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Balance transfer card essentials: How they work

Wednesday, January 09, 2013 at 5:03:13 PM

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Balance transfer cards don't work for everyone. Making a balance transfer card work for you means knowing how they work and then finding the right balance transfer offer for your individual situation.

While balance transfer cards can potentially save you a considerable sum of money in interest expenses, these credit card card offers are definitely not a quick fix to excessive credit card spending.

So how can I tell if a credit card balance transfer is right for me?

There are many balance transfer offers available, so it is important to ask some questions before deciding on one.
• Are you currently carrying a large balance on credit card(s)?
• Is the rate on your existing card(s) about to increase significantly?
• How much higher is your current rate than available balance transfer rates?
• Can you qualify for a balance transfer at this time?
• If yes, what is the APR on the offer do you expect to get?

The short answer:

If you are paying currently or will soon have to pay a high rate on a balance and if you can qualify for a good balance transfer offer, then you may benefit greatly by using a balance transfer to reduce your interest expenses.

Before you apply for a balance transfer:

Be prepared to follow the ground rules if you want it to work out well. These are not complicated, but if you break any of these your savings could disappear into thin air, so go in to this transaction with your eyes wide open.

Rules of engagement

Before submitting your application, there are some things that you need to know:
• Know when the rate will increase.
• Have a plan (or 'exit strategy') for eliminating the transferred balance before the rate increases.
• Make your payments on time and never miss one. Doing either will almost certainly lead to rate hikes.
• Don't exceed your credit limit. This could also trigger a rate increase.
• Don't use your new balance transfer card as an invitation to go on a spending spree and run up new debt.

What is MY best balance transfer deal?

The best credit card balance transfer for you is an offer that you can qualify for and which, in addition to balance transfer capabilities, has other features you will use.

Examples of other features you might want from your 'perfect' credit card are:
• No annual fee - so you won't have anything added to the transferred balance.
• Rewards - including cash back, travel, gas, points, etc.
• A low APR on purchases  - this can limit your interest expenses.
• Business cards - do you need cards for employees or statements that categorize your spending?

Keep it simple:

Don't be seduced or bewildered by a multitude of features that you'll never use
Prioritize the features you'll actually use.
Ignore the rest. A smattering of travel points you'll never redeem on an airline you never fly is for the birds.
Keep the overall cost of the card in mind. Two percent bonus on your spending (with a cap on rewards earned) may not add up to much, so do the math. For example, will your rewards exceed the costs of fees and interest?

How and what to compare among balance transfer cards:

Now that you know the features you want from your ideal credit card, you can start comparing specific balance transfer card offers.

Here's what you should compare in order to find the right balance transfer credit card for you:
The balance transfer rate (APR). This is one of the most important features, as it determines what you will be charged to make your balance transfer.
Length of the term. This feature will allow you to know the amount of time the balance transfer rate is available.
Any balance transfer fees (some cards charge as much as a 3 percent fee on the balance you are transferring.)
APR on new purchases. If you plan on using the card to make purchases, you'll want to know the rate you will be charged.
Any other features you have prioritized as important to you. Ignore the features you have not identified as priorities.

What to expect from a top balance transfer credit card:

Today's best balance transfer deals provide 0 percent APR for 14 and even 18 months with no balance transfer fee or annual fee.

Our top picks:

Card that we consider 'best of breed' include the Discover it™ (the 14 month version) and the Capital One® Platinum Prestige Card.

However, if you're more comfortable shopping around before you buy, we have an entire page dedicated to what we consider to be the top balance transfer credit card applications available.

Can I get a balance transfer with less than excellent credit?

While the majority of balance transfer deals are targeted at those with excellent credit, you can check our pages of credit card applications for fair/average credit for any balance transfer cards. Capital One offers a wide range of products for those with fair credit, while the NFL Extra Points Credit Card from Barclays has balance transfer options available to those with good credit.

More credit card articles, reviews and news

We have an entire page dedicated to balance transfer card news, reviews and comparisons. Here you'll find a selection of articles detailing how balance transfer programs work, comparisons of featured cards and other topics.

A reminder before you apply for a credit card

Following these simple rules can help make a balance transfer successful:
• Pay regularly and on time.
• Don't exceed your balance.
• Have an "exit strategy" or plan for paying down the balance before the introductory rate expires.
• Consider making a payment schedule that will decrease your balance over time.
• Minimize new purchases on your balance transfer cards. In fact, you may want to stash it away where you won't be tempted to use it.

We're committed to finding a card you'll love

At we're committed to finding your best credit card deal. We not only provide information you need to make a good decision - we have a great selection of best offers and advanced tools to make finding and comparing your best credit card offers fast and easy.

At our #1 priority is finding your best credit card applications online.

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