Adam McCann, Financial Writer
@adam_mcan
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.
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Compare CardsPeople also ask
Do balance transfers hurt your credit?
Yes, balance transfers do hurt your credit when you open a new credit card account to do the transfer. Applying for a balance transfer credit card 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 allow you...
read full answerAre balance transfers bad?
No, balance transfers are not inherently bad, 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. The best balance transfer credit cards feature 0% APR offers 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 will accrue interest daily at the card's regular APR....
read full answerIs a balance transfer a good idea?
Yes, a balance transfer is a good idea if you need months to pay off high-interest debt and you are able to qualify for a 0% balance transfer credit card deal. Most balance transfer cards require a 700+ credit score, and most also have high regular APRs, making it important to repay what you owe before the 0% period ends.
What you should know before making a balance transfer:
- You generally need good credit or...
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