What’s a Balance Transfer Credit Card?

Whether you want to combine all your payments, lower your interest rate, or just save some money, a balance transfer credit card may be right for you.

Credit cards can be a handy tool for large payments and emergencies, but in the case of interest and falling behind on overwhelming payments, the resourcefulness of a credit card can be more than you’ve bargained for. When the interest on a credit card balance begins to slowly eat away at your wallet one month at a time, it can seem rather hopeless. However, that’s where a balance transfer credit card comes into play. This type of card allows you to move the balance of one card to another to simplify payments and potentially achieve a lower interest rate.

With a balance transfer credit card, it won’t mean that your loan is negated, and you’ll still be required to repay your debts and loans. What’s essential to remember when signing up for a balance transfer credit card is that if you don’t pay close attention to the stipulations, you could be later slammed with fees, costing you more money.

A balance transfer card could be used to your advantage if you have multiple debts spread out and are interested in combining them all into one simplified payment. You could very well be in luck in finding a balance transfer credit card that has a promotional offer of a 0% interest rate on balance transfers for a period of time, granting you the ability to quickly pay down your debts with no additional fees. If you have a handful of cash that can be thrown at a debt to knock it down, this is a great option because you could easily take advantage of a no interest rate without attempting to juggle multiple loans across multiple cards.

The Slippery Slope with Balance Transfer Credit Cards

If a balance transfer credit card seems too good to be true, it can be. There are some concerns that can raise red flags for a money-wise person who is striving to live as frugally as they can. Credit card companies naturally want to make some money, and wherever they can, they will. If a credit card company can’t get money out of you from an interest rate, then they’ll try for something called a balance transfer fee, and it’s not any better. 

Some credit cards may end up charging you a balance transfer fee, where you could be hit with a whopping 3-5% of the amount you transfer (and there could also be a minimum to ward you off from outsmarting the system by only transferring a few bucks). This is where you must ask yourself if the balance transfer fee can be justified if you would be saving more in the long run in comparison to the interest that would be charged. In some cases, it’s the lesser of two evils.

When you sign up for most major name balance transfer cards, you’ll notice that promotional offers extend for certain periods of time. This is something to be noted before you sign up for one because after the promotional period is up, you’ll then enter standard fees and rates. Avoiding this just takes a little bit of dedicated financial planning so you can move around these fees and enjoy the perks of the balance transfer card’s sign-on bonuses.

Important Tips to Remember with Balance Transfer Credit Cards

While the downsides of a balance transfer credit card may have you bummed out, don’t negate the idea just yet because with a balance transfer credit card, you can still come out ahead, and for a lot of people with credit card debt, this is an excellent and viable option. The success of your relationship with your balance transfer credit card relies on your attention to the details, your vigilance in payments and your ability to plan with your finances.

Find a balance transfer credit card that fits your financial situation the best. That’s a major first step because once you narrow the pool down to one, your attention will then turn to reading all the fine print, stipulations and fees in order to learn how to avoid getting charged whenever necessary. If there’s a promotional deal going on with the balance transfer credit card, make a note in your calendar for however long it lasts so you can avoid future fees, especially if there’s a time frame for balance transfers and interest rates.

Much of your success with a balance transfer credit card depends on your financial management. You don’t have to be a long-term financial guru to master a balance transfer card, just take up the role for long enough to get yourself out of debt, pay off the card, and avoid unnecessary fees. You might have to make a few lifestyle sacrifices to dodge fees and balance transfer charges, but your future, debt-free self will thank you for it.

It’s tempting, but don’t make purchases with your shiny new balance transfer card. You’ll quickly discover that if you do so, you’ll fall into a trap, being stuck with a heaping pile of debt bigger than the one you started with. Many balance transfer cards will offer a promotional interest rate on balance transfers but not for the purchases you make with their card. It’s a tricky way for them to make money off you and if you want to quickly pay off your debt, it’s better to leave the card at home in a desk drawer.

A Few Winners Among Balance Transfer Credit Cards

There are a few balance transfer credit cards that stand out among the rest, but even with these winners, it’s crucial to read all of the surrounding fine print that could bog you down in debt further.

Chase Slate®

Chase Slate will waive balance transfer fees within the first 60 days of you signing on, but be wary because it’s a 5% fee after that. There’s no annual fee and there’s 0% APR for the first 15 months. This is a nice head start to pay down your debt.

American Express EveryDay® Credit Card

What’s so gracious about American Express’ EveryDay Credit Card is there’s no balance transfer fee. Similar to Chase Slate, there’s also no annual fee, a double win. For the first 15 months there is 0% APR for both purchases and balance transfers.

Citi Simplicity® Card

This credit card does have a balance transfer fee of 5%, but it wins out in the category of long periods of 0% APR, which can end up benefiting you more depending on your financial situation. Citi Simplicity has 0% intro APR for the first 21 months for balance transfers made in the first 4 months after you open the account, and 0% intro APR for the first 12 months of account opening for purchases. With Citi Simplicity Card, there’s no annual fee either.

Wells Fargo Platinum Visa® Card

Wells Fargo has favorable reviews for balance transfer as well, with a 0% introductory APR on purchases for the first 18 months, and 0% APR for balance transfers for the first 18 months. For balance transfers, the APR is relatively generous because after your first 18 months of enjoying 0%, you’ll be charged 3% for the next 120 days, then ushered into a standard rate of 5% from then on out. There’s also no annual fee.

There is an undeniable convenience with balance transfer credit cards, but it’ll take a bit of financial navigating and preparation to take advantage of the perks they offer. For someone who isn’t carried away with purchases and can follow a monetary schedule, this is an excellent way to quickly and efficiently tackle credit card debt.