Everything You Need To Know About Balance Transfer Credit Cards

balance transfer credit cards

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Credit cards are double-edged swords. They can easily help you build credit, but they can also get you into financial trouble if you’re not careful. If you recently racked up a little too much debt from those sales at Madewell or were enticed into signing up for too many cards (damn points!), then listen up. There’s something you can do to consolidate that debt and save money in the long run.

Balance Transfer Credit Cards

Now, you might be asking why you’d need another credit card in order to help you get out of credit card trouble, but hear us out.

A balance transfer credit card is a little different. It’s perfect for the person who has multiple credit card payments per month and wants to consolidate them all into one, lower monthly fee. It’s also great for anyone with a high balance on a store credit card with a higher interest rate.

Pro Tip: Store cards are great for those extra savings on every purchase, but they come with higher interest rates than credit cards from banks and financial institutions. Because of this detail, it’s easy to rack up debt and feel buried beneath that interest every month if you’re not able to pay off the card in full. Be wary of store credit cards and always only charge what you can afford to them.

How do balance transfer credit cards work?

balance transfer credit card info

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When you sign up for a balance transfer credit card, you receive a credit limit and an interest rate. The interest rate may not be a ton lower than your current interest rate on all of your other cards, but don’t let that fool you.

When it comes to transferring, you can only transfer up to the credit limit on the card. For example, let’s say you sign up for a balance transfer card and you receive a limit of $5,000. Now, on your two other credit cards, you have balances of $3,000 and $4,000. That’s a total of $7,000. Unfortunately, you can only transfer $5,000 of that $7,000 to the new balance transfer credit card. However, doing so will still allow you to save by lowering the balance to $2,000 on one of those cards.

Another awesome perk? Balance transfer credit cards offer insanely great introductory offers of 0 percent interest for the first year or so. You could pay nothing in interest for 15, 18 or even 20 months, which would allow you to pay down your debt in that timeframe without paying anything extra. Many balance transfer credit cards also have no annual fee.

Okay, but what’s the catch?

Alright, so transferring isn’t something that can happen overnight. When you sign up and get approved for a balance transfer credit card, you need to provide the company with the names, account information and balances of what you want to be transferred. This process could take up to two weeks. So if you have any payments due during that time, you still have to make them — and pay that interest.

Additionally, there’s a small fee to transfer the money from one or two credit cards to this new balance transfer card. It’s usually between 3 and 5 percent of the balance that you’re transferring, which can add up. So if you’re transferring $2,000 from one card and $3,000 from another, you could end up paying between $150 and $250 to do so.

Are there perks beyond saving money?

balance transfer credit card perks

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Definitely. Beyond saving money in interest and not having to pay multiple creditors every month, you can continue using this credit card like any other card. Once you have room to make charges on the card, you can easily enjoy cash back rewards, points or miles like any other credit card out there.

A few great offers we saw in December 2018 included $150 after spending $500 on the card in the first three months, or unlimited 1.5 percent cash back on every purchase.

Even better, though, transferring your debt to a balance transfer credit card can help you start making the right moves toward improving your credit score. Now, it won’t wipe your slate clean, so that debt and those missed payments may still have hurt your score. However, it will help you make payments and decrease the size of your debt so that you can start to boost your score moving forward.

What are some of the best balance transfer cards out there right now?

Websites like Bankrate.com, CreditCards.com and CompareCards.com offer rankings and information on all of the balance transfer cards out there right now. According to CreditCards.com, the top five balance transfer credit cards on the market as of December 2018 are:

  1. Capital One Quicksilver Cash Rewards Credit Card
  2. U.S. Bank Visa Platinum Card
  3. Discover It Balance Transfer Card
  4. Citi Simplicity Card
  5. Chase Freedom Unlimited

Whatever you choose to do, continue paying down your high-interest credit card debt. A balance transfer credit card isn’t right for everyone, but it could be the key to helping you achieve a debt-free life. Make smart money moves and you’ll be financially independent in no time.


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