Balance transfer credit cards can help you pay off debt faster because of a unique feature that they have. These credit cards enable you to transfer existing debt from other cards to them. You can get low interest or even zero interest rates on the debt transferred for a limited period.
The interest rate on balances transferred remains intact for as long as the introductory offer is in place – which ranges from three to 18 months. By paying more on your debt during this period, you can reduce your debt faster than if you just made your normal payments. In most cases, you will need an excellent credit score to get the best balance transfer credit cards.
What to Watch for When Getting These Cards
You know that you have a good one when you have these four features on the card:
- 0% APR on balance transfers
- No transfer fees – most cards will charge 3% of the amount transferred
- Long introductory periods on amounts transferred – aim for one with at least a year
- Low-interest rates after the introductory period end if you expect to have a balance.
Making New Purchases
Some balance transfer credit cards will also give you zero interest on new purchases. The period on this feature may or may not be as long as the period for zero interest on balances transferred. If you are trying to pay down debt, it is best not to charge anything to your new card.
The Interest Rate
After the introductory period is finished, and if you still have a balance on the card, your new interest rate will be based on your current credit score. This could mean a shock to you because the interest rate on some of these cards could go quite high – up to 24.74% (such as the Citi Diamond Preferred Card). If you miss a payment or are late with one, you could instantly be placed into an interest rate of about 39% on some cards!
If you are willing to go with a low-interest rate on balance transfers, you may want to look at the SunTrust Prime Rewards Credit Card. Although it does not offer a 0% interest on transfers, it does charge just 3.25% interest for an amazing 36-month period. Once that period is over, the interest rate ranges from 11.24 to 21.24% – which is still lower than most other balance transfer cards. It also offers 1% cashback on all purchases.
The best balance transfer credit cards may also have some other features on them. Credit card companies are highly competitive and often try to outdo each other to get your business. These cards may also give cash back: the Citi Double Cash Card gives 2% cashback on all purchases.
A few credit cards will also have some fees. One card that has no fees is the Citi Simplicity Card. This credit card not only has no annual fee, but it also does not charge a late fee. It also promises not to raise your interest rate to a penalty level (often 39% or more). The zero percent interest applies to both balance transfers and new purchases for 18 months.
For People with Less Than Excellent Credit
One balance transfer credit card that offers an 18-month introductory period on balance transfers is the Wells Fargo Platinum card. You only need good credit to apply for this card, but there is a 3% charge for all amounts transferred to it. You can make the transfers within the first 120 days after getting the card (most cards only allow transfers for 60 days).