Choosing a good balance transfer card

Choosing the right balance transfer card can be a game-changer when it comes to managing your finances.

If you’re struggling with high-interest credit card debt, a balance transfer card can provide a valuable opportunity to save money and pay down your debt faster.

In this guide, we’ll explore the key factors you need to consider when selecting the best balance transfer card for your financial situation.

Look for Low or 0% Introductory APR

One of the main advantages of a balance transfer card is the introductory APR (Annual Percentage Rate). Many balance transfer cards offer 0% APR for a set period, which can range from 6 to 18 months.

During this time, you’ll only pay your balance, without accruing additional interest. This gives you a head start in paying off your debt, especially if you’re transferring a large amount.

When choosing a card, compare the introductory APR rates and the length of time the 0% APR will be offered. The longer the introductory period, the more time you have to pay off your debt without paying interest.

However, be aware of how the APR will change once the introductory period ends. Many cards will revert to a high standard APR after the introductory period, so it’s important to factor this into your decision.

Consider the Balance Transfer Fee

While a 0% APR can be incredibly helpful, it’s important to consider any fees associated with transferring your balance.

Most balance transfer cards charge a fee, typically between 3% and 5% of the amount you transfer.

For example, if you transfer $5,000, a 3% fee would amount to $150. While this fee may seem small compared to the amount you’ll save on interest, it’s still an important factor to consider.

Some cards may offer a 0% balance transfer fee during the introductory period, but these deals are less common. Be sure to calculate the total cost of the transfer, including any fees, to see if the 0% APR will truly save you money in the long run.

Evaluate the Credit Limit

When applying for a balance transfer card, your credit limit plays a crucial role in how much debt you can transfer. If your credit limit is lower than the amount you want to transfer, you may not be able to consolidate all of your debt onto one card.

Make sure to choose a card with a high enough credit limit to accommodate your balance transfer needs.

Additionally, be mindful of your credit utilization ratio, as transferring too much debt to a single card can negatively affect your credit score. It’s generally recommended to keep your credit utilization below 30% of your credit limit.

Check the Ongoing APR After the Introductory Period

As mentioned earlier, many balance transfer cards offer 0% APR for an introductory period, but what happens when that period ends? After the intro period, most cards will revert to a standard APR, which can be quite high.

The ongoing APR can range anywhere from 14% to 25%, depending on the card and your creditworthiness.

Before choosing a balance transfer card, make sure you know the standard APR that will apply once the introductory period ends.

If you still have a balance remaining after the introductory period, you’ll be charged interest at this higher rate. If you think you might carry a balance beyond the introductory period, look for a card with a lower ongoing APR.

Look for Additional Perks and Rewards

While the primary reason for choosing a balance transfer card is to reduce debt, it’s always a bonus when the card offers additional perks or rewards. Some balance transfer cards offer cashback, points, or travel rewards, which can help you earn benefits while paying down your debt.

However, it’s important not to get too distracted by rewards programs, as your main goal is to reduce debt. Make sure the rewards or benefits are not overshadowing the card’s balance transfer benefits. Always prioritize low APR and no or low fees before considering additional perks.

Consider Your Credit Score

Your credit score plays a significant role in determining which balance transfer card you’ll qualify for. The better your credit score, the more likely you are to be approved for cards with favorable terms, such as 0% APR for longer periods and low fees.

Before applying, check your credit score to get an idea of which cards you might be eligible for. If your credit score is on the lower end, you may still be able to qualify for a balance transfer card, but it’s important to be realistic about the terms you’ll receive. In some cases, you may have to settle for a card with a shorter 0% APR period or higher fees.