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Your Guide to Balance Transfer Credit Cards and The Best 0% Offers
Published or updated December 23, 2014 by Glen Craig
I was drowning in debt.
I managed to finally get my head on straight and start to really take care of my finances.  This after I already dug a hole with thousands in credit card debt.
I tried to do the right thing and pay off more than my minimum balance and tried to pay my cards (yes, more than one) on time every month.
I was living paycheck-to-paycheck in NYC in a small studio apartment.  Even though the place was small it took up a nice chunk of my monthly income.  I remember writing out those checks to the different credit card companies (this was before paying online was so easily available).
The beginning of the month would come and I’d pay my rent.  Then I’d get to the card bills.  I paid what I could over the minimum, with enough to still eat some kind of food, but it was killing me.  I was paying so much every month to my credit card bills but I was barely, if at all, putting a dent in my debt (my debt was earning some nice interest against me for the card companies).
Keep in mind I take full responsibility for my debt.  I made the purchases and dug the hole all by myself.
So I kept at it.  As my credit improved I started to see offers in the mail for credit cards.  One of them had a 0% balance transfer interest rate.  I applied and transferred over a balance.
I quickly saw that I was able to pay off much more of my debt when I wasn’t also paying off interest on thousands of dollars.
Balance transfer offers, especially ones with intro 0% APR’s, were a big part of my getting out of debt!
Do you have a balance on your credit cards?
A balance transfer credit card can help you pay off your debt faster, just like it did for me.
How Does a Balance Transfer Credit Card Work?
With a balance transfer credit card offer the idea is to move one lump sum of debt from a high interest rate creditor (like a credit card) to another creditor at a lower rate (usually another credit card company).
For example, let’s say you have a credit card with a $10,000 balance at 17% with Credit Card Company A.  You get an offer in the mail from Credit Card Company B for “0% APR on balance transfers for 12 months” and quickly decide that 0% is a lot less than 17%.
You call in, complete the application, and are granted a $10,000 line of credit.  Your new credit card company (Company B) sends your old credit card company (Company A) a check for the $10,000 balance and you now owe the new credit card company (Company B) the money instead.
Your new card doesn’t charge you interest on the balance transfer for the introductory period, so whatever you pay goes right to your balance.  Where before, part of your payment went to interest it’s now paying off your debt faster.  Of course, make sure you pay more than the minimum to really take advantage.
When Does a Balance Transfer Make Financial Sense?
A balance transfer credit card can be a powerful tool but you have to use it for the right reasons.
Moving money from one card to the next does you no good if you can never pay off the balance.
A balance transfer only makes sense if:
you’ll be paying your card on time every month.
you can be approved for the new line of credit needed to complete the transfer (you usually need to have at least good credit, if not better, to get approved)
you can afford to pay off the debt during the balance transfer offer (or at least make significant progress against it)
you won’t rack up new debt on the credit card you just transferred the balance off of
If you can’t handle these four things, a balance transfer isn’t for you.
If you miss a payment during the introductory period, your low rate could immediately disappear to be replaced with a higher interest rate that could cost you even more in the long run.  One late payment may be all it takes to ruin your offer.  Make sure you have some system in place to make sure you pay your credit card on time.
And you’re going to need a good credit history, maybe even an excellent one.  This makes sense when you think about it.  Why should a card company offer you a low rate if you’re a risky borrower?  Getting rejected for a card will look bad in your credit history.  If you received a pre-approved offer then they should already know about you but if you are the one looking then you want to make sure your credit is good before you apply.
A balance transfer that you can just barely afford does help, but you won’t make any significant progress on your debt and will have to hope you can get yet another balance transfer in the future.  If you don’t stop overspending on your other lines of credit you will just end up with two big balances to pay off rather than one.
How Do I Know the Best Balance Transfer Card Offers?
Here are five significant factors you need to look at before taking on a balance transfer offer.
1. What is the rate?
The first factor to know is what the new interest rate will be on the balance transferred to the new credit card.
Most offers are for 0% for a certain period of time, but there are some banks and credit unions that offer flat rate at 4% to 9% based on your credit history.  (Obviously 0% seems better than 4% or 9% but make sure you are looking at the other factors below as well.)
The rate you receive is one of the largest factors in your decision to do a balance transfer.  If you can drop a 17% debt down to 0% or 4% you are going to save a ton of money on interest payments.
2. What will the new monthly payment be?
This is key in determining how much of a dent you will be able to make in the debt.
For example, if your $10,000 debt at 17% is constantly making you spend $300 more than you earn — you’re going deeper into debt — and the balance transfer drops your payment to $295 per month you really aren’t improving your situation all that much.  Yes, you aren’t going further into debt.  But when the balance transfer offer runs out you will either need to find a new balance transfer offer or be stuck paying the higher rate that comes after the intro. period ends.
That kind of balance transfer helps you stop taking on water, but you’re still stranded at sea.  You’ll need to find other ways to cut back, earn more income, or both in order to work on actually paying off the debt.
The best situation is where you have a little extra money left over each month and a balance transfer (with a significant interest rate reduction) gives you enough breathing room to actually pay the debt off during the balance transfer period.  (Or if not completely paid off, a huge portion of it wiped out by your extra payments.)
3. What is the length of the offer?
Some balance transfers promo rates are for 12 months.  Others 15 months.  And yet others 18 months.  I’ve even seen up to 24 months, or two years of introductory APR.
The length of the offer significantly changes how much of an impact you can make on the balance.  If you knew you could choose between 12 months at 0% and 18 months at 0%, you would choose 18 months every single time.
Yet sometimes the offer that is mailed to you is just for 12 months.  Sometimes the market is such that you only see shorter offers while other times you get longer ones.  You can’t control that.  But getting an offer with 3 or 6 extra months might result in you completely paying the debt instead of just paying off a portion of it.
4. What are the balance transfer fees?
This is the unfortunate part where you learn that performing a balance transfer will cost you money 99.9% of the time.
Most major companies now charge a balance transfer fee of $10 (or some other nominal amount) or 3% of the balance that you transfer over, whichever is higher.
That means transferring that $10,000 balance at 17% to a new offer for 0% for 12 months (to keep using our example) is really costing you 3% instead of 0%. You’ll pay the $300 in balance transfer fees just to get started.
However, even with that kind of fee in place if you can drop 10%, 14%, or 20% off of your rate you are still coming out ahead as long as you actually pay the balance off.
Sometimes you get lucky and find an offer that has no balance transfer fee.  They aren’t always out there but it can sweeten the deal to move to a particular card if all other factors are good for you.
5. Is there an annual fee?
Most cards these days have a basic version without an annual fee.  You usually bump up to an annual fee card in exchange for more perks like an increased cash back or a bigger miles bonus.
But you still want to be aware of any annual fees.  If the card you’re considering has an annual fee and you aren’t getting some perk that’s truly useful to you then you’re reducing how effective your balance transfer rate it.
Some Great 0% Intro APR Balance Transfer Credit Card Offers
You’ve read this far so you’re obviously interested in a balance transfer card offer (and you are intelligent too 😉 ).
Here are some great offers to consider.  Make sure to read all of the details from the card issuer before you sign up to make sure the card fits your needs.
This card from Discover offers up a generous 18 months of 0% APR on balance transfers* (variable APR of 10.99%-22.99% after).  You also get the benefit of 6 months of 0% APR on purchases* (variable APR of 10.99%-22.99% after).  Note that there is a 3% fee on balance transfers.
Discover recently revamped their credit card lines to change how people think about their cards.  Their aim is to give consumers a fair card with no annual fee, no over limit fee, no foreign transactions fee and no pay-by-phone fee.  And get this, no late fee on your first late payment (but hey, aim to not pay late anyway)!  And if you do happen to pay late, hey it happens, they won’t increase your APR*.
And then there’s their Cashback Bonus® program.  Get 5% cash back for online shopping and department store purchases through Decmeber 2014 on up to $1,500 in purchases (make sure to sign up for the extra bonus).  Get 1% on everything else (the 1% is unlimited).
Here’s a compelling new feature — you get a free FICO® credit score on your monthly statement!  This is a pretty great perk.  Every month you get to see where your credit stands and if your spending has affected your score.
The new Discover it™ looks like a great card for balance transfers as well as an overall credit card.
Blue Cash Everyday® Card from American Express
You’re getting 15 months of 0% intro APR on balance transfers with this card.  The intro rate also applies to purchases as well.  When the intro APR rate ends you’ll have a variable APR which is currently 12.99%-21.99%.
This isn’t just APR goodness here, you’re also getting a cash rewards card.  You earn 3% on grocery purchases (up to $6,000 spent per year), 2% at U.S. gas stations and select dept. stores, and 1% on everything else. (Terms and restrictions apply.)  You get your cash back in the form of Rewards Dollars that you can redeem as a statement credit.
Speaking of rewards, there’s a bonus of 50 Reward Dollars when you use your card to make $1,000 in purchases within the first three months of having your card.  And if you meet that bonus requirement you can also get Amazon Prime free for a year!  Getting 2-day shipping on most items at Amazon is a nice thing to have.
The Blue Cash Everyday® Card is a great card whose reward structure is easy to understand.  You’re also getting a nice 15 months of 0% intro APR on your balance transfers and purchases, all with no annual fee.  See our Blue Cash Everyday review.
A nice 18 month 0% balance transfer card from Citi. You also get 0% APR on purchases for 18 months as well.
If the long duration 0% balance transfer wasn’t enough, the Citi Simplicity is special in that there are no late fees, annual fees or penalty rate hikes if you make a payment late.
The balance transfer fee is 3% of the transfer or $5, whichever is greater.
This is great for someone who has a large balance to transfer that will take a while to pay off and they are still working on a good system to pay their bills on time. (Citi Simplicity Review)
Final Word on 0% Balance Transfer Credit Card Offers
All of these cards can help you save money on high interest credit card debt.
But you have to carefully consider your options and needs before you apply.  If you have a low to moderate amount of credit card debt, one of the cards with a shorter intro period and rewards might better serve your purposes.
If you have a higher balance, though, you might be better served by choosing a card with fewer frills — but with a longer period in which to pay off your debt.
You can make great strides in tackling your debt using a balance transfer credit card.  But you are only helping yourself if you don’t dig yourself deeper into debt and you actually take that low- or zero-percent interest period and pay more towards your credit card balance.
*This content is not provided by Bank of America. Opinions expressed here are author’s alone, however this site may be compensated by Bank of America.
* See the online credit card application for details about terms and conditions. Reasonable efforts are made to maintain accurate information. However all credit card information is presented without warranty. When you click on the “Apply Now” button, you can review the credit card terms and conditions on the issuer’s website. Discover is a paid advertiser of this site.
Filed Under: Credit Cards
Glen Craig is married and the father to four children that he spends the day chasing as a stay-at-home-dad. He took an interest in personal finance when he realized most of his paycheck was going toward credit card bills. Since then he's eliminated his credit card debt and started on a journey towards financial freedom.
January 5, 2012 at 4:24 pm
Good breakdown on 0% credit cards. I’ve never had to use one, but I could see how they can save someone a lot of money.
I haven’t seen any come in the mail recently, but it sounds like I may be seeing some soon if the economy picks up.
January 5, 2012 at 7:05 pm
They can do more than save money – they can help you pay down your credit card debt!
I think we’ll start to see more competition and offers among the credit card companies. The economy has plenty of room to grow.
July 21, 2012 at 9:38 pm
I currently have a balance on a credit card that offers 0% interest for 12 months, however, I am approaching the offer expiration. I am unable to pay the balance in full. Can you transfer the balance to another card with a similar offer to avoid interest?
July 22, 2012 at 9:30 am
So long as your credit is good and there are offers available to you then yes, you should be able to transfer your balance again.
In fact this is what I did when I made the resolution to eliminate my credit card debt. I transferred my balance to one card then transferred it again when the 0% offer was up. It was a big part of my getting rid of my debt.
Just make sure you transfer before your current offer expires. Also make sure you use the opportunity to pay off your debt and you don’t add more to it. Choose your card carefully because you may not want too many credit card accounts open.
January 26, 2013 at 2:31 pm
Living pay-to-pay check in NYC most have been tough. I’m glad you shared your personal experience with us.
January 26, 2013 at 10:40 pm
I think living paycheck-to-paycheck anywhere is tough, but yeah, it was.
August 23, 2013 at 12:02 pm
This technique can work for some situations, but it’s important to remember the difference between APR (annual percentage rate) and a balance transfer fee. If you’re paying 17% APR, that 17% is divided among all 12 months, resulting in a monthly interest rate of 1.41%. A 3% balance transfer fee is assessed right away. So, for those who are considering this route, it’s very important to consider how long it will take to pay off the balance. Using your numbers, if someone can pay it off in 2 months or less, transferring the money to a 0% card will actually cost more than keeping it on a 17% APR card for 2 months.
February 4, 2015 at 11:19 pm
August 23, 2013 at 7:23 pm
This is a great article for anyone considering transferring their credit card debt to a 0% credit card. We all get these offers and its important to only transfer the money if you follow your tips like paying monthly with a plan to pay it off. Otherwise, we can easily just run up the card and get stuck in more debt. Well written!
February 5, 2015 at 9:42 am
Yes! You can easily go down a slippery slope of using more and more credit without actually getting ahead on your debt.
January 31, 2015 at 11:31 pm
These are all great but at some point you have to stop appling for credit . Because once your aviable to receive a card at %00 credit you have pretty good credit. And all the cards will approve you from $3500 to $5000. Be carfull.
February 4, 2015 at 3:41 pm
What is to keep someone from excellent credit from using a 0% APR card to, say, load a bank account with cash for 18 months, not pay a bill, or at least the minimum amount, and take advantage of a little interest earned, etc. For example, I see banks saying if you can keep a certain amount of money in the account for 12 months, they will give you $200.
I admit it is only a little bit of cash, but do people try this?
June 12, 2015 at 8:43 am
Yes Joel, that is called Stoozing and it can make you money – but you have to be extremely disciplined not to spend that money in the bank account or moneymarket account, otherwise it will impact you badly.
A Little About Me
I'm Glen Craig - I used to live paycheck-to-paycheck, drowning in credit card debt. I turned that all around and now I build wealth rather than debt.
My goal is to make personal finance easy for you.
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