Balance transfer credit cards can help reduce or eliminate your credit card debt. But it’s also important to know what balance transfer credit cards can’t do, and how they have the potential to make your credit situation worse.
Nearly 80% of Americans don’t understand how balance transfers work. That’s why it’s mission-critical to be fully aware of the credit card balance transfer tips we'll tell you about below. These 12 tips can help you to get the maximum benefit from balance transfer credit cards and avoid any potential disasters.
12 Credit Card Balance Transfer Tips
1. You can't transfer a balance between two cards of the same issuer.
The purpose of balance transfer credit cards is to entice you to transfer balances to a competing credit card issuer. It would be counterproductive for a credit card issuer to allow transfers from their own credit cards, causing them to lose revenue on business they already have.
For example, if you have a significant balance on a Capital One credit card, look for balance transfer offers from other issuers like Chase, American Express, or Discover, to name a few.
2. Know the balance transfer process.
Always read the fine print for any balance transfer offer. It can contain provisions that affect the transfer.
One important issue to focus on is ensuring you completely pay off the card or cards you’re transferring balances from. Balance transfer cards can provide you with checks to pay off existing balances, or they can make the payoffs directly to the other credit card accounts.
But it’s very likely the payoff accounts will have residual outstanding balances. This is due to a combination of interest accumulated on the balance being paid off and any outstanding charges that have yet to clear the account. Be sure to pay any residual balances, even after the balance transfer is complete. Ignoring these balances, no matter how small, can sink your credit score in a heartbeat.
3. Don’t make purchases on a balance transfer card – unless the 0% APR includes purchases. Even then, be careful.
Balance transfer cards should be reserved for balance transfers. If you add purchases, you’ll have a hybrid account with confusing monthly statements. The issuer will calculate interest on purchases used with the card. Even worse, your monthly payments will be divided between the balance transfer balance and purchase activity. If your plan is to pay off the balance transfer, then adding purchases to the account can hurt your cause.
Make purchases on a balance transfer card only if the offer also includes 0% APR on purchases. And even then, tread lightly. The main purpose of a balance transfer credit card should be to consolidate and pay off high-interest credit cards.
4. You might want more than one balance transfer card.
You don't want to have too many balance transfer cards active at the same time. However, it's possible the amount of credit card debt you’re trying to pay off doesn’t fit neatly within the credit limit of one balance transfer card. In that case, you may need a second balance transfer card to cover the remaining balance. This is fine, as long as you can manage the payments on both cards and pay off the balance within the 0% APR timeframe.
For example, one card may offer 0% APR for 15 months and another card only for 12 months. Be sure you're keeping track of when these offers end.
5. You can continue to roll over your balance transfer with a new balance transfer card once the offer on the first card ends.
Some people get a balance transfer credit card with the intention of paying off the balance in full before the 0% APR period ends. But, life happens, unexpected expenses come up, and you may still have a balance left by the end of the 0% introductory period. If that happens, you can consider getting another balance transfer credit card. Then, you can transfer the remaining balance to the new card. In that way, you can extend the interest-free period on your balance transfer strategy.
6. The longest balance transfer offer isn't always the best due to fees.
There are two factors to consider here, the card's annual fee and the balance transfer fee. If the 0% APR introductory offer extends beyond one year, you may end up paying two annual fees. If the annual fee is $95, you’ll need to add $190 ($95 X 2) to the balance transfer fees on your card.
You may be able to offset both the balance transfer fees and the annual fee by signing up for a balance transfer card that also pays a sign-up bonus. But if you do, you’ll need to make purchases to qualify for the bonus (balance transfers don’t count toward bonuses, and rewards).
Look for a balance transfer credit card without an annual fee. Also, if you can qualify for a balance transfer credit card with no balance transfer fee, that's an excellent deal. Check out our table below, where we list the best balance transfer credit cards available, including one without a balance transfer fee.
7. Always make your payments on time to avoid a penalty APR.
Balance transfers can be delicate arrangements. The fine print in your card agreement may include a hidden landmine, like nullification of the 0% APR if you’re late with even one payment.
It gets worse if the single late payment turns into the default rate. For example, the credit card issuer may bypass the regular rate of 21.99% and jump to the default rate of 29.99% on just one late payment.
8. Keep your old credit card open to help your credit utilization ratio.
In an effort to get out of debt, some consumers close credit cards after paying them off. But if you do, it’s likely your credit score can take a dive.
Here’s why: one of the biggest factors determining your credit score is your credit utilization ratio. That’s the amount of your outstanding debt, divided by your total available credit limits.
For example, let's say you have two credit cards, each with a $10,000 credit limit ($20,000 total). If you have an $8,000 balance on one of the cards, your credit utilization ratio is 40% ($8,000 divided by $20,000).
Then you use a 0% balance transfer offer from the credit card with no outstanding balance to pay off the $8,000 balance on the second card. In the process of declaring war on your credit card debt, you cancel the credit card you’re transferring the balance from.
Now you’re left with just $10,000 in credit limits, with $8,000 in outstanding credit. Your credit utilization ratio will immediately rocket from 40% to 80% ($8,000 divided by $10,000).
Since your credit utilization ratio makes up 30% of your credit score, you can expect your credit score to plummet.
That's why is better not to close out the credit cards you are paying off. Instead, you can cut up and discard the credit card if you don't intend to use it again.
9. Beware of back interest.
Though it isn’t common, there are credit cards with 0% APR offers that have a frightening gotcha provision. You’ll get the 0% interest rate for, say, 12 months. But if you don’t pay off the entire balance within the 12 months, interest can apply retroactively, all the way back to the time you first used funds from the offer.
This is not common with traditional credit cards, especially the major ones. But it can happen with certain classes of cards, like merchant credit cards, and purchase-specific cards, like medical credit cards.
If the 0% introductory offer is for 12 months, but the regular interest rate is 25%, the $10,000 balance you place on the card initially can balloon to $12,500 after one year. From then on, you’ll be paying interest and principal on the suddenly elevated outstanding balance until it’s paid in full. That’s what back interest can do to an otherwise attractive offer.
10. Keep your credit score high!
Balance transfer offers are almost exclusive to individuals with good or excellent credit. If your credit score is much lower than 700, you’ll probably be denied offers, certainly the better ones.
But there’s another potential gotcha provision buried in the fine print. Since credit card issuers can pull your credit report periodically, the potential is real that the balance transfer arrangement can be revoked if your credit score falls below a certain level.
In addition, you’ll want to keep your credit score high so you can take advantage of future balance transfer offers. After all, balance transfer offers are temporary, it's possible you'll need another one if you still have debt to pay off after the introductory period ends.
11. Use balance transfers to reduce your credit card balances – not to make the payments more tolerable so you can borrow more.
One of the major attractions of 0% balance transfer credit cards is they can save you a fortune in interest. You should take advantage of that arrangement to pay down or pay off the balance transfer as quickly as you can. After all, once a credit line is paid, you’ll eliminate the interest expense permanently.
The worst thing you can do after taking advantage of a 0% balance transfer offer is to continue running up other credit card balances. That’ll have the opposite effect of getting control of your credit cards, causing your balances to increase perpetually.
12. Beware of the serial balance transfer trap!
I suggested using more than one balance transfer credit card when one cannot accommodate all your high-interest credit card debt. And also to be prepared to apply for another balance transfer card if time runs out on the previous one.
But at the same time, it’s important that balance transfers don’t become a financial lifestyle. Debt, even if it isn’t accruing interest, is still debt. And it needs to be repaid at some point.
If you’re going to use a 0% balance transfer credit card to get out of credit card debt, be sure to include an end date in your strategy. If you don't use them correctly, balance transfer credit cards can keep you locked into a never-ending debt cycle.
Hint: If you’ve ever contemplated rolling one or more balance transfer card balances onto a home equity line or a first mortgage refinance – or if you’ve done it already – you’ve probably already crossed the line into the serial balance transfer trap.
Balance Transfer Offers Available Now
The table below presents several credit cards with balance transfer offers that are outstanding in at least one special category. You can also review our full list of best balance transfer cards here.
|Credit Card||0% APR Intro Offer||Annual Fee||Best For|
|Citi® Diamond Preferred® Card||21 months on balance transfers, 12 months on purchases||$0||Longest 0% APR term|
|Chase Freedom Flex(SM)||15 months on balance transfers and purchases||$0||Balance transfer card for credit scores below 700|
|Wells Fargo Reflect Card||18 months on balance transfers and purchases*||$0||Long 0% APR on both balance transfers and purchases|
|U.S. Bank Cash+ Visa Signature Card||15 months for balance transfers and purchases||$0||Cash back rewards and welcome bonus|
*Extended to 21 months if all intro payments are paid on time.
Do balance transfers hurt your credit?
It all depends on how you work the balance transfer. If you use the balance transfer to pay off existing outstanding credit lines, but don’t increase the balances on the paid off card(s), there should be no impact on your credit score. After all, you’re simply moving debt from one credit card to another.
However, if you transfer a balance from one card, and begin using the old card to make additional purchases, your credit score can suffer. That’s because not only will your overall amount of credit outstanding increase, but you’ll also be carrying balances on two (or more) cards instead of one.
Should you max out a balance transfer credit card?
You’ll need to step lightly here. If you max out the balance transfer card, it could have a negative impact on your credit utilization ratio. It’s probably best to use no more than 80% of the amount of the balance transfer credit line.
But again, if you’re simply moving debt from one credit card to another, the impact – if any – should be minimal. However, if you continue to charge on the card you transfer the balance from, you’ll be increasing the amount you owe on your cards, overall. That will drop your credit score.
Can a balance transfer be denied?
Yes, and there are several circumstances where that can occur:
- The balance you want to transfer exceeds your credit limit, or the balance transfer limit on the card.
- The credit card issuer modifies the terms of your credit card, either reducing the allowable balance transfer amount, or eliminating it completely.
- Your intention is to use the balance transfer on one card to pay off the balance on another card with the same issuer.
- Your credit score has fallen. Credit card issuers periodically monitor your credit score. If it falls below a certain level, your balance transfer privilege can be reduced or revoked.
It’s always good practice to contact the credit card issuer before making a balance transfer to confirm it will be accepted. That’s even more important if you want to do a balance transfer on a card you’ve owned for a while, but either haven’t used it in a while or haven’t used it for a balance transfer.
When is it a good idea to get a balance transfer credit card?
A balance transfer card makes most sense when you’re serious about reducing or eliminating your credit card debt. Since interest on credit cards is notoriously high (commonly greater than 20%), eliminating that interest charge will provide an opportunity to concentrate on reducing or eliminating credit card principal.
If you merely take a balance transfer card to lower your interest costs, the benefit will only be temporary. Once the standard rate on a balance transfer card kicks in, you’ll be right back where you started.
If you’re considering a balance transfer or applying for a new balance transfer card, be sure to view it as a useful tool instead of a “get out of jail free card.”
Avoid the temptation to use balance transfer cards to simply lower your monthly credit card payments, while increasing your credit card debt. There are plenty of good balance transfer credit cards you can use to reduce or eliminate your credit card debt.