rossman, credit card analyst for Bankrate.com. “It doesn’t make sense to chase 1, 2 or 3% in cash back or airline miles if you’re paying roughly 18% in interest.”
The results suggest that many Americans are missing out on opportunities to reduce their credit card debt with balance transfer credit cards.
Rossman’s advice: “Forget about rewards until you’re debt-free. Sign up for a 0% balance transfer card instead.”
How do you do a balance transfer?
If you don’t know how to do a credit card balance transfer, don’t worry. The process shouldn’t take more than a few minutes if you have your information ready.
Once you’ve applied for and received a balance transfer card, you’ll have a window in which to make qualifying balance transfers. Most issuers will have a process online or in their mobile app that allows you to make balance transfer requests.
You’ll need to know the account numbers of the card or loan accounts you want to transfer balances from and the balance amounts you want to transfer from each.
Most issuers also allow you to make balance transfer requests by phone if you’d rather not go through their online process.
Balance transfer guides by credit card issuer
If you want to do a balance transfer with a specific bank or card issuer, Bankrate has detailed guides from the following financial companies:
How long do balance transfers take?
Timelines for processing balance transfers vary from issuer to issuer. On average, balance transfers take between 7 and 10 days, but it could take weeks.
Make sure you’re still making payments on those existing balances until you receive official confirmation that the balance transfer has gone through.
Should you close your old account after transferring a balance?
You might be tempted to cut up your high-balance card once you transfer, but that move could actually damage your credit score. One of the factors in determining your score is the average length of open accounts. If you close multiple accounts that you’ve had open for years, you could seriously reduce that average and hurt your score.
Closing accounts also raises your credit utilization ratio (by taking away multiple lines of credit that factor into your overall average ratio), which can also lower your score.
If you keep those accounts open and use them for small purchases once a year (paying off those balances immediately), you can actually help strengthen your credit score over time.
The exception is if you have cards with annual fees. If you’re consolidating debt from multiple rewards credit cards with high annual fees, it might not be worth it to keep those in your wallet long-term if you don’t plan on consistently using them.
However, keep in mind that if you close those accounts, the issuer might not let you reapply for the card for a specific time frame.
What types of debt can you transfer?
Balance transfers are primarily used to consolidate multiple balances from different credit cards. However, each issuer has its own rules for what types of debt you can transfer.
For example, Chase customers can transfer credit card balances only, but Bank of America and Citi both allow credit card balances, auto loans, personal loans, home equity and student loans to be transferred. Most issuers do not let you transfer a balance from an existing account with that same issuer.
Should you pay off a loan with a credit card?
Some issuers allow you to transfer loan debt to a credit card, but just because you can do something doesn’t mean you should. Balance transfer credit cards are meant to help you consolidate smaller lines of credit, so you wouldn’t want to put a $20,000 car loan on a balance transfer credit card.
More importantly, loans often have much better interest rates and lower fees. While balance transfer credit cards often offer a 0% APR period, your balance transfer fee might actually be higher than your loan interest rate. Most of the time, it’s simply not worth it to pay off a loan with a credit card.
There are always exceptions, but make sure you do thorough research and potentially reach out to a financial adviser before you transfer a large loan balance to a credit card — even if the card has an attractive balance transfer option.
Is a balance transfer credit card right for you?
Used correctly, balance transfer cards can help you:
- Reduce debt while avoiding high interest. Most balance transfer credit cards come with attractive 0% APR intro periods, which help you save hundreds or even thousands of dollars. In most cases, you’ll pay a small balance transfer fee (typically between 3% and 5% of each balance transfer) instead of compounding interest.
- Simplify your finances. If you transfer multiple balances to one credit card, you’ll have just one monthly payment to keep track of. No more multiple accounts, passwords and payment due dates.
- Improve your overall financial health. Debt can be expensive, especially credit card debt. As of July 17, the current average interest rate on credit cards is 17.86%. Also, credit utilization accounts for 30% of your credit score. The more credit you’ve used in relation to your available credit, the lower your score might be.
However, transferring balances may or may not be the right move depending on your circumstances. Consider the following situations:
|
My balance situation is …
|
Should I consider a balance transfer? |
| $10,000 or less on one credit card |
Yes |
| $10,000 or less total on multiple credit cards |
Yes |
| $10,000 or less in different kinds of debt |
Yes |
| More than $10,000 in card or loan debt |
Maybe not |
| My credit score is … |
Should I consider a balance transfer? |
| Good or excellent |
Yes |
| Fair, poor or bad |
Maybe not |
Under $10K with good or excellent credit — Yes
A balance transfer is ideal when it involves less than $10,000 in debt, whether on a single credit card, multiple cards or different types of credit accounts.
- A balance on one credit card: A credit card-to-credit card balance transfer is probably the most common use.
- Balances on multiple cards: Some balance transfer cards allow you to transfer balances from more than one credit card account. Still, don’t forget that you’ll probably have to pay a fee for each transfer, so multiple transfers will raise your total cost accordingly.
- Different kinds of card/loan debt: Depending on the balance transfer card, you may be able to transfer balances from different types of credit accounts, including cards, car loans and student loans. Keep in mind that multiple transfers can mean multiple transfer fees.
With a good or excellent FICO score (between 670 and 850), qualifying for a top-rated balance transfer credit card shouldn’t be a problem.
Over $10K with fair, poor or bad credit — Maybe not
If your combined balance is higher than $10,000, you might want to consider other options. You typically can’t transfer a balance higher than your credit limit, and $10,000 is at the high end.
In fact, the average credit limit for a new credit line for an account holder with super-prime credit is $10,300, according to the American Bankers Association. For other credit rankings, it’s much lower. Also, the larger the balance, the harder it will be to pay it all off within an intro offer period.
If you think a balance transfer isn’t quite right for your personal situation, consider getting a personal loan.
With a FICO score of 660 or below, you may have trouble qualifying for one of the better balance transfer credit cards. Fortunately, a number of lenders offer loans for people with low credit scores, so a loan could be an alternative solution.
The question of balance transfer vs. personal loan involves several factors, including interest rates, fees and potential effects on your credit score. Make sure you do your homework before deciding.
How much money can you save with a balance transfer offer?
If you’re paying down a large balance, a 0% intro offer can save you hundreds or even thousands of dollars.
Experian reported that the average credit card balance reached $6,028 in the first quarter of 2019. Here’s how much you could save by transferring $6,028 in debt to one of our top balance transfer credit cards:
|
Balance transfer intro offer period |
Regular APR |
Potential savings* |
| Discover it® Balance Transfer |
18 months |
14.24% – 25.24% variable |
$818 |
| Capital One Quicksilver |
15 months |
16.24% – 26.24% variable |
$653 |
| Citi Simplicity® Card |
21 months |
16.74% – 26.74% variable |
$865 |
| HSBC Gold |
18 months |
13.24%, 17.24% or 21.24% variable |
$758 |
| Citi® Double Cash Card |
18 months |
15.99% – 25.99% variable |
$818 |
| BankAmericard |
18 billing cycles (for balance transfers made in the first 60 days) |
15.24% – 25.24% variable |
$999 |
| Chase Freedom Unlimited |
15 months |
17.24% – 25.99% variable |
$653 |
| Capital One SavorOne |
15 months |
16.24% – 26.24% variable |
$653 |
If you’re interested in simulating your own credit card numbers to get an idea of your payoff timeline, try the Bankrate Credit Card Payoff Calculator.
*Potential savings calculated by comparing how much interest you would pay on your current card with an average variable APR of 20%. The formula also takes into account the balance transfer fee, where applicable. Calculations are made with the assumption that you will pay off a $6,028 balance within the intro offer period.
Compare Bankrate’s top balance transfer credit cards of 2019
How we evaluate balance transfer credit cards to find the best
Bankrate’s writers and editors have years of experience in studying the financial services industry and offering unbiased advice. In the case of balance transfer credit cards, we have evaluated dozens of cards to determine which ones are most likely to help you achieve your financial goals.
Our scoring and review process pays particular attention to the essential features of a balance transfer credit card, including:
0% introductory APR offer
Balance transfer cards should typically have a long period — between 12 and 18 months — of 0% APR. You’ll find it easier to pay off the transferred balance before the regular APR takes effect.
Balance transfer fee
A good balance transfer credit card will offer a low fee on transferred balances. A great balance transfer credit card might not charge a transfer fee at all, like the Chase Slate Credit Card or Amex EveryDay Credit Card. If you have an excellent credit score, consider asking to have the fee lowered or waived.
Regular variable APR
Regular variable APR is the interest rate that you will be charged after the introductory 0% APR period. You’ll want this rate to fall in a reasonable range, at least a few points below 30%.
Transfer limit
Make sure the card you choose has enough capacity to handle the amount of debt you want to transfer. A low cap could make it difficult to fit the entire balance on a single card.
Rewards
Rewards may not be the main motivation behind getting a balance transfer card, but you should aim to get the most value from your credit card.
Comparing balance transfer offers
There is a balance transfer card out there for just about every situation — whether you’re just looking for a no-nonsense card to consolidate debt or want a card that you can earn rewards with for years to come. Which one is right for you really depends on what you hope to use the card for, how much you are planning to transfer to the card and what you can feasibly put toward paying it off each month.
Defining your financial goals
The first step is deciding what you hope to accomplish with your balance transfer credit card.
If you want to use the card long-term to earn rewards, you’ll want a card like the Capital One Quicksilver or Capital One SavorOne. These cards offer a solid intro offer, but they also come with some serious cash back earning potential. If you’re more interested in budgeting tools to help you stay on track, a more straightforward balance transfer card like the Wells Fargo Platinum Visa card might be a better fit.
Comparing offer details
Once you have an idea of what type of card you want, you should compare offer details to find the one that works best for your balance and budget. Use our Balance Transfer Calculator to figure out which card offer is right for you.
For example, let’s say you have good-to-excellent credit, and you’re looking to consolidate $10,000 on a balance transfer card. In this example, we’ll assume you aren’t concerned with the rewards rate or extraneous features of the card. Here are two of our top balance transfer credit cards:
|
Discover it® Balance Transfer |
Citi Simplicity® Card |
| Intro period length |
18 months from date of first transfer, for transfers that post to your account by November 10, 2019 |
21 months for transfers made within the first 4 months |
| Regular APR |
14.24% – 25.24% Variable |
16.74% – 26.74% Variable |
| Balance transfer fee |
$300 (3% intro fee for balance transfers that post to your account by November 10, 2019) |
$500 (5% of each transfer) |
| Monthly payment* |
$556 |
$477 |
| Potential savings** |
$1,375 |
$1,434 |
*Calculations made with the assumption that you will pay the balance transfer fee upfront and pay off a $10,000 balance within the intro offer period.
**Potential savings calculated by comparing how much interest you would pay on your current card with an average variable APR of 20%.
If there is any chance that you could need longer than the intro period to pay off debt, it might be worth it to pick the card that has a lower APR rate, even if your potential savings aren’t quite as high.
Conversely, if you can’t budget more than $600 a month to pay off your balance, choosing the credit card with a longer intro period (which also means a lower monthly payment) is probably the better option for your specific situation.
Reading the fine print
Keep an eye out for balance transfer cards that come with what is known as “deferred interest.” With this type of situation, your balance would accrue interest during your card’s introductory offer, but that interest would only be charged if you didn’t pay off debt in full before your offer ends. This means you could avoid interest for many months only to be hit with deferred interest on the total balance when your offer runs out.
Fortunately, the most popular balance transfer cards available today do not charge deferred interest. However, it never hurts to review your offer thoroughly, including the fine print.
How long is the average balance transfer offer?
The Credit CARD Act of 2009 states that introductory offers must be at least 6 months long, but offer periods range up to 21 months. The average is somewhere in the middle, with common offer periods falling at 12 months, 15 months or 18 months long.
Unless you’re transferring a very small balance (in which case your balance transfer fee might outweigh your potential interest savings), you probably want to have at least 12 months to pay off that balance. Which specific offer length is best for you really depends on your monthly budget.
Using the same $10,000 balance example from earlier, here are the monthly payments you would need to make on a 12-month, 15-month and 18-month balance transfer offer in order to avoid interest payments:
|
Necessary monthly payment |
| 12-month intro period |
$834 |
| 15-month intro period |
$667 |
| 18-month intro period |
$556 |
What is the average credit limit for a balance transfer?
Typically, issuers will only let you transfer a balance plus fees that are no higher than your credit limit, and how that limit is determined is based on multiple factors. Two of the largest factors that most if not all issuers look at when determining your initial limit are your credit score and annual income. Usually the higher your credit score and income, the higher your credit limit.
If you want to make a balance transfer that exceeds your credit limit, you can call the issuer to ask if they will increase your credit limit. Explain your situation and why you are wanting a higher credit limit. It might help to say that you are trying to lower your utilization ratio.
While it’s not guaranteed that they will approve the increase, it’s highly possible. In fact, CreditCards.com found in April 2018 that cardholders had an 85% shot at getting a credit limit increase just by asking.
How do balance transfers affect your credit score?
You might experience a temporary dip in your credit score after you complete a balance transfer. Applying for a new credit card involves a hard inquiry into your account and will shorten your average account age, and transferring multiple balances to one card will hurt your credit utilization ratio for that new card. These are all factors that go into the composition of your credit score.
However, consolidating your debt with a balance transfer credit card and successfully paying off your balance within the intro offer period can significantly reduce your overall credit utilization ratio and prove to lenders that you can be trusted to pay back lines of credit issued to you — both of which can raise your credit score dramatically over time.
