What Is a Balance Transfer, and Should I Do One?

Now that you’re on a search for the best balance transfer credit card, what do you look for? Opinions vary widely from person to person because the best option is a matter of personal situation. I’ll provide you with an idea of features to seek in a credit card that offers balance transfers. I’d also like to suggest some credit cards that, in my opinion, are the best balance transfer credit cards.

What is a Balance Transfer?

A balance transfer credit card lets you move your existing balance from one or more credit cards onto a new card – often with a low or 0% interest rate for a set period.

Balance transfers come with certain costs and limitations, though. Generally, you’ll have to pay a balance transfer fee — usually 3% to 5% of the total transferred. And if your balance transfer card’s limit is low, you might not be able to transfer your full balance.

How balance transfers work?

While the exact process for balance transfers can vary widely, here are the steps you generally have to take when working with major issuers:

  1. Apply for a card with an introductory 0% APR offer on balance transfers or use an offer on a card you already have. To qualify for the best offers, you generally have to have good or excellent credit (typically, FICO scores of at least 690). Something to keep in mind: Same-issuer transfers generally aren’t allowed. For example, if you want to transfer a balance from a Citi card, you can’t transfer it to another Citi card.
  1. Initiate the balance transfer. If you’re doing this online or by phone, you’ll need to provide information about the debt you’re looking to move, such as the issuer name, the amount of debt and the account information.

Sometimes, balance transfers can also be initiated using convenience checks, or the checks issuers send you in the mail. Before using one, though, read the terms to find out if it will count as a balance transfer and what your interest rate will be.

  1. Wait for the transfer to go through. Once the balance transfer is approved, which could take two weeks or longer, the issuer will generally pay off your old account directly. That old balance — plus the balance transfer fee — will show up in your new account.
  2. Pay down the balance. When that balance is added to the new card, you’ll be responsible for making monthly payments on that account. And if you pay it down during the introductory 0% APR period, for example, you could potentially save a bundle.
Balance Transfer

A Balance Transfer for Life

A credit card offering a balance transfer for life gives you a great debt consolidation option. Occasionally, it’s an even better option than refinancing your home or applying for a line of credit. You’ll get a low rate on all the balances that you move from your existing credit cards over to the new account.

The best reason to choose this type of balance transfer offer, with a low rate until paid off, is when you have multiple credit cards with high balances and high interest rates. That way, you’ll not only have one monthly payment, but also save on the amount of finance charges you pay.

Unfortunately, the annual percentage rate on a balance transfer for life may not be as appealing as a 0% for a set number of months. In the long run though, if you have a high balance and plan to take more than a year to pay it off, you will save much more.

Also, this type of offer will save you time and stress. You won’t need to repeatedly transfer it to the best credit card offer you can find. If you continue to apply for a credit card every few months, it can negatively impact your credit.

How much can I save?

In the example below, the customer has a 0% on balance transfers for 6 months, with an annual percentage rate of 20.99% afterwards. The customer has transferred balances from other accounts totaling $10,000.00 and will be making a $150.00 payment a month.

On the customers other account, the same amount has been transferred, with plans to also pay $150.00 a month. The only difference is that this balance transfer offer is at 1% until paid off.

MBNA Low Fee 0% Balance Transfer Card
Balance transfers:
0% for 25 months
Balance transfer fee:
1%
Representative APR (variable):
20.9% APR
Pay the balance over:
26 months with fees & interest of £50.80
Virgin Money Balance Transfer Credit Card
Balance transfers:
0% for 24 months
Balance transfer fee:
1.25%
Representative APR (variable):
21.9% APR
Pay the balance over:
26 months with fees & interest of £67.99
Barclaycard Platinum Balance Transfer
Balance transfers:
0% for 21 months
Balance transfer fee:
0.9%
Representative APR (variable):
21.9% APR
Pay the balance over:
26 months with fees & interest of £83.82
Halifax Low Fee 0% Balance Transfer Credit Card
Balance transfers:
0% for 23 months
Balance transfer fee:
1.5%
Representative APR (variable):
21.9% APR
Pay the balance over:
26 months with fees & interest of £100
Sainsbury’s Bank Low Balance Transfer Fee Credit Card
Balance transfers:
0% for 23 months
Balance transfer fee:
1.5%
Representative APR (variable):
21.9% APR
Pay the balance over:
26 months with fees & interest of £100
MBNA Low Fee 0% Balance Transfer Card

See what you can save in just 1 year?! Imagine if these balance transfers were paid for in 3 or even 4 years. I hope you can see the great benefit of using a balance transfer for life credit card over a standard balance transfer offer for a set period of time.

Keep in mind too, this example does not take into consideration new purchases, only payments and finance charges. See how making new purchases could put you at a disadvantage.

So what credit cards are available?

Find several online credit cards to choose from that have a balance transfer for life offer. Banks even offer this balance transfer option on some business cards!

As explained earlier, the best time to use a credit card offering a low rate balance transfer until paid off is when you don’t think you can pay off your transferred balances in a years time. But what if you can pay them off in a year?

It’s probably best then to find a balance transfer option at zero percent for 12 months, that way you can maximize your savings in your specific situation. You’ll definitely be able to find such an offer, it’s one of the most popular these days.

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