Balance Transfer Credit Cards

What are the most important balance transfer credit card features to consider? How worthwhile a particular balance transfer card will be depends on four factors: the balance transfer fee, the introductory transfer APR, the length of the introductory period, and the regular interest rate that will apply once the intro terms expire. Before comparing balance transfer credit card offers, we recommend using a credit card payoff calculator to determine approximately how long it will take you to pay off your balance. If you determine that you will be able to become debt free within the zero percent balance transfer introductory periods commonly being offered, then all you have to focus on is the balance transfer fee. The regular interest rate will be inconsequential.

If, on the other hand, that isn’t possible, the regular rate comes into play and the card with the longest introductory period isn’t necessarily the best balance transfer credit card for you. Instead, you should use a credit card debt calculator to figure out which offer allows you to minimize the combined cost of the balance transfer fee, interest incurred during both the intro period (if it isn’t a 0 percent transfer card) and after the regular rate kick in. It’s important that you not disregard a balance transfer credit card’s regular APR, thinking that even if a balance remains at the conclusion of the intro period, you can simply transfer it to another balance transfer card. Many consumers made this mistake in the lead-up to the Great Recession and incurred costly interest charges when the balance transfer credit card market dried up. Low interest balance transfer credit cards aren’t always available, after all, and while you could be lucky, you shouldn’t count on it.

Is there such thing as a free balance transfer? Not anymore. Free balance transfer credit cards (i.e. cards with 0% balance transfer APRs and no balance transfer fees) were once offered because credit card companies were allowed to revoke the 0% APR and institute an interest rate above 20% after a customer missed a payment by even a single day or went over limit by a few dollars. Banks could therefore afford to offer free balance transfers because the revenues gained from the many consumers who slipped up far outweighed the losses incurred as a result of those people who somehow managed flawless use. Now, with the passage of laws preventing "gotcha" practices, banks tend to offer either no balance transfer fee credit cards or 0% balance transfers, but not both. And if you somehow do manage to find a 0 APR no balance transfer fee offer, the 0% intro term isn’t likely to be competitive.

When are 0% balance transfer offers available? The existence of zero interest balance transfer cards depends both on the economy and the timing of your request. In times of fiscal well-being, 0 balance transfer credit cards are typically prevalent because credit card companies can afford to offer such attractive terms in order to lure new customers. On the other hand, during tough times, such offers may be few and far between. For example, during the worst of the Great Recession, it was nearly impossible to find 0% balance transfer credit cards, as most issuers did not want to add indebted customers to their portfolios.

Additionally, in order to get the advertised introductory rates, credit card companies require that you apply for a balance transfer either at the same time you submit a credit card application or within 30-60 days of doing so. We therefore recommend that you have the amount you want transferred as well as the respective account number handy when you fill out an application for a new balance transfer credit card.

Should I use a balance transfer credit card to make purchases? The answer to this question is simple: You can make purchases with a balance transfer credit card for as long as it has a 0% interest rate on purchases. If your card does not offer 0% on purchases or this introductory rate has ended, making purchases with it could end up being very expensive. You see, whenever you carry debt on a credit card, there is no grace period for new charges, which means finance charges start getting assessed as soon as you swipe your card. Obviously, a 0% purchase interest rate would protect you from this, but remember that any purchases made with your balance transfer card that are not paid off in full by the time the 0% intro rate ends will begin accruing interest at that time.