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Is a balance transfer a good idea?

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Balance transfers can be a lifesaver if you’re looking to pay down debt and avoid the high interest rates credit cards normally charge. However, credit card balance transfers are far from foolproof, and they can cause just as many problems as they solve.

So, are balance transfers a good idea? They can easily save you hundreds (or thousands) of dollars, but you’ll have the best shot at saving if you go about your balance transfer the right way from the start.

Before you sign up for a balance transfer credit card and take steps to consolidate debt, it helps to know how balance transfers really work, as well as their main advantages and disadvantages.

What is a balance transfer?

A balance transfer is the act of moving debt from one credit card to another. Consumers typically transfer balances from one card to another to take advantage of a promotional card offer that extends a 0 percent APR for a limited period of time.

Is a balance transfer a good idea?

At this point, you may be wondering what could possibly go wrong with a 0 percent introductory APR. Is it a good idea to transfer a credit card balance?

Pros of a balance transfer

  • Save money on interest. By consolidating high-interest credit card debt with a balance transfer card, you can save hundreds or thousands of dollars in interest depending on your debt. It’s easy to see why you can save so much when you consider that the average credit card interest rate is currently over 16 percent.
  • Pay off debt faster. During your card’s introductory offer period, every dollar you pay goes toward your debt. This means you can stop wasting money on interest and pay off your debt at a much faster pace.
  • Simplify your financial life. If you have debt on multiple credit cards with high interest rates, a balance transfer credit card can make debt repayment easier. Instead of making multiple debt payments each month, you may be able to move all of your debt to your balance transfer card and make one payment every month.

Cons of a balance transfer

  • Potential for more debt. Consolidating debt with one new credit card can make it tempting to rack up more debt on other cards. You will only make considerable progress with your debt repayment if you have the discipline to pay as much as you can each month.
  • Balance transfer fees. Balance transfer credit cards typically charge upfront fees that equal 3 percent or 5 percent of the debt you’re transferring. These balance transfer fees can add up quickly if you transfer balances over and over, and they eat away at your interest savings.
  • Good to excellent credit required. The best balance transfer offers are only available for consumers with good to excellent credit, so you may not qualify. If you want to transfer balances with bad credit, you may have to choose from inferior offers.
  • Balance transfer offers don’t last forever. Cards in this niche typically offer a 0 percent introductory APR for 12 to 21 months. If you don’t get serious about your debt payoff during the provided timeframe, you may not be much better off.

Ultimately, consumers who opt to consolidate debt with a 0 percent intro APR credit card may help themselves or make their situation worse. It all depends on whether they take debt repayment seriously, as well as whether they continue using credit cards to rack up more debt.

How to tell if a balance transfer is right for you

Generally, balance transfers work best if you can meet the following criteria:

  • You have very good or excellent credit
  • You have a plan to pay off your debt or make considerable progress during your card’s introductory offer period
  • You plan to use cash or debit for purchases (instead of other credit cards) while you’re paying off debt

Balance transfer example

In addition to checking off the boxes above, you should also run the numbers to see how much you could save with a balance transfer offer.

For example, imagine you owe $6,100 in credit card debt on two different cards that charge a 21 percent APR, and say you’re currently paying $350 per month across both accounts. At this rate, it would take you about 21 months to become debt-free if you didn’t make any other charges, and you would pay $1,281 in interest payments during that time.

Now, say you want to get serious about paying off your credit card debt and transfer your $6,100 in debt to a balance transfer card. Imagine you’re approved for the Citi® Diamond Preferred® Card, which offers an introductory 0 percent APR on purchases for 12 months and on balance transfers for 21 months, followed by a variable APR of 14.49 percent to 24.49 percent.

For this card, balance transfers must be completed within four months of account opening and balance transfers include a fee of 5 percent (minimum $5) of the transfer. If you transferred your $6,100 in debt to this card, you would owe a balance transfer fee of $305, meaning you would start your debt payoff with a balance of $6,405. However, you could pay off your debt completely in 21 months with the same payment of $305 per month.

If you’re curious how the numbers might work for your specific situation, our credit card balance transfer calculator can help.

What to look for in a balance transfer card

As you compare the best balance transfer credit cards, there are a few major factors you should look for, such as:

  • Cards that feature introductory APR offers for as long as possible—especially if you have a lot of debt to pay down
  • Annual fees and lower balance transfer fees (for example, a 3 percent fee instead of 5 percent)
  • Any cardholder benefits you may want access to, such as rewards, purchase protection, travel insurance or no foreign transaction fees

For example, the Citi Simplicity® Card is one of the most popular balance transfer cards available right now, and it’s easy to see why. This card provides an introductory 0 percent APR on balance transfers for 21 months (followed by a variable APR of 15.49 percent to 25.49 percent). Note that balance transfers must be completed within the first four months of account opening and a 5 percent balance transfer fee (minimum $5) applies.

Plus, the Citi Simplicity Card has no annual fee, no late fees and no penalty APR. Cardholders who initiate balance transfers can pay down debt faster without having to waste money on interest payments. However, the card charges a 3 percent foreign transaction fee and it doesn’t include a welcome offer or any rewards.

If you’re looking for a balance transfer card that includes a welcome offer and rewards, the Wells Fargo Active Cash® Card is a good option to consider. It offers 2 percent cash rewards on purchases, a $200 cash rewards bonus after spending $1,000 within the first three months and a 0 percent introductory APR on purchases and qualifying balance transfers from account opening for the first 15 months after account opening (16.49 percent, 21.49 percent, or 26.49 percent variable APR thereafter). But it should be noted that a rewards card can be a poor choice if your ultimate goal is paying off debt since you have to spend money to earn cash back or bonus offers.

The bottom line

Whether or not its a good idea to transfer a credit card balance all depends on how you handle the situation. If your goal is to consolidate debt and pay it off, then a balance transfer can be a valuable tool and save you money on interest. But if you only want to consolidate balances so you can rack up more debt on other cards, then you likely won’t benefit much from transferring a balance.

Ultimately, approach balance transfers with a certain amount of caution, and only move forward if you have a plan to get out of debt. If you transfer balances the right way, you could pay down your balances faster and potentially save thousands of dollars.

Written by
Holly D. Johnson
Author, Award-Winning Writer
Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance topics. In addition to writing for Bankrate and CreditCards.com, Johnson does ongoing work for clients that include CNN, Forbes Advisor, LendingTree, Time Magazine and more.
Edited by
Associate Editor