Balance transfer credit cards are one of the specialty credit card offerings that can help you get a handle on your credit card debt and knock it down to manageable proportions. They were conceived as a way for one credit card company to woo customers away from another, but they provided a valuable tool for those struggling with high interest rates on one or more credit cards. In their first incarnation, most balance transfer offers had 0% interest on balances transferred from another card during an introductory period. Those introductory periods started at three months, but competition among credit card issuers soon had companies offering 0% interest for up to 9 months, 12 months and even longer.
That couldn't last, and as more and more people caught on to the trick of transferring their balances across the different providers, the card issuers wised up and started making changes. For a while, financial pundits were sounding the death knell for balance transfer credit cards - but they were far from dead. Nowadays, you'll find quite a few deals on offer through various banks and card issuers. They offer a range of options and interest rates ranging from 0% to 1.5% on transferred balances, most of them good for the life of the balance. So how do you pick among the huge number available to choose the best one? Here are a few tips to help you find the best card for you.
- Compare credit cards by balance transfer rate.
The most obvious characteristic of balance transfer credit cards is the interest rate on transfers, but don't be seduced into thinking that the lowest rate equals the best card. A 0% balance transfer rate could be ideal if you can clear up your entire balance in the length of time for which it is effective - as long as all of the other factors don't negate your interest savings. Just keep in mind that the balance transfer rate is only one part of the picture. - Check the amount of time the balance transfer rate is effective.
Which is better - a 0% balance transfer rate for six months or a 3% balance transfer rate for the life of the balance? The only way to know for sure is to do the maths and compare your final figures. Don't forget, though, that there are still other factors to consider. - Consider the balance transfer fee in the equation.
There have been a few - a very few - no fee balance transfer credit cards, but that's not an option that you'll see often. More often, the balance transfer fee is a percentage of the total balance transferred or a flat rate, sometimes as high as 3-5%. The only way to know for sure if you'll really save by transferring your balance is to figure up how much you'd pay in interest fees if you leave the balance where it is, then compare that to the balance transfer fee added to any interest payments that will be due on your transferred balance. - Look at the requirements for keeping the low balance transfer rate.
Most balance transfer credit cards now require you to use your card to make new purchases each month - and those new purchases will acquire interest at the card's new purchase rate until your transferred balance is fully paid off. You'll need to carefully compare the requirements and choose the card that will cost you the least.
As you can see, all balance transfer credit cards are not created equal. All that comparing will be far easier if you use our best buy tools, where you can compare multiple credit cards side by side to help you decide which is the best one for your needs.
