Choosing a balance transfer credit card can be exciting, stressful, and complex all at the same time.
The exciting part is that you’re doing something to improve your finances. You understand the financial impact of credit card debt, and hope that a balance transfer offer can alleviate some of the pain.
At the same time, you’re sure to feel a bit of stress during this time. There are hundreds of balance transfer credit card offers to choose from. Furthermore, you know that the decision you make will impact your finances in a variety of ways.
In regards to the process being complex, this is almost always related to a lack of information. You have a basic understanding of what a balance transfer credit card is all about, but you’re not in position just yet to make a final decision.
That’s where we come into play. With our help, you’ll no longer have questions or concerns about how to choose a balance transfer credit card. We provide you with the advice and guidance you require, all with the hope that you’ll use it to your advantage.
Start With These Three Points
The best balance transfer card for you may not be the ideal choice for the next consumer. However, regardless of your debt load or financial goals, there are three points that deserve your immediate attention:
- Your current debt: in addition to the amount of credit card debt you’re carrying, make note of the issuers you’re currently doing business with. The more organized you are upfront the easier it is to make sound decisions in the future.
- Balance transfer fee: in a perfect world, you could transfer all your credit card debt free of cost. Unfortunately, most offers come with a balance transfer fee attached to it. For example, three percent of the balance you transfer.
- The 0 percent APR period: perhaps the biggest benefit of a balance transfer credit card is the 0 percent APR period. This provides you with a predetermined period of time – typically 12 to 21 months – to pay off your debt without interest.
It’s these three points that help you form a solid foundation for moving forward. When you know your debt, understand how the balance transfer fee works, and have a plan to take advantage of the 0 percent APR, you’re in position to succeed.
Balance Transfer Credit Card FAQs
If you don’t have experience with a balance transfer credit card, it’s easy to believe you’ll never know enough to make a confident decision. This isn’t true. As you answer a variety of frequently asked questions, you’ll find yourself in position to quickly decide for or against using this financial tool.
Answer these balance transfer credit card FAQs to better understand the process:
1. How much is the balance transfer fee?
You can’t ignore this question, as it’s money that’s coming out of your pocket as you transfer funds.
While not always the case, balance transfer fees typically range from three to five percent of the amount you’re transferring.
For example, if you’re transferring $20,000, you can expect your fee to range from $600 to $1,000.
This is a lot of money, so you don’t want to proceed until you’re sure that you’ll come out on top in the end (more on this below).
Note: they’re few and far between, but there are balance transfer credit card offers that don’t have a fee or charge something lower than three percent.
2. How long does the 0 percent APR last?
One of the top benefits of a balance transfer credit card is the opportunity to carry a balance for a long period of time, without any fear of a finance charge. This means that every payment you make goes directly toward your debt, nothing else.
The promotional rate on a balance transfer credit card typically spans 12 to 21 months. If all other details are equal, you’ll always want to opt for the offer with the longest promotional period.
Tip: it’s your goal to pay off all your debt before the 0 percent APR expires, but be realistic with yourself. If you don’t think this will happen, you must understand that the interest rate at that point will increase. Don’t be surprised if it reaches 20 percent or higher, thus meaning any balance you carry will come with plenty of interest attached to it.
3. Are you really saving money by using a balance transfer credit card?
In an overall sense, this is the only question that really matters. The most important thing is that you use a balance transfer credit card to improve your finances, not make things worse.
The answer here is based on the answers to the two questions above.
Let’s say you incur a balance transfer fee of $600, but are successful in paying off your entire balance over a period of 12 months (with no interest). In the end, when you factor in the interest you didn’t pay, you’re likely to come out on top.
To calculate your exact savings, collect this information for the balance transfer credit card offer you’re interested in:
- Balance transfer fee
- Length of the promotional APR
- Amount of debt you’re transferring
- Interest rate after the promotional APR expires
With all this data, you can run a variety of scenarios to help you determine if moving forward makes financial sense.
What is the Best Balance Transfer Credit Card?
Just the same as any type of credit card offer, there’s no right or wrong answer. It all comes down to what you’re looking for as a consumer.
Your goal is to find a reputable balance transfer credit card with a low transfer fee and long promotional period. Furthermore, if you can find one with a competitive rate after the promotional rate expires, it’s icing on the cake.
For those who don’t know where to get started, here are seven of the best balance transfer offers:
- The Amex EveryDay Credit Card from American Express
- HSBC Cash Rewards Mastercard
- HSBC Gold Mastercard
- American Express Cash Magnet Card
- Barclaycard Arrival Plus World Elite Mastercard
- ABOC Platinum Rewards Credit Card
- Amalgamated Bank of Chicago Union Strong Credit Card
As you compare these offers, you’ll find that each one provides something unique to the consumer. You’ll also find that no two are exactly the same, thus making your research even more important.
As a consumer in need of a balance transfer, it likely means you have too much debt spread across multiple credit cards.
While you may feel alone, keep in mind that the average American has a credit card balance of $6,375.
With this guide, you should now have a clear idea of how to choose the best balance transfer credit card. Good luck!