Choosing a Balance Transfer Credit Card: Things to Keep in Mind

Editorial Note:

A balance transfer credit card is a low APR card that allows you to transfer high-interest credit card debt onto a new card. This can help save you money on interest, pay off your debt faster and lower your monthly payments.

There are a number of important features of balance transfer credit cards. Depending on your situation, it makes sense to choose one particular benefit over another. Some of the key points related to choosing a balance transfer credit card are listed below.

Introductory (or Promotional), Regular, and Penalty APRs

Balance transfer credit cards can have a zero introductory (or promotional) APR or a very low APR. This is directly related to your credit score. Good and excellent credit score applicants are more likely to receive a 0% APR credit card. Note that once the promotional rate is over, any balances will be subject to the regular APR. It is good to know what your regular and penalty APRs will be.

Promotional Period

The length of your balance transfer period is also important. The longer the period, the better. A longer period will give you more time to pay off your balance completely without paying interest. The best balance transfer cards offer periods that are 15 to 21 months long. A card with a shorter period may offer other promotional or permanent benefits to make up for the decreased time.

Balance Transfer Fees

It is common for a balance transfer card to charge a fee, usually the larger of $5 to $10 or 3% to 5%. A $5000 balance transfer can result in a $150 to $250 transfer fee. Note that the balance transfer fee does not eliminate the interest savings gained from transferring your balance. A few cards out there do not charge a balance transfer fee. This is also a benefit offered by some credit unions to their members. In general, you need good credit (a credit score of 701 or more) to qualify for credit cards with no balance transfer fees.

Rewards of a Balance Transfer Credit Card

Planning to keep the balance transfer card after the promotional period is over? If the answer is yes, then you may be interested in a balance transfer credit card with rewards. Some of such cards offer a permanent (but capped) tiered cashback promotion. This may be 3%, 2% and 1% cash back on purchases in categories like groceries, fuel, or others. These tiers will be applicable on new purchases only but may be capped at a specified value per year. Some credit cards issue sign-up bonus points, which you can redeem for bill credits, travel benefits, or other perks.

Examine Your Options Thoroughly

Balance transfer credit cards, with all their potential benefits, should be well considered. Some benefits are more important to you than others, and we encourage you to carefully examine your options before choosing a balance transfer credit card.

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