{"id":9061,"date":"2024-12-05T10:03:00","date_gmt":"2024-12-05T10:03:00","guid":{"rendered":"https:\/\/finderica.com\/how-to-decide-if-a-balance-transfer-credit-card-is-right-for-you\/"},"modified":"2024-12-05T10:03:00","modified_gmt":"2024-12-05T10:03:00","slug":"how-to-decide-if-a-balance-transfer-credit-card-is-right-for-you","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=9061","title":{"rendered":"How to Decide if a Balance Transfer Credit Card is Right For You"},"content":{"rendered":"\n
\n

\"ScoreCard<\/p>\n

The average American household carries almost $7,000 in credit card debt month to month.<\/p>\n

Many families struggle just to manage minimum payments while incurring even more debt from predatory interest rates \u2014 the average annual percentage rate (APR) for new credit cards surpassed 20% in 2023.<\/p>\n

In short, credit card debt can be debilitating. While there are several options available to those struggling (the debt avalanche and debt snowball methods, personal loans and even debt settlement), one of the easiest and most manageable \u2014 when done right \u2014 is a credit card balance transfer: taking outstanding debt from one or more cards and shifting it all onto one (more manageable) credit card.\n<\/p>\n

What Is a Balance Transfer Credit Card?<\/h2>\n

Balance transfer credit cards are normal credit cards with a balance transfer perk. A card with a balance transfer option allows you to move a balance \u2014 or multiple balances \u2014 from one card to another.<\/p>\n

It doesn\u2019t matter if you move balances from Visa to Discover or from a store credit card to a new Mastercard. However you usually can\u2019t transfer balances between two cards issued by the same company, such as moving a balance from a Chase Freedom card to a Chase Sapphire Preferred card.<\/p>\n

Qualifying balance transfers generally come with lower introductory interest rates for a set amount of time. The rates then rise to a higher APR after the promotional period ends.<\/p>\n

\n
\n

7 Ways to Make Money if You Hate People<\/h3>\n

Do you avoid people too? In the past, there was almost no way around working with people if you wanted to earn a living, but things have changed.<\/p>\n

Our team has compiled a list of creative ways<\/a> you can fatten your bank account this month, without having to put up with people.<\/p>\n

Enough small talk. Here are some ways<\/a> to earn extra cash, without all of the social stuff.<\/p>\n<\/div>\n<\/div>\n

What to Look for in a Balance Transfer Credit Card<\/h2>\n

Fine print matters. If you\u2019re considering a credit card balance transfer, explore the fees (don\u2019t forget to check the annual fee), the duration of the offer and interest options of the card you\u2019re considering before making the jump. You\u2019ll also want to make sure the new card offers a higher credit limit and that you have a strong enough score to be approved.<\/p>\n

\n

Balance Transfers: At a Glance <\/p>\n

\n\n\n\n\n\n\n\n\n\n
Fine Print<\/th>\nDetails<\/th>\n<\/th>\n<\/th>\n<\/th>\n<\/tr>\n<\/thead>\n
Balance transfer fees<\/td>\nTypically from 3% to 5%<\/td>\n\n\t\t\t\t\t\t\t<\/td>\n\n\t\t\t\t\t\t\t<\/td>\n\n\t\t\t\t\t\t\t<\/td>\n<\/tr>\n
Promotional APR<\/td>\nLook for 0% intro APR<\/td>\n\n\t\t\t\t\t\t\t<\/td>\n\n\t\t\t\t\t\t\t<\/td>\n\n\t\t\t\t\t\t\t<\/td>\n<\/tr>\n
Duration of Promotion<\/td>\nUsually 12-18 months<\/td>\n\n\t\t\t\t\t\t\t<\/td>\n\n\t\t\t\t\t\t\t<\/td>\n\n\t\t\t\t\t\t\t<\/td>\n<\/tr>\n
Credit score<\/td>\nAt least 690 (FICO)<\/td>\n\n\t\t\t\t\t\t\t<\/td>\n\n\t\t\t\t\t\t\t<\/td>\n\n\t\t\t\t\t\t\t<\/td>\n<\/tr>\n
Credit limit<\/td>\nLarger than current<\/td>\n\n\t\t\t\t\t\t\t<\/td>\n\n\t\t\t\t\t\t\t<\/td>\n\n\t\t\t\t\t\t\t<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<\/div>\n

Fees<\/b><\/h3>\n

You will incur a fee when you transfer a balance to another card. These balance transfer fees vary based on the amount you transfer.<\/p>\n

Typically, you\u2019ll be charged a $5 to $10 balance transfer fee. For higher balances, expect to pay 3% to 5% of the transfer balance.<\/p>\n

Don\u2019t be scared off by the balance transfer fee. It\u2019s minor compared with the amount you\u2019ll save in most cases. However, if you are transferring a large balance of several thousand dollars, don\u2019t be alarmed by how high the fee can climb. For example, a 10% balance transfer fee on a $5,000 balance adds $500.<\/p>\n

Though hard-to-find, some credit card issuers offer a 0% balance transfer fee card.<\/p>\n

Interest<\/h3>\n

When looking for\u00a0 balance transfers, an introductory 0% APR is the best deal \u2014 and the only one you can consider. You can get this by opening a new account or through an offer on an existing account.<\/p>\n

If you transfer a balance to an existing account, make sure it has a better interest rate than the card you\u2019re transferring from. Promotional periods do expire, and you\u2019ll be forced to pay the remaining balance at the full interest rate when they do. Know what these interest rates will be ahead of time, in case you\u2019re unable to pay off the whole balance during the promotional period.<\/p>\n

Standard interest rates range from 14% to 26%. If the standard rate is higher on the card for the balance transfer than your current rates for your credit cards, only move forward if you are 100% sure you can pay off all<\/i> the debt during the promotional period.<\/p>\n

Duration<\/h3>\n

Promotional periods typically range from 12 to 18 months (and up to 21 months if you\u2019re lucky). You may only need 12 months to pay off small balances at a lower interest rate, while higher balances might take more time to pay off. Balance transfers with a longer introductory duration give you the best chance of paying off your total balance.<\/p>\n

Keep in mind that failing to make at least the minimum payment voids most promotional offers, and you will be forced to pay the remaining balance at full interest.<\/p>\n

Credit Score<\/h3>\n

If you have good or excellent credit, you have the best chance at scoring a 0% intro APR for cards offering balance transfers. Generally, FICO credit scores of 690 or better are required for the 0% interest rate.<\/p>\n

While it\u2019s harder to get a credit card for balance transfers with bad credit, it\u2019s not impossible. In that case, they generally have higher interest rates with shorter promotional periods, which might still be a better option than your current situation.<\/p>\n

<\/b>Credit Limits<\/h3>\n

You can\u2019t transfer $3,000 onto a card with a $2,000 limit. Verify the card you\u2019re considering has a credit limit that supports your transfer balance.<\/p>\n

Why Balance Transfer Cards Make Sense<\/h2>\n

Consolidating your credit card balances from multiple cards onto one can be attractive for a few reasons.<\/p>\n

They Can Save You Money<\/h3>\n

The 0% introductory APR on a balance transfer gives you an opportunity to pay off your outstanding debt without earning any more interest.Let\u2019s look at a real-world example: Imagine you have a $1,500 credit card balance with a 15.99% APR. That means you\u2019re being charged 15.99% interest on your average daily balance every year \u2014 and that\u2019s on top of the minimum payment.<\/p>\n

If you transferred that $1,500 balance to a card offering 0% APR for 12 months, then you avoid paying any interest on your balance for 12 months. That means if you make a $125 payment every month for 12 months, you can pay off the entire balance before the promotional period ends \u2014 and save hundreds of dollars in finance charges you\u2019d otherwise pay on your high-interest debt.<\/p>\n

They Can Help You Get Organized<\/h3>\n

Juggling multiple credit cards with different minimum payments and due dates can be exhausting \u2014 and puts you at risk of missing payments, which hurts your credit score and results in late fees.<\/p>\n

Debt consolidation onto a single transfer card allows you to focus on a single payment each month, which greatly reduces your chances of missing it and incurring fees. Just be sure to always<\/i> pay this one by the due date. As soon as you miss one payment, that 0% APR could go away \u2014 and that was the whole reason for incurring the fee to transfer the balance to a single card.<\/p>\n

They Can Improve Your Credit Score<\/h3>\n

If done successfully (i.e., if you transfer the balance and pay it off before interest begins to collect), balance transfers can improve your score.<\/p>\n

Negative Effects to Your Score<\/h4>\n

While you\u2019ll have to deal with a hard credit inquiry when opening a new account, this won\u2019t take long to fall off. You\u2019ll also be adversely affecting the age of credit by adding a brand-new account and potentially closing old accounts.<\/p>\n

Positive Effects to Your Score<\/h4>\n

But that\u2019s all OK. Credit utilization makes up a whopping 30% of your score \u2014 more than credit inquiries and age of credit. Credit utilization is how much credit you are using versus the total credit available on all of your accounts combined.<\/p>\n

Opening a new account and transferring a balance can increase your available credit (especially if you keep the old line of credit open) and positively affect your FICO score. And when you are more easily able to pay down that debt, you\u2019ll see major improvements to your score.<\/p>\n

How Balance Transfers Work<\/h2>\n

Does a credit card balance transfer sound like the solution for your debt situation? Here\u2019s what you need to do:<\/p>\n

1. Find the Best Credit Card for Your Situation<\/h3>\n

Using the tools provided above, assess cards on the market. Determine if you are pre-qualified to avoid taking a hit to your FICO score, then apply for the best card \u2014 one that offers a 0% APR introductory rate, ideally for 18 months, and that has a limit higher than the total of all the balances you\u2019re looking to transfer. Bonus points if the interest rate post-promotion is lower than your current interest rate and the card offers some sort of rewards program.<\/p>\n

2. Set Up the Transfer<\/h3>\n

You\u2019ll need to be proactive about this. Many credit cards have a short period from account opening in which you are able to conduct your credit card balance transfer. It\u2019s safest to do this within the first week of account opening, but the timeline can vary by card. You\u2019ll either need to do this online or over the phone.<\/p>\n

Have all the information you\u2019ll need at your fingertips. The new card issuer will need to know more about the outstanding debt you\u2019re moving over, including the account information, the debt amount and the credit card issuer name. Watch your account statement over the coming days to ensure it has transferred; confirm this not only in your new credit card account but on the old cards as well.<\/p>\n

3. Create your Game Plan<\/h3>\n

Determine how much you need to pay toward the balance on your new card each month in order to pay it off by the end of the introductory period. Pause unnecessary payments on other accounts. For example, if you\u2019re paying extra on the principal of your mortgage or contributing extra money from your paycheck to a 401(k), consider pausing those otherwise financially sound strategies to instead reroute extra funds toward paying down your debt.<\/p>\n

You should also have a plan for your existing credit cards. Now that their balance is $0, your credit utilization will have soared. However, the credit card companies may close your accounts due to lack of activity. Close any of those old cards that charge an annual fee. For the others without an annual fee, set reminders to buy something cheap (e.g., a pack of gum) frequently enough that the cards stay active. Just remember to pay off those purchases immediately so you don\u2019t fall back into debt on those cards.<\/p>\n

Timothy Moore covers banking and investing for The SS from his home base in Cincinnati. He has worked in editing and graphic design for a marketing agency, a global research firm and a major print publication. He covers a variety of other topics, including insurance, taxes, retirement and budgeting and has worked in the field since 2012. Reporting from former SS staff writer Stephanie Bolling is included in this report.\u00a0<\/i><\/p>\n

\n
\n

5 Companies That Send People Money When They\u2019re Asked Nicely<\/h3>\n

When you log into your bank account, how do your savings look? Probably not as good as you\u2019d like. It always seems like an uphill battle to build (and keep) a decent amount in savings.<\/p>\n

But what if your car breaks down, or you have a sudden medical bill?<\/p>\n

Ask one of these companies to help\u2026<\/a><\/p>\n<\/div>\n<\/div>\n

<\/p>\n

<\/p>\n


\n <\/p>\n

<\/p>\n

\n
\n