What is a Balance Transfer Credit Card?

With credit card debt being a prevalent issue in today’s financial world, credit card balance transfers are a viable and sought-after option for many credit card users. This process entails consolidating any ‘balance’ (i.e the outstanding debt) from one credit card account to another credit card offered by a different credit card firm. Many credit card companies attract customers to partake in this process by offering extremely low-interest rates for a certain period of time and even refraining from charging any transfer fees. However, the process of credit card balance transfers is not as self-explanatory as it seems and requires careful consideration to be used optimally. 

Choosing the right balance transfer card for you

As with many financial services, choosing the right balance transfer card for your financial needs is a highly nuanced and personalized process: no one card works for all. There are a few facets to consider in choosing the right transfer for you.

Interest rate and time period 

As mentioned earlier, many credit card companies offer promotional interest rates as low as 0%, and these would be a great first step toward choosing the right balance transfer card; however, even companies that offer introductory interest rates that are low (around 3%), may also be a great choice if they offer the introductory interest rate for a longer period of time. Introductory rates are mandated by law to last for a minimum of 6 months; therefore a balance transfer card that offers a low introductory interest for 21 months, could be more rewarding than a balance transfer card that offers a 0% introductory interest rate for only 6 months and then reverts to its standard interest rate. As such, it is important to check the combination of the introductory interest rate, its period of validity, and the standard APR (Annual percentage rate) - which will come into effect once the promotional/introductory rate expires - to choose the right balance transfer card for you.

Balance transfer fees

The amount charged as transfer fees by most credit card companies hovers between 3%-5% of the amount being transferred to that credit card. Much like the precious facet, one must consider the balance transfer fee alongside the introductory/promotional interest rate and the introductory rate time period. Many companies will offer a 0% balance transfer fee, but will usually compensate for this by offering short introductory APR periods or high introductory APR rates.

Personal financial history 

One of the first steps you should take is examining your credit history. Credit card companies will meticulously scrutinize your credit card history and you may not qualify for a balance transfer card if certain issues arise. Furthermore, make sure to check that the creditor issuing the credit card you are transferring funds to is different from the creditor issuing your current card, as you cannot transfer funds between cards issued by the same creditor. 

Notable balance transfer credit cards 

• Citi^® Diamond Preferred^® Card
• Chase Freedom Unlimited^®
• Citi^® Double Cash Card – 18 month BT offer

You can check out our list of the best balance transfer cards for more options.

Should you do a balance transfer?

The answer to this question highly depends on which card features will work most to your benefit. Despite the fact that most balance transfer cards don’t have official rewards programs, the savings are often more rewarding than most points programs. In short, you should absolutely consider a balance transfer card if you maintain a balance for multiple months. 

Most people open these cards to make use of lower interest rates and to consolidate their credit card debt. On the other hand, many people don’t end up qualifying for promotional interest rates due to credit card companies scrutinizing every detail of a person’s credit score and history. However, there are many soft pull credit cards on the market that enable you to enables you to check pre-approval without the credit score damages caused by a hard credit inquiry. Balance transfer cards are made to help ease customers’ debt payment and with the right planning and knowledge, you too can optimally utilize this financial tool.