Balance transfers only have pros in theory. When you transfer a balance, you’re ideally shifting high-interest debt to a credit card with a lower interest rate.
When it comes to potential cons, you generally need good credit or better to get a 0% balance transfer credit card. Most balance transfer cards have very high regular APRs, making it important to repay what you owe before the 0% period ends. In addition to that, many balance transfer credit cards will charge a balance transfer fee, usually 3% to 5% of the amount you transfer, so make sure you consider that added cost.
You can use this balance transfer calculator to compare the cost of repaying what you owe with your current card versus taking advantage of the best balance transfer offers.
While this mathematically may reduce the total interest cost, you should read the fine print prior to initiating a balance transfer. Many lenders or card issuers have different and higher interest rates for balance transfers than normal spending. If the rate on balance transfers is considerably lower, it may make sense to move forward with this transaction. Keep in mind that each time you request a credit card, it will negatively impact your credit score. I would not recommend taking advantage of teaser rates and moving from card to card; make it a goal to not carry a balance at all as soon as possible.
Hi! I'm with Eric on this one! Unless you are a person who keeps meticulous records, never ever misses a payment, and reads all the fine print, you stand the chance of making a mistake or missing a fee/charge that could make this plan more costly than if you just plugged way at paying off that higher interest debt as fast as you can. I do financial stuff for a living; I pay my credit card bills in full each month; I balance my checkbook; I write and stick to a budget; I pay all things on time; I read the fine print... and I have STILL made mistakes that have cost me fees over my 54 years! So it just makes me nervous when someone enters into a plan like the one you are describing. It's one of those things that is good in theory but often hard to put into practice. Best wishes and thanks for writing!
Balance transfers don’t hurt your credit score directly, but transferring a balance can indirectly cause credit score damage. When you apply for a balance transfer credit card, it will generate a hard inquiry on your credit report, causing a slight dip in your credit score. If you transfer a balance to an existing credit card account, however, there is no hard inquiry and no credit score damage. A balance transfer could still result in high credit utilization, though, and even allow you to rack up more debt than you can afford, if you’re not careful. Both of those things can hurt your credit score.… read full answer
So, the act of transferring a balance itself won’t affect your credit, but it will indirectly alter several key components of your credit profile, from utilization to the age of your accounts. These changes might lower your score a bit in the short term. But over time, interest savings and the ability to pay off your debt faster should make transferring a balance a net positive for your credit score.
How Balance Transfers Can Help or Hurt Your Credit Score
Balance transfers can take up to three weeks, or be completed in just a few days, after you make a request or apply for a card. Transfers to new accounts may take longer than existing accounts. Continue making payments on your original account in the meantime to avoid hurting your credit score.
If you apply for a new balance transfer card, the resulting hard inquiry will likely cause a slight dip in your credit score for up to 12 months.
Adding a new balance transfer card will reduce the overall age of your accounts, which can have a slight negative impact on your score.
Keep an eye on how the transfer affects your account’s credit utilization. Making a transfer will usually add 3%-5% to your debt due to balance transfer fees. If your utilization is over 30% of your credit limit, that’s not good for your score.
If you leave your old credit card(s) open, adding a new card will reduce your utilization ratio across all accounts, assuming no additional spending. The utilization on the card you transferred the balance from will drop, and it will increase on the card you transferred the debt to.
Balance transfer cards often have 0% introductory APRs. This gives you the chance to pay off your balance faster, since the full amount of your payments will go to the principal rather than interest. This is good for your score long-term.
Balance transfers won’t hurt your credit by themselves. But they affect other elements of your credit that could bring your score down a little temporarily. Still, the benefits will outweigh the negatives in the long run, as long as you plan to repay most, if not all, of your balance during your card’s low introductory APR period.
Where people get into trouble is trying to use a balance transfer to support unsustainable spending habits, thinking 0% balance transfer credit card offers are always available. They’re not, and learning that the hard way is a very expensive mistake. So make sure to use a balance transfer calculator to make a payment plan.
Yes, there are some completely free balance transfer credit cards, at least for a pre-set period of time. The best free balance transfer credit card used to be Chase Slate® because it offered an introductory APR of 0% for 15 months on balance transfers, a $0 balance transfer fee for 60 days, and a $0 annual fee. Chase Slate also gave 0% for 15 months on new purchases. Unfortunately, this card is not accepting new applications for the moment.… read full answer
There are a few free balance transfer offers available right now. But it’s important to remember that no balance transfer is guaranteed to be free. If you get the right card and repay what you owe by the time regular rates take effect, you’ll have yourself a free transfer. But if you have a balance remaining at that point, or you miss a monthly minimum payment along the way, you’ll end up owing interest.
All in all, it’s difficult to find a balance transfer credit card that not only has a 0% intro APR but also charges no annual fee and balance transfer fee. Now, banks tend to offer either no balance transfer fee credit cards or 0% balance transfers, but not both.
If you’re a student or have at least good credit, though, you’ve got some good options.
Yes, there are some low interest balance transfer credit cards for life, though getting a low balance transfer interest rate permanently or for the life of a transferred balance often means sacrificing in other areas. The best low interest balance transfer credit cards for life are the Simmons Bank Visa®, the M&T Visa Credit Card, and the Saratoga's Community FCU VISA® Platinum Credit Card.… read full answer
Some cards include both a low introductory APR on balance transfers and a low ongoing APR once the introductory rate expires. Others simply let the cardholder keep the same rate on balance transfers until the transferred balance is paid off.
Exactly how low of an ongoing APR you’ll get on your balance transfer credit card depends on your creditworthiness (credit score, payment history and more). Many cards express interest rates as a range, and the better your overall credit profile is, the better chance you’ll have of securing a low rate. Some cards only have a single regular APR for all cardholders, though.
In addition, the low interest on your balance transfer credit card may not always be for life. If your interest rate is variable, it will fluctuate along with changes in the economy. Also, how you use your card can make an impact. Late or missed payments, and payments less than the minimum amount due, can cancel your low interest rate and replace it with a higher APR. Finally, under the Credit CARD Act of 2009, an issuer can raise your interest rate, but they must provide advance notice.
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