Adam McCann, Financial Writer
The catch with balance transfer credit cards is that a 3-4% transfer fee usually applies, and you will have to start paying interest on the remaining balance when any 0% introductory period ends. Credit card companies also limit the types of balances you can transfer, and opening a new card may hurt your credit temporarily.
In general, balance transfer credit cards are very helpful, but knowing about their potential downsides is useful so that you can pay off your debts as efficiently as possible.
Here’s the Catch With Balance Transfer Credit Cards:
- Fees: Not all balance transfer cards charge a balance transfer fee, but most do. This fee is typically 3% to 5% of the total balance transferred, and the average is 2.55%.
- Expensive regular APRs: Many balance transfer credit cards offer introductory APRs of 0% for 6 to 21 months on transferred balances. But after this period expires, any remaining balance is subject to an expensive regular APR, which is [ccl-avgapr-bt-intro] on average for a balance transfer card.
- Limits on the types of balances you can transfer: Different credit card companies allow you to transfer different types of debts to their credit cards. It’s important to find out which types of debts are eligible before you apply for a specific credit card.
- Temporary credit score damage: When you apply for a new balance transfer credit card, the hard inquiry into your credit report will cause your credit score to drop by around 5 to 10 points. Luckily, you can recover from this with a few months of responsible credit use.
The good news is that the benefits of balance transfer credit cards outweigh the drawbacks. Balance transfer credit cards can help you save a lot of money on interest and get debt-free sooner. You can also use these cards to consolidate multiple debts into one monthly payment.
2023's Best Balance Transfer Credit CardsCompare Cards
People also ask
Did we answer your question?