A credit card with a 0% balance transfer offer can be a lifesaver when you’re coping with a pile of high-interest credit card debt. That’s especially true these days, when rising interest rates continue to bust records and low interest-rate credit cards are tougher to find.
With a 0% introductory apr balance transfer, you’ll not only save money on interest, but you also can pay your down debt pretty quickly.
However, not all 0% balance transfer card offers are as good a deal as it appears. For example, some balance transfer cards charge such high transfer fees that you could owe hundreds more dollars before you’ve even started reducing your balance.
Here are five things to keep an eye on before you settle on a 0% intro rate balance transfer card.
1. Balance Transfer Fees Add Up Quickly
When you’re scanning the terms and conditions of a new card, a 3% to 5% balance transfer fee might not look scary. However, if you’re transferring a significant amount, you could be shocked to discover how much pain those fees can cause.
For example, if you want to transfer $6,000 to a card with a 3% balance transfer fee, you’ll pay a $180 fee to do so.
If your card charges a 5% balance transfer fee for the amount of each transfer, (which isn’t that uncommon) you’ll owe your card issuer $300 – a $120 difference!
Tip: When comparing cards, don’t just look at the intro offer of a balance transfer card. Also look at what it’s charging to transfer balances. Some cards charge a higher balance transfer fee in exchange for a longer introductory period, which might not be in your best interest. Depending on what you owe, a card with a lower fee but a somewhat shorter introductory period actually might be cheaper overall.
2. You Might Be Able To Transfer Your Debt for Free
Depending on your credit score, you might be able to avoid a balance transfer fee altogether.
A number of balance transfer cards, such as Bank of America’s BankAmericard® Mastercard, the American Express EveryDay® card and the Chase Slate® Visa card, waive balance transfer fees from the first day of account opening.
That could make opting for a card with a somewhat shorter balance transfer intro period, but no balance transfer fee, less costly overall – even if you aren’t able to pay off your debt by the end of the promotional period.
Tip: Before you apply for a 0% balance transfer card with a promotional intro balance transfer fee, make sure you’re ready to transfer your balance right away.
Many credit card companies give you a relatively short period of time (typically around two billing cycles) to transfer your debt for free. That’s also true for interest-free promotions.
3. Limits to What Type of Debt You Can Transfer
The rules vary by card issuer. Generally, though, you won’t have free rein to transfer just any old debt you choose. For example, most card issuers refuse to transfer debt from the same bank. (So, for example, you can’t transfer a Chase Freedom® card balance to a Chase Slate card.)
Card issuers also can be strict about who owns the debt and what category it falls in. For example, some issuers may let you transfer someone else’s debt. Others require your name to be on the original account. Similarly, some issuers allow you to transfer a variety of debts, such as student loan and personal loan debt, and others may only transfer credit card debt.
Tip: If you’re part of a couple, you might be able to take advantage of a partner’s higher credit score by transferring one partner’s debt to a card in the other partner’s name.
4. The Promotional Clock Could Start Ticking Sooner
When you think of a balance transfer offer that comes with an interest-free promotion with an intro apr period, you might expect the clock of the promotional period to start ticking as soon as your old debt is transferred to your new credit card. But that’s not usually how it works.
With many cards offering an intro APR of 0% for the first year, you would think that you have a calendar year once your balance has been transferred. In reality, many balance transfer cards specify in the card’s terms and conditions that the promotional period starts as soon as you open the account. This means that if you request a balance transfer 50 days after opening your account, you won’t have as much time to pay it off before the card’s standard interest rate kicks in. Some card issuers require you to request a balance transfer within 60 days of account opening, so don’t procrastinate!
Some balance transfer cards, such as the Citi Simplicity® Card and the Citi® Double Cash Card, are more generous. For example, they start the promotional clock on the date of your first transfer. In addition to starting the clock on the date of the first transfer, the Citi Simplicity credit card offers no annual fee, no late fees, and no penalty APR.
Tip: Before you pick a card, decide how much of a monthly payment you can afford. That should help you narrow your list of potential cards. You might find that you don’t need 18 billing cycles to pay off your debt and instead would be fine with a 15-month balance transfer card that charges lower fees.
5. If You Add New Charges, Your Balance Could Stick Around for a Lot Longer
When you use a 0% balance transfer card for new purchases, you need to seriously step up your monthly payment. If you don’t, your transferred debt will linger after the card’s interest-free promotion ends.
That’s because the way a credit card issuer allocates your monthly payments could mess with your payoff schedule if you fail to increase the payment to account for new purchases.
The Federal Credit CARD Act of 2009 requires card issuers to allocate what is left after you pay a card’s minimum amount due to the balance with the highest APR. So if your card charges its regular variable APR on new purchases, then the majority of your monthly payment will be put toward those new purchase balance, not your older balance.
To avoid that situation and to keep putting a dent in your old debt, you’ll need to pay off your new balance in full by the due date– and then pay even more toward your transferred balance. It is extremely important to pay on time because if your account isn’t in good standing, there’s a good chance the balance transfer APR offer and promotion period ends. The last thing you want to do is add late fees and a penalty APR, further adding to your existing credit card balance.
Tip: To keep things simple, take your balance transfer card out of your wallet until you’ve finished paying off your old credit card balance.
That way, you won’t worry about recalculating your monthly payment.
The Bottom Line
Balance transfer cards can be a fantastic tool for eliminating debt. However, they can be tricky. To get the best deal possible, keep a calculator handy when you’re comparing the best balance transfer cards and carefully read through each card’s terms and conditions. You might find that the “best balance transfer credit cards” with the jazziest promotions aren’t the ones that save you the most money.