This page includes information about the Discover it® Balance Transfer product which is no longer offered by Discover.
For the modern consumer, Benjamin Franklin’s famous two certainties of life might be in need of an update: not just death and taxes but also debt.
As of 2019, the average American has roughly $38,000 in personal debt (not counting mortgage debt), and this number is only expected to rise in the future. The statistics about credit card debt alone are staggering, with 25% of all personal debt in America coming from credit cards.
Facts such as these show that even if the average consumer feels alone or hopeless on their path to debt reduction, they are, in reality, members of an unexclusive club that nobody wanted to join in the first place. Shame about debt often means that productive conversations regarding debt reduction can be hard to find, and tools such as balance transfer credit cards underutilized. While it won’t be right for everyone, reducing a single debt or consolidating multiple debts with a balance transfer card could help ease the burden.
How to transfer a balance using a balance transfer card
A balance transfer using a credit card is a simple concept, but its name is a bit of a misnomer. When using a balance transfer as a debt reduction strategy, you are paying off the balance on one credit card with a new card that you apply for.
A balance transfer card can be a beneficial debt reduction tool because it gives you the ability to transfer a balance that was subject to a high APR (annual percentage rate) to another card with a lower APR. Often times balance transfer cards will have introductory offers where, for a certain time frame, the card has a 0% APR before the regular APR applies. These benefits allow card owners in debt to pay off their balance faster without the added burden of additional interest.
How many balance transfers can you make to a single balance transfer card?
The number of balance transfers that are allowed on a single card depends on the issuer and your individual credit limit, and each are subject to a balance transfer fee of 3%-5%. Most issuers allow between two and five balance transfers to a single card as long as the balances transferred do not exceed your credit limit.
This strategy is known as debt consolidation, or combining multiple debts into one. In addition to balance transfer credit cards, other debt consolidation options include personal loans and home equity loans.
What impact do multiple balance transfers have on your credit utilization ratio?
One thing to keep in mind when consolidating your debt using a balance transfer card is your credit utilization ratio.
Your credit utilization ratio is an important aspect of your credit score that accounts for 30 percent of your FICO score or 23 percent of your VantageScore. Your credit utilization ratio analyzes what percentage of your total line of credit that you are using in order to determine how financially stable you are at any given time.
Credit card issuers and other lenders look at the percentage of your credit line that you are using under the assumption that if you are utilizing your full credit line you may be less financially secure. To achieve an optimal credit score, it is suggested that card owners should not spend more than 30 percent of their available credit. Problems can arise from using a balance transfer card to consolidate debt when multiple balances combine on one balance transfer card because an individual’s credit utilization ratio can increase exponentially.
On the subject of balance transfers and credit utilization, Bankrate credit card industry analyst Ted Rossman said, “It’s true that utilization is reported multiple ways: overall and per card. Sometimes people who transfer balances max out the new card (or come close). That’s not great, even if your overall utilization goes down.”
Is transferring multiple debts to a balance transfer card a good debt reduction strategy?
Getting yourself out of debt can seem like a herculean task when added interest keeps growing your balance as you try to pay it off. Because of this, Rossman says, “I still think a balance transfer is worth it because of the potential for large interest savings.” However, he goes on to add that “you should probably wait [to apply for a balance transfer card] if you’re about to apply for a mortgage or car loan — don’t risk even a modest credit hit just yet.”
Transferring multiple forms of debt to a balance transfer card can be an effective debt reduction strategy to help consumers escape debt by lowering or eliminating high-interest rates for a set period of time. Like all aspects of credit card ownership, it’s important to make a decision that is most beneficial for your own financial future based on careful consideration of all options.
A balance transfer card isn’t going to be the best debt reduction strategy for everyone. But, if you don’t have any major upcoming financial obligations like a new mortgage or car loan, it could be a good way to ease the stress of high-interest credit card balances.
Some suggestions for best balance transfer cards
Capital One Quicksilver Cash Rewards Credit Card
0% intro APR offer on balance transfers: 15 months (15.49% – 25.49% variable after) The Quicksilver Cash Rewards Credit Card from Capital One is a good choice for a balance transfer because it offers a 0% intro APR for 15 months — one of the longer 0% APR periods in the industry. Better yet, this card doesn’t have an annual fee so saving money on your high-interest rates won’t cost you any additional money.
For a full review of the Capital One Quicksilver Cash Rewards Credit Card, click here.
Chase Freedom Unlimited®
0% intro APR offer on balance transfers: 15 months (16.49% – 25.24% variable after) On par with the Quicksilver Cash Rewards Credit Card, the Chase Freedom Unlimited credit card offers a 15-month 0% APR period on balance transfers. The Chase Freedom Unlimited card also has a generous rewards structure that gives card owners 1.5% cash back on all purchases and $150 cash back when you spend $500 in the first 3 months.
For a full review of the Chase Freedom Unlimited, click here.
Discover it® Balance Transfer
0% intro APR offer on balance transfers: 18 months (13.49% – 24.49% variable after) With an introductory 0% APR period of 18 months, the Discover it Balance Transfer card is another good choice for individuals looking for relief from high-interest rates on their debt. The card also has benefits such as Cashback Match™, which matches any rewards you earned with the card at the end of the first year.
For a full review of the Discover it Balance Transfer, click here.
Citi Simplicity® Card
0% intro APR offer on balance transfers: 21 months (14.74% – 24.74% variable after) The Citi Simplicity has one of the longest balance transfer offers currently available: 21 months at 0% APR. The card’s also inexpensive to own, with no annual fee, no late fees and no penalty APR.
For a full review of the Citi Simplicity Card, click here.