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Survey: Most Consumers Pay Back Balance Transfers During Promotional Period

When consumers don't pay their credit card balances in full each month, they'll typically pay interest on their carried balance—a cost that can add up over time. Balance transfer cards can help consumers avoid this cost by letting them transfer high interest credit card debt to a new card that has a low or 0% annual percentage rate (APR) for a period of time.

Balance transfer card offers can seem very appealing—many offer 0% APR for extended periods of time. But while these offers save consumers significant amounts of money, little is known about how consumers use these cards.

As part of our ongoing look at credit cards in the U.S., Experian surveyed a group of 202 consumers with balance transfer credit cards to see why they applied for the card and how they ended up using it. Read on for our insights and analysis.

Most People Surveyed Transferred Balances to Take Advantage of a Promotion

The majority of consumers surveyed (57%) said they got a balance transfer card to take advantage of a promotional offer, such as an interest-free period or a no-fee transfer. Balance transfer cards are most effective at saving consumers money when they come with a promotional introductory offer, so reacting to a good offer often will accompany the underlying reason to necessity.

Among the others asked, 35% said they chose a balance transfer card so they could close extra accounts—eliminating cards by consolidating balances. Otherwise, 28% said they transferred a balance because they had spent too much money and 25% said they did it to defer payments.

Nearly Two-Thirds of Consumers Paid Off Their Balance During Promotional Period

Of those who opened a card with a promotional introductory offer—75% of respondents—almost two-thirds said they paid their transferred balances in full during the promotional period. This indicates consumers are using balance transfer cards wisely by clearing their balances before having to pay any interest on their outstanding debt.

61% Paid a Balance Transfer Fee

Though balance transfer cards can help save money on interest, other fees associated with transferring a balance can pile up. The most common cost is a balance transfer fee, which is usually a one-time payment of 3% to 5% of the total balance transferred, depending on the card.

Of those surveyed, 61% reported being charged a balance transfer fee. The remaining portion—39%—said they didn't have to pay a fee, likely due to the fact that some balance transfer cards come with a promotional offer that allows fee-free balance transfers.

Low or 0% APR Was the Most Popular Intro Offer

Not surprisingly, the most popular intro offer respondents reported getting with their new balance transfer card was a 0% APR period. With a 0% APR period, the cardholder pays no interest on purchases for a period of time (usually six to 18 months) before the card's standard APR kicks in. More than two-thirds—66%—of those surveyed said they received a 0% APR offer. Other offers respondents received included improved terms and conditions compared with their existing cards and reduced or low APRs for certain periods of time.

Ultimately, what consumers received when applying for their balance transfer cards was in line with what they set out for when looking for a card. One-third of survey respondents said their intent when looking for the card included wanting an improved APR. Others said they were looking for cards with low or no balance transfer fees.

Savings on Credit Card Interest Can Be Significant When Transferring a Balance

Regardless of whether a consumer gets a low A or 0% APR offer when applying for a balance transfer card, any reduction in interest will in most cases help the borrower save money over time. Consumers in the U.S. owed an average of $6,194 in credit card debt in the second quarter of 2019, according to Experian data. And the average interest rate for credit cards in the U.S. is just under 17%, according to the Federal Reserve—with some companies charging as high as 30% based on the consumers' creditworthiness.

For consumers on the higher end of the APR spectrum, and depending on how much they owe, transferring a balance to a low or 0% APR could mean saving thousands of dollars and shaving years off their repayment period.

For more information on balance transfer cards, see our articles on how to transfer a balance and find a card that's right for you.

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