Are balance transfers bad?

Balance transfers are not bad by nature, but they can be bad for your finances if used recklessly. When you transfer a balance, you’re ideally shifting high-interest debt to a credit card with a lower interest rate. Balance transfer promotions usually offer a 0% APR for a specific number of months, but these introductory APRs eventually expire. If there’s a balance remaining at the end of the introductory period, it’ll accrue interest daily at the card’s regular APR. And if you’re late in paying, the issuer could revoke the introductory APR. Your remaining balance would then be subject to the regular APR or even a higher penalty APR in some cases.

Sure, opening a balance transfer credit card will affect your credit score because of the hard inquiry on your credit report. But that’s the case with any credit card. The most important thing is to use a balance transfer to reduce the cost of your debt, not just prolong spending habits that really can’t last in the long run. So avoid repeated balance transfers. While you may get a break on interest for a while, you could get caught with your pants down if you can’t get approved for another balance transfer card at some point.

Something else to consider is balance transfer fees. Most balance transfer cards charge 3%-5% of every balance you transfer. That could end up being very costly. Also, you can only transfer balances up to your card’s credit limit (or sometimes a lower balance transfer limit), and that includes fees.