Should I do a balance transfer?

You should do a balance transfer if it will save you money, based on your current interest rate, the balance transfer credit card you can expect to qualify for, and the monthly payment amount that you can afford. The point of doing a balance transfer is to make debt less expensive and easier to pay off. So you should not do a balance transfer if your credit isn’t good enough to get a card with a low balance transfer APR and fee, or if you won’t be able to pay off most of the transferred balance before the card’s regular APR takes effect. Most balance transfer credit cards require at least good credit for approval and have high regular rates.

To decide whether you should do a balance transfer, as well as which credit card is best for the job, use a balance transfer calculator. There are lots of numbers to crunch when considering a transfer, including introductory balance transfer APRs, regular APRs, balance transfer fees and annual fees. It’s hard to take everything into account without some help. You can also check for pre-approval from several issuers to see which cards you have the best chance of getting.

Doing a balance transfer means using a new credit card to pay down existing debt from another credit card or loan. A transfer should save you money on interest and enable you to pay off your debt faster. But if you’re not careful, you could wind up with even more debt and a higher interest rate than you started with.

Here’s when to do a balance transfer:

• Your credit is good or excellent: A credit score of 700+ is typically required to get a balance transfer credit card with a 0% APR.
• You have moderate debt: The best balance transfer cards have minimum credit limits of $500 - $1,000, but will offer higher credit limits to people with higher credit scores. If you have a lot of debt, you may only be able to transfer part of what you owe.
• You take fees into account: Balance transfers cost you a percentage of the total debt transferred, usually 3% to 5%. That fee gets added to your balance on the new card. So the balance plus the fee must be less than or equal to your credit limit on the new card. A few cards do not charge a transfer fee.
• You have a payoff plan: Figure out what monthly payments you’ll need to make to pay off the balance by a target date. Aim to pay in full before any low intro APR period ends, given that regular rates are often above 20%.
• You have a separate credit card for new purchases: When you charge a new purchase to a balance transfer card, it’s subject to the card’s purchase APR. And there’s not always a low intro APR for purchases, even when a card offers 0% balance transfers.

If you decide that you should do a balance transfer, make sure to shop around for the best offer. Take a look at the best balance transfer credit cards and compare their terms to see which one fits your needs.

Once you do a balance transfer, you may be tempted to apply for another balance transfer card when the introductory APR on your current card expires. That may sound like a good plan to avoid paying interest, but it’s easy to rack up more debt than you can afford. Plus, 0% APR balance transfers aren’t always available.