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Balance Transfers

How to Choose the Right Balance Transfer Credit Card

To choose the right balance transfer credit card, first make sure you don't already have credit card accounts with the card issuer you're considering. Then compare the length of your introductory 0% annual percentage rate (APR) period; fees associated with the card; and any other features, like cash back, you may be able to use in the future.

The best balance transfer credit card is one that will help you pay off debt interest-free, and that may also get you additional benefits that meet your needs once the debt is gone. Here's how to choose the right card for you.

What Is a Balance Transfer?

When you make a balance transfer, you move existing debts to a new credit card that charges 0% APR for a period of time. Balance transfer credit cards commonly offer introductory 0% APR periods of 12, 15 or 18 months. The goal is to pay off debt, without accruing interest charges, before that time frame ends. That generally means avoiding making additional purchases on the card in the meantime.

Some balance transfer cards offer benefits like cash back on purchases, access to free credit score monitoring and cell phone insurance covering theft and damage if you pay your bill with your card. You may also find cards that offer sign-up bonuses if you spend a certain amount within a few months of account opening. But since a balance transfer card is best used to pay down debt, not build up more of it, benefits like a sign-up bonus are not always worth the potential growth in your balance.

How to Compare Balance Transfer Cards

To qualify for a balance transfer card, you must generally have a good or excellent credit score, defined as a score of 670 or higher in the FICO credit scoring model. If you're eligible for a card, compare your options based on the factors that are important to you. These should include:

  • Issuer: Credit card companies are eager for your business, and a balance transfer card brings your balances to their doorstep. That means they generally do not allow transfers from other credit cards of theirs you may already own. When you choose a Chase balance transfer card, for example, you will not be able to move a balance from an existing Chase card to the new one. But you can move an American Express or Discover balance to a Chase card, for instance. That also applies to the credit card company's affiliates, such as airline credit cards the company issues.
  • Introductory period: Calculate how long you'll need to pay off your debt and choose a balance transfer offer based on that time frame. If you have a large amount of debt to get rid of, for instance, go with the longest introductory period you can find.
  • Balance transfer fees: In most cases, the card issuer will charge a fee when you transfer a balance—commonly 3% or 5% of each transfer. You may be able to find a card that charges no balance transfer fees, but take into account whether you're likely to still have debt when the introductory period ends. If so, you're likely better off choosing a card with the lowest ongoing APR available, even if you have to pay a balance transfer fee. Calculate how much you'd pay in interest in each scenario before making a final decision.
  • Additional fees: Aside from balance transfer fees, credit cards may also charge annual fees, foreign transaction fees or late fees. An annual fee could make it pricey to keep the card for the long haul, which should be your goal: Length of credit history accounts for 15% of your FICO® Score* , so the longer you keep the account open, the better generally. But if you choose a balance transfer card that also offers cash back, and you'll get enough cash back on purchases in the future to make up for the annual fee, it could be worth it.

If you travel frequently, not having to pay foreign transaction fees might be an even bigger consideration. And while you should plan to pay all bills on time to protect your credit score, take a look at the late fees assessed so you're not surprised if you miss a payment. You may even be able to find balance transfer cards that don't charge late fees at all—though if that could make you lax about payments, that might not be a good thing.

Is a Balance Transfer a Good Option for You?

Before making a balance transfer, ensure that you'll qualify for a 0% APR period that's long enough to allow for substantial debt paydown. Check the credit limit that your new credit card issuer has offered, and choose balances to move that fall within it. Your balance transfer fee will be included in your credit limit, reducing how much you can transfer. If you're unable to transfer all your debt, prioritize the highest-interest balances so you'll save the most money.

Take a close look at how your card treats new purchases too. If your card does not give you a grace period—since you're technically carrying a balance while you pay off your debt during the promotional time frame—then you may pay interest on new charges as soon as you make them. Understand whether your card charges higher than 0% APR on purchases, and whether it will start accruing immediately, to avoid surprise charges. In general, a balance transfer credit card is a good option if you plan to use it only to pay down debt, not to buy new items—at least during the promotional period and while you're paying off the transferred debt.

How to Get the Most Out of Your Balance Transfer Card

To use a balance transfer credit card for its ideal purpose—getting rid of debt—make sure you pay enough each month to eliminate your balance by the end of the introductory period. That likely means making more than the minimum payment. Also, set up monthly automatic payments for a specific amount through your credit card issuer so you never miss one. That will keep your credit score strong and give you continued access to the 0% APR offer, which some issuers eliminate if you pay late.

It's also important to keep your previous credit cards open, even if they no longer have balances. Closing credit cards shortens your average age of accounts, which could have a negative effect on your credit score. Also, in most cases, keeping accounts open with zero balances will lower your overall credit utilization rate, or the amount of available credit in use. Credit utilization accounts for 30% of your FICO® Score—the second-largest share, after payment history—and keeping your utilization rate low can have a positive impact on your credit.

In the end, if you use a balance transfer credit card to lower your total debt, your credit score will likely improve. Make sure to continue that positive financial behavior by keeping balances low and paying all bills on time long after the debt on your balance transfer card is gone.

The Bottom Line

A balance transfer credit card can be an extremely useful tool for consolidating and knocking out debt. Choose a card that meets your individual needs—not only while you're getting rid of the balance, but afterward, once it's like any credit card in your wallet that could get you rewards and benefits too.

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