Finding the right plastic for a balance transfer isn’t as simple as picking the no balance transfer fee credit card with the lowest APR. Because as fees go down, rates tend to go up, and vice versa. So comparing only credit cards with no balance transfer fee or only zero percent balance transfer credit cards is ill-advised. Rather, you need to consider all of the following factors in combination:
- Balance transfer fee;
- Length of 0% intro APR (if applicable);
- Regular APR; and
- How much you can afford to pay each month.
A credit card payoff calculator
will be a big help with this. Just remember, the longer you expect to take paying off what you owe, the more emphasis you should put on the regular APR. If you’ll be able to pay down the majority of your balance during a 0% intro period, the transfer fee becomes more important.
You should also be careful to avoid these common balance transfer mistakes:
- Assuming 0% balance transfer offers are always around: People often think they can just hop from one 0% balance transfer card to another until debt-free. But if the music stops and you’re stuck with a big balance and a high regular APR, this will prove to be a very costly mistake. And when the economy takes a turn for the worse, it’s very possible that no 0% transfer cards will be available, especially those with no transfer fee.
- Overestimating your ability to pay: This will result in more of your debt being exposed to a card’s regular APR. Considering that the average 0% balance transfer credit card has a regular rate of 17.51%, you certainly don’t want that.
- Forgetting that most regular APRs are variable: When interest rates are hovering near historical lows, there’s really only one way variable rates can go. And it’s not down.