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How to Choose the Right Balance Transfer Credit Card


You may have come across offers for balance transfer credit cards. But do you know how they work? Or more importantly, which ones are good offers?

Although there are lots of balance transfer cards to choose from, there are only four things you need to consider when picking one.

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What Is a Balance Transfer Credit Card?

A balance transfer is when you move high-interest debt to a credit card with a lower interest rate. Often this means moving debt from one credit card to another, but you can actually transfer other types of debt, too. Transferring your debt can make it easier to:

  • Consolidate debt from multiple sources into one monthly payment

  • Pay less interest so you can pay more on the principal

  • Pay less on your debt overall 

Balance transfer credit cards are designed for balance transfers. They usually come with a low or 0% introductory APR for any debt you move to them. Depending on the card and your credit score, this introductory rate could last for 12, 18, or 24 months.

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Balance transfer or personal loan: Which is better?

4 Things to Consider When Choosing a Balance Transfer Credit Card

A balance transfer just might be the solution for paying off your debt. But keep in mind they do come with consequences. You’ll reap the most benefit if you evaluate your options to find a top-notch offer instead of going with the first option you find.

1. Check Your Credit Score

You should start by checking your credit score. Many balance transfer cards require a good credit score, meaning a FICO score of 670 or higher. A higher score will help you get approved for a lower and longer introductory interest rate.

Impact On Credit Score

Opening a new credit card impacts your credit score. Any time you apply for a new line of credit — whether it’s a credit card, auto loan, or something else — you’ll undergo a hard credit inquiry that temporarily lowers your score. It will also reduce the average age of your accounts, which could lower your score.

Paying off your credit card balance could raise your credit score in the long run.

However, paying off your credit card balance could raise your credit score in the long run. You’ll need to consider your own financial situation carefully to determine whether a balance transfer is worth the initial drop in credit that it could cause.

2. Compare Balance Transfers to Other Options

A balance transfer isn’t your only option for consolidating debt — and depending on your situation, it may not be your best option. You should also consider other options for consolidating credit card debt like:

  • Personal loans

  • Home equity loans 

  • Home equity lines of credit

  • Debt management plans

  • Retirement account loans

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Discover five ways to consolidate credit card debt.

3. Compare Balance Transfer Cards Carefully

Some balance transfer credit cards offer a lot of flash up front: 0% introductory rate, lots of rewards points, maybe even a discount on the balance transfer fee. However, introductory rates end, and you may find some of a card’s perks are restricted when you read the fine print. Here are things you should consider:

Intro Period

The goal of a balance transfer is to pay off your debt before the introductory period ends. That way, you save money on interest and eliminate your debt. So before committing to a card, consider the amount of debt you have and how long it will take you to pay it off. If possible, choose a card with an introductory period that’s longer than you think you need in case you face any setbacks in paying off your balance. 

The goal of a balance transfer is to pay off your debt before the introductory period ends.

Intro APR

You want to save money with your balance transfer, so look for a card offering a 0% APR. That way, your entire monthly payment goes to the principal, and you can pay off your debt sooner.

Regular APR

Introductory APRs are exciting, but pay attention to the regular APR, too. Some balance transfer cards have higher-than-normal APRs. This is a problem for two reasons. 

First, if you don’t pay off your balance before the regular APR kicks in, you could end up paying more than you were with your old credit card. Second, once your balance is paid off, you’ll be stuck with an expensive credit card you don’t want to use.

Instead, try to find a card that you can keep afterwards to diversity your credit mix and increase your credit utilization rate. Doing that can increase your credit score and your overall financial health.

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Balance Transfer Fees

All credit cards come with fees (although in some cases you can avoid paying fees). But balance transfer cards come with an extra balance transfer fee. The average transfer fee is between 3% and 5% of the balance you transfer. Obviously, the lower the transfer fee the better, and occasionally you might find a card offering no transfer fee, especially if you have good credit.

If you’re choosing between a great APR or a low balance transfer fee, take time to calculate what you’ll pay in each scenario. If you’re unlikely to pay off your balance before the introductory APR period ends, then you may be better off with the lower APR. It all depends on the amount of debt you’re carrying and the card options you’re working with. 

The average transfer fee is between 3% and 5% of the balance you transfer.

Rewards and Perks

Some balance transfer cards offer reward points or other perks to entice borrowers. However, don’t get drawn in by the promise of tons of points until you investigate. Some cards do offer reward points on the balance you transfer, but others reserve rewards for new purchases you make on the card. Making new purchases on a balance transfer card could make it harder to pay off the balance before the introductory APR period ends.

Keep in mind that rewards cards tend to be more expensive than other types of credit cards. Some people earn enough rewards to offset this extra cost, but you’ll need to know how to maximize your rewards points in order to do that. You’ll also need to manage your debt carefully to avoid getting deeper in debt.

Keep in mind that rewards cards tend to be more expensive than other types of credit cards.

4. Know Your Current Credit Card Issuer

You cannot transfer a balance between two credit cards by the same issuer. For example, if you have debt on a Chase card then you can’t move it to another Chase card. That also means that if you got your credit card through your bank or credit union, you’ll need to look outside that institution to find a balance transfer card.

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The Takeaway

You don’t have to keep juggling debt from multiple sources. Now that you know what to look for in a balance transfer credit card, you’ve got the tools to consolidate your debt, save, and pay it off faster.

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