When Is Transferring a Credit Card Balance Worth It?
If you’re carrying high interest credit card debt, you have probably entertained the idea of transferring your balance at least once. After all, most balance transfer offers extend an attractive 0% intro APR for anywhere from 12-21 months. Meanwhile, some cards offer exceptional perks and even rewards that can sweeten the deal.
Depending on how much interest you’re paying, a balance transfer offer could indeed save you a boatload of money. Before you take the plunge, however, you should run the numbers and explore each of the offers available. Just like any other credit cards on the market, balance transfer cards aren’t all created equal. If you want to find the perfect card for your needs, you have to put in the work.
Transferring a Balance: How Much Could You Save?
But first, let’s start with how much you could save. The reality is, this figure depends on your current annual percentage rate, or APR, as well as the total amount of the balances you hope to transfer. In the meantime, you’ll need to factor in balance transfer fees as well.
Yes, you read that right. Most balance transfer credit cards charge a balance transfer fee equal to 3% of your total balance in order to process the transaction. While this detail isn’t always touted along with the benefits of these offers, it’s absolutely crucial to know about this fee and understand what it means. It doesn’t mean you won’t save money, but it definitely shakes things up.
Here’s how a balance transfer (with a fee) might look in the real world:
Let’s say you’re currently carrying $10,000 in credit card debt with a 15% APR. If you paid only the interest + 1% of your balance as the minimum payment every month ($225), you would owe $125 per month in interest alone during month one, plus another $100 towards the principal.
If you transferred that balance to a 0% intro APR card and paid a balance transfer fee of $300 (3% of your balance), you could secure 0% APR for anywhere from 12-21 months and pour the money you were paying towards interest directly towards your balance instead.
Sure, paying the $300 balance transfer fee is a drag, but you would recoup those savings within three months and save hundreds of dollars in interest for the remainder or your 0% APR introductory period. No matter how you look at it, that’s a winning situation and one that could ultimately help you reach your goal of becoming debt-free that much faster.
Balance Transfer Offers: What You Should Know
As you can see, 0% intro APR balance transfer offers can be a smart move if you’re carrying high interest debts. Even after paying a balance transfer fee, you’ll likely come out far, far ahead.
But that doesn’t mean that any balance transfer offer will do, nor does it mean there aren’t some additional factors to consider. Before you sign up for a new balance transfer card, here are some details you should know:
At least one card doesn’t charge a balance transfer fee during the first 60 days.
While most balance transfer cards charge a balance transfer fee equal to 3% of your balance, the Chase Slate® card comes with no balance transfer fees for the first 60 days plus no annual fee, ever!
If you want to transfer a large balance without paying a fee to do so, this is the best offer out there. The only caveat to consider, however, is that this card only offers 0% APR for the first 15 months. While that may be plenty of time for some people, others may need more time to pay down their debts.
If you want the longest 0% APR introductory period you can get, consider this card.
Speaking of that, one card on the market is offering one of the longest 0% APR introductory offers we’ve ever seen. With the Citi Diamond Preferred® card, you’ll get 0% APR for a full 21 months. That’s almost two years to pay down your debts with no interest whatsoever.
This card does charge a balance transfer fee, so you’ll need to factor that in. If you have a large balance to pay down, paying a balance transfer fee may still be worth it since you’ll have several extra months at 0% intro APR.
Some balance transfer cards also offer rewards.
The Discover it® offers 0% APR for a limited time, plus the opportunity to earn ongoing rewards. This card offers 1X points on every dollar you spend plus 5X points on your first $1,500 spent in categories that rotate every quarter.
If you want to pay down your balances at 0% intro APR and earn rewards when you use your card at the same time, these are both excellent options to consider.
If you keep using your card, you may never get out of debt.
With that in mind, transferring a balance to a 0% intro APR credit card will only help you get out of debt if you use that time to pay as much money towards your balance as you can. If you continue charging on credit cards while you try to pay down your debts, you may not end up any better off in the long run. That’s why the smartest thing to do while you’re paying down debt is to stop using credit altogether. Utilize your 0% intro APR balance transfer offer to its fullest by paying off your balance as quickly as you can.
If you’re struggling under the weight of high interest debts, a balance transfer offer can provide some welcome relief. Before you pull the trigger, make sure to research all of the top 0% intro APR offers available and figure out how much you could save. With some basic planning and self-discipline, you could not only save money on interest, but you may get out of debt much faster than you think.
Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author’s alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This content was accurate at the time of this post, but card terms and conditions may change at any time. This site may be compensated through the credit card issuer Affiliate Program.