Are you considering transferring your credit card balances to a new card? It can be a good decision, especially if you are tired of juggling multiple monthly payments. Those who have improved their credit scores can benefit greatly from doing a balance transfer, as they may be able to qualify for a better interest rate than what they currently have.
Before you transfer your balances, you should know what the best balance transfer cards have in common. They’re not all the same, and educating yourself can help you make the best decision for your circumstances.
With that in mind, here are 5 common features of the best balance transfer cards.
#1: A Low or No Introductory APR
The first thing to consider is your APR or interest rate. There’s no point in transferring your balances if you can’t get a better rate.
It’s very common for balance transfer cards to offer a very low APR to start, or even no APR. However, these introductory rates don’t last forever, so make sure to read the fine print.
Check out the section that explains the APR, and look to see what it will become when the introductory offer expires. You should expect some increase, but make sure that it doesn’t jump 20 points before you commit.
#2: Sufficient Time to Pay Your Balance at the Introductory Rate
The whole point of transferring your credit card balances is to be able to pay them off at a low interest rate. The length of time that your introductory low or no APR offer lasts can vary from card to card.
Ideally, you want an introductory period between 12 and 18 months. That gives you sufficient time to pay down your balance at the introductory APR, but it allows the lender some protection if it takes you longer than that.
Of course, you’ll want to weigh the length of the introductory period against other features of the card. In some cases, it may be preferable to agree to a shorter period in return for other perks.
#3: A Low Transfer Fee
Most balance transfer cards charge a fee for the amount being transferred. The standard fee is typically around 3% of your transferred balance. However, some are lower – and some may have no fee at all.
Compare your options and then, talk to the credit card issuers to see if there’s any wiggle room. Some companies may agree to waive the fee is your credit is excellent. That means a score of 750 or higher. Others may be willing to agree to a reduced fee.
Some credit card features aren’t negotiable, but the transfer fee is worth asking about. You might be able to save some money.
#4: A Sufficient Limit to Cover Your Transfer (and Then Some)
The percentage of credit you utilize determines 30% of your FICO score. If you’re going to transfer your balances to a new card, you want to make sure that the limit on your new card is high enough to cover the balance you’re transferring with room to spare.
Think about it this way. If you transfer a balance of $3,000 and the limit on your new card is $3,000, you’ve maxed out your card as soon as the transfer is complete. That will impact your credit score, and your credit score should take precedence.
You might not know ahead of time how much you’ll be approved for, but it’s a good idea to call the credit card company and ask what their typical limits are. Do this before you apply, and you’ll reduce the risk of running into a problem when the transfer happens.
While some balance transfer credit cards are straightforward, others might have some surprising loopholes hidden in the fine print. Here are some examples:
- A statement that the introductory APR applies only if you pay off the transferred balance in the introductory period. If you don’t, the new APR will be backdated to cover your transferred balance. This isn’t common, but it’s important to read everything to make sure you’re not going to be penalized.
- A provision that nullifies the introductory APR if you miss a payment or blow through a grace period. Some companies leave themselves an out in case a new customer doesn’t pay on time, and this is one that can cost you a significant amount if you’re not careful.
While loopholes like these aren’t included in every credit card, you can’t afford to skip reading the fine print. If you’re unsure what something means, go back to the company and ask before you complete your application.
Transferring your credit card balances to a new, low-interest card might be the best thing you can do for your credit. The key is to read the fine print, ask questions, and don’t move forward until you understand what having that new card will mean.
If you have any other questions, don't hesitate to get in touch with a team member at your local branch.