How to Maximize Balance Transfer Benefits
Joy Wallet is advertiser-supported: we may earn compensation from the products and offers mentioned in this article. However, any expressed opinions are our own and aren't influenced by compensation. To read our full disclosure, click here.
A balance transfer credit card can give you a good shot at a debt-free life within two years. Or it can at least reduce a large chunk of credit card debt.
By moving a balance from a high-interest card to one with no interest or a very low rate and then using that savings to pay off the debt in about two years or less, you can say goodbye to credit card debt.
It’s worth knowing how balance transfers work before you apply for a new credit card to get the most out of a balance transfer. We’ll show you the best ways to maximize transfer benefits from a card by taking advantage of a 0% annual percentage rate (APR) for 21 months, which some cards allow. Here are some of the best things to look out for in balance transfer offers.
Jump To
Know your existing debt
A good first step is knowing how much credit card debt you have and how much you want to transfer. Make a list of your credit card balances and APRs.
Cards with the highest APRs are the best place to start transferring balances. Ideally, you can move the highest balances from those cards to a new card with a lower rate.
Do a little math and determine how much your monthly payment will be with each card you’re researching based on the new interest rate and how long you’ll have the low rate.
Raise Your Credit 80 points*
- 5 star service trusted by over 450,000 members
- Have processed over $11,000,000 in bill payments for members
- No deposit, no credit check, no interest
- New member promotions available
*Potential increase based on StellarFi member data. StellarFi numbers observed an average of 80 points VantageScore® 3.0 increase during a member’s lifetime. Score increase based on members with an incoming score range of 300-499 pts, who made regular on-time payments, with regular on-time payments. Results may vary.
Decide how much to transfer
Some credit card companies only allow a certain amount of debt to be transferred, so you’ll want to focus on the highest debts with the highest interest rates to be transferred first to gain the most in savings.
Once you start paying the new balance down, you may be able to transfer a balance from a card with the second-highest APR.
Try only to transfer balances you can pay off during the offer period. The introductory period of little to no interest charged can last six to 21 months, and then the rate will rise to the APR that comes after a check of your credit report. This can easily be 18% or higher.
Know the terms of a new card
Terms and conditions vary by card, so check the fine print of every new credit card you’re considering applying for.
Here are some important items to check:
Annual percentage rate (APR)
This is the interest rate you’re charged annually. With a new card that you’re transferring a balance to, it can be zero or a low number, such as 5%. Whatever it is, it should be lower than the high interest rate on the debt you want to transfer.
When does APR change?
The APR period for a low intro APR usually lasts six to 21 months. It will then go up to the regular APR set by the credit card company, such as 15.99%-25.99%. You’ll save the most money by paying off the transferred debt before the promotional period ends.
Expect a variable APR
When the interest rate does change, it will likely be to a variable APR that can change monthly. That’s why the regular APR is given as a range when the promotional period ends.
Transfer limits
Some cards may limit how much money you can transfer. You may not be able to move your entire balance over.
Credit card companies may limit transfers to include fees and interest charges not to exceed your available credit limit or a certain amount, such as $15,000, whichever is lower.
How long can you transfer balances?
This is one aspect of balance transfers that you may not think about but is important to know before applying for a card and moving your debt from one card to another.
While the introductory period may apply for 21 months, you may have to make any qualifying balance transfers in the first 60 days of opening a new card. Some cards may not have a time limit, allowing transfers until the low interest rate ends.
Do new purchases qualify?
The 0% or low intro introductory APR for balance transfers may also apply to new purchases on the new credit card. Many cards, however, limit the low rate for new purchases to much less time than for balance transfers. For example, new purchases may have a 0% intro APR for 12 months, while transfers keep the low rate for 21 months.
Some cards specify that any new purchases will be charged interest unless you have a special 0% APR offer on purchases. And even if you pay off your new purchases in full with your monthly payment, you may still be charged interest unless you pay the entire balance (including the balance transfer) before the monthly pay period ends.
Annual fee?
It’s common for a new card to waive the annual fee for the first year, then charge you one in subsequent years. The list of conditions should mention this and can be a factor in deciding if a balance transfer is worthwhile.
Balance transfer fee
Check how much the balance transfer fee is with the new card for debt consolidation. It could be a flat rate of 3-5%, which on a $10,000 transfer equals $300 to $500. Or it can be a flat fee, such as $5 to $25 or more per transfer.
If a card gives two options for its flat rate balance transfer fee: $5, or 5% of the transfer amount, it may stipulate that whichever is greater will be charged. If you’re transferring more than $100, then the 5% rate would be charged.
Some cards may not charge a transfer fee at all. But to get the longest 0% APR periods, you may be charged a balance transfer fee.
Whatever the transfer fees are for credit cards you’re considering, factor in these costs as part of the savings you’ll have to give up for a low interest rate.
Late fees
A $30 fee for paying a credit card bill late is common. But a balance transfer credit card may take away the low introductory rate if you pay your bill more than 30 days past the due date. Check the terms for a penalty APR if your payment is late.
Raise Your Credit 80 points*
- 5 star service trusted by over 450,000 members
- Have processed over $11,000,000 in bill payments for members
- No deposit, no credit check, no interest
- New member promotions available
*Potential increase based on StellarFi member data. StellarFi numbers observed an average of 80 points VantageScore® 3.0 increase during a member’s lifetime. Score increase based on members with an incoming score range of 300-499 pts, who made regular on-time payments, with regular on-time payments. Results may vary.
Pay your credit card bill on time
We’ve mentioned this in a few areas above, but it’s worth repeating: Pay your credit card bill on time. This goes for all bills since late payments can hurt your credit score more than anything else.
But paying a balance transfer credit card bill late can also cost you money immediately in a late fee of $30 or more.
A worse outcome is that missed payments could mean losing the APR benefit that you got the card for in the first place. A penalty APR of around 25% or higher could be charged to the amount of debt you transferred, and your lower interest rate would be long gone.
Set up a repayment plan
If your goal is to eliminate your credit card debt with a balance transfer card, the best way to meet it is to pay off the transferred balance before the low intro interest rate ends.
If your balance on a 0% card is $10,000 for 21 months, divide $10,000 by 21 to get a monthly payment of $476.19. You’ll pay no interest, and all of the $476.19 you pay each month for 21 months goes toward paying off the principal. This math is worth doing when you review your existing debt before applying for a card.
If you can’t afford to pay the new balance off before the promo period ends, consider not transferring as much money to the new card, or make the transfer and at least make the minimum monthly payment.
If you sometimes forget to pay your bills on time, set up automatic payments to the new credit card and make sure there’s enough cash in your bank account when the bill is due.
Don’t add new purchases
Getting rid of credit card debt takes time and could require sacrifices. You may want to hide your new credit card and not use it to make new purchases while paying off the transferred balance. Remember, this is your ultimate goal, and adding to the balance by buying things can make it harder to reach.
Don’t close old credit cards
It can be tempting to cancel old, high-interest credit cards you’re transferring balances out of and paying off elsewhere. After all, if your goal is debt management, then closing an old credit card you no longer use can be a good way to celebrate the low debt you’re working toward.
Credit cards are funny in that even if you’re not using an old card very often. The card can be a tremendous help in raising the score on your credit report. The longer you have credit cards open, the longer your credit history will be — which creditors like.
It can be worth keeping if the card doesn’t have an annual fee. And even if it does have a fee, if you can afford it and use the card every few months to keep it active, it can help raise your credit score.
Keeping old cards open can also raise your credit utilization ratio, which measures how much of the credit available to you that’s being used. Use more than 30% of your credit limit, and your credit score could drop.
More credit cards mean having more credit available to you, so a balance won’t hurt your score as much if it’s spread among several cards and available credit.
Look for perks
Credit card perks may be hard to come by with a balance transfer card if you don’t have a good . But if you qualify, some cards offer benefits such as cashback on new purchases, free cell phone protection, and no annual fee.
Costs
We’ve listed these earlier, but here’s a summary of the main costs to expect with a balance transfer card:
- Balance transfer fee: Not all companies charge these fees, which can be a fixed amount, such as $5 per transfer, or a percentage of the transfer, such as 3% to 5%.
- Annual fee: This fee ranges from $99 to $150, though you may find it as low as $39.
- Changing annual percentage rate: The APR is the interest rate charged over a year on a balance. Of course, paying 0% is best, but when that introductory rate expires, a new rate will start that can change monthly, called a variable APR.
- Late bill payments: Credit cards typically charge $30 for a first late payment and $41 for subsequent ones. The Consumer Financial Protection Bureau proposes that late fees drop to $8 per violation.
Raise Your Credit 80 points*
- 5 star service trusted by over 450,000 members
- Have processed over $11,000,000 in bill payments for members
- No deposit, no credit check, no interest
- New member promotions available
*Potential increase based on StellarFi member data. StellarFi numbers observed an average of 80 points VantageScore® 3.0 increase during a member’s lifetime. Score increase based on members with an incoming score range of 300-499 pts, who made regular on-time payments, with regular on-time payments. Results may vary.
Pros and cons
Pros
- Eliminate credit card debt. With a 0% introductory rate, a balance transfer credit card can be used to eliminate high-interest debt. Divide the total balance by the number of months to get your monthly payment, and when the term ends your debt will be gone.
- Almost two years for payoff. Some cards give cardholders a low rate for up to 21 months, hopefully giving them enough time to pay off a high balance.
- New purchases may qualify. Some credit cards offer a 0% promo period for new purchases, giving you an interest-free loan for a major purchase such as kitchen appliances or furniture.
Cons
- Balance transfer fees. Balance transfer fees are often charged when moving a balance from one card to another, which can consume a big chunk of savings. If a large transfer isn’t made, the savings may not be worth it.
- You may rack up more debt. A new credit card with a low interest rate can entice you to spend more. By paying off the new transfer balance, you’ll see your balance and minimum payment amounts drop, which could leave you with a higher credit limit that you’ll want to fill up again with new spending.
- Limited time to transfer debt. Some cards require transfers within 60 days of opening a card to qualify for a low interest rate. That should be enough time for most people, but if you expect to pay off some debts on a new card and then add more debt from an old card later, you may not have time to do it.
The bottom line
Balance transfer credit cards can be a smart way to eliminate high-interest credit card debt, especially if you get a card charging 0% interest for a year or more. If you can pay off the transferred debt before the promotional period ends, you can be out of credit card debt.
Joy Wallet is an independent publisher and comparison service, not an investment advisor, financial advisor, loan broker, insurance producer, or insurance broker. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. They are not intended to provide investment advice. Joy Wallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. We encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Featured estimates are based on past market performance, and past performance is not a guarantee of future performance.
Our site doesn’t feature every company or financial product available on the market. We are compensated by our partners, which may influence which products we review and write about (and where those products appear on our site), but it in no way affects our recommendations or advice. Our editorials are grounded on independent research. Our partners cannot pay us to guarantee favorable reviews of their products or services.
We value your privacy. We work with trusted partners to provide relevant advertising based on information about your use of Joy Wallet’s and third-party websites and applications. This includes, but is not limited to, sharing information about your web browsing activities with Meta (Facebook) and Google. All of the web browsing information that is shared is anonymized. To learn more, click on our Privacy Policy link.
Images appearing across JoyWallet are courtesy of shutterstock.com.
Writer
Aaron Crowe is a freelance journalist who specializes in personal finance writing and editing. He has worked at newspapers, where he won a Pulitzer Prize, and has written for numerous online publications. These include AOL, US News & World Report, WiseBread, Bankrate, AARP, and many websites focusing on housing, credit and insurance. He lives in California with his wife and daughter.
Share this article
