Balance transfer credit cards let you move your debt to a new card with better rates. Discover what to look for and when to transfer your debt.
It is easy to fall into debt using credit cards. One of the hardest parts about resolving your debt is dealing with interest fees. Credit card companies use interest rates and other penalties to make it difficult to fully pay off your debt, creating a vicious cycle where you remain in debt because the amount you owe keeps increasing. It is possible to eventually break this cycle over time, but you end up spending much more money than necessary. It is also risky because all it takes is one or two missed payments to plummet back into debt.
One of the most effective methods to get out of credit card debt is transferring your existing balance to a new credit card. While it does not erase your debt entirely, it allows you to take advantage of lower interest rates on the new credit card. Many card providers also offer additional benefits when you first sign up for a card, in addition to reward programs.
When to Transfer your Card Balance
While transferring your balance is a good way to get out of debt, there are certain situations where it will not help. The best time to do a card balance transfer is if the amount you owe is under $10,000. This limit refers to all of your credit card debt, not how much you owe on a single card. Technically, you can transfer your balance even if the debt is over $10,000, but it is much harder to find a credit card company willing to perform the transfer, and you do not get nearly as many benefits. You also risk hurting your credit score, which makes it harder to get a transfer balance once your debt drops below $10,000.
Comparing Balance Transfer Cards
There are many balance transfer cards available. Before you pick a card, make sure you compare the benefits each has to offer. There are several important comparisons to make. The first is the annual percentage rate (APR). The majority of balance transfer cards offer 0 percent APR for a set period after you sign up for a card, with the best cards offering an entire year. This means you do not have to pay any additional interest on your credit card payments.
The signup APR is important, but you must also consider the standard APR after the interest-free period ends. If the APR is higher than your existing balance, you must decide if it is worth getting the higher rates. If you believe you can pay off the majority of your debt within a year, it is a good idea to transfer, even if you end up with a higher interest rate. If you are unable to pay off most of your debt, you risk losing all your progress and potentially ending up in a worse situation based on the harsher interest rates.
Another consideration is how much debt you can transfer. Some cards set a maximum limit on balance transfers. This includes the total balance, as well as how many cards you can transfer. There are even select credit cards which allow you to transfer other types of debt, including car or student loans.
You must also check for the balance transfer fees. The majority of cards have some kind of fee to transfer your debt, typically between three to five percent of your balance. There are a handful of credit cards without a fee, but these cards typically have shorter introductory APRs.
Wells Fargo Platinum Card
Wells Fargo offers one of the best balance transfer cards in 2021. You must pay an initial three percent of your total balance to open an account for 120 days. After this period, you must pay five percent if you want to transfer additional funds. While this initially seems pricey, the benefits are worth it. The platinum card has 0% APR for 18 months, which is much longer than other transfer cards. Wells Fargo also provides free access to the My Money Map tool, which helps you create a budget and manage your credit card payment plans.
U.S. Bank Visa Platinum Card
Visa’s platinum card is the only transfer card with a longer APR than Wells Fargo, lasting for 20 months. The balance transfer fee is either three percent for each transfer or $5, whichever is higher. Beyond the extended APR window, the Visa Platinum Card has minimal perks. It gives you enough time to create a budget and build up your credit score, allowing you to transfer to a better card once the introductory APR ends.
Citi Rewards+
One of the downsides of balance transfer cards is there are normally minimal perks outside of the generous APR. The Citi Rewards+ card allows you to accumulate points on your credit card while getting out of debt. You earn two points for each dollar you spend at qualifying supermarkets and gas stations, up to $6,000, and one point for any other purchase. You can redeem these points for discounts at online stores, including Amazon and Best Buy. The card also provides 0% APR for the first 15 months.