Balance Transfer Resource Center
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A balance transfer credit card has become a popular way to borrow money for little or no cost. By transferring high interest credit card debt onto a 0% card, you can save hundreds if not thousands in interest payments. And in some cases, simply depositing the balance transfer in an interest bearing savings account and pocketing the interest earned has allowed some to actually profit from credit cards.
| All About Balance Transfer Cards |
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| 1. Balance Transfer Overview 2. 0% Balance Transfers 3. Balance Transfer Fees 4. No Fee Balance Transfers 5. Balance Transfer Arbitrage 6. Balance Transfer & Credit Scores 7. Fixed APR Balance Transfers |
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While balance transfer cards can enable you to transfer high interest rate debt onto a no interest card, there are a number of things to consider before applying for a balance transfer credit card. Below you find several factors to consider when choosing a balance transfer offer, along with links to helpful articles and resources to help you make the most of balance transfers.
1. Balance Transfer Overview
A balance transfer credit card is one that allows the card holder to transfer credit card and other debt on to the card. While not all balance transfers are interest free, most balance transfer cards offer 0% APR transfers for a limited period of time to new card holders. For this reason, a card that offers this feature is often referred to as a 0% balance transfer. For most cards, the 0% introductory rate lasts for 6 to 12 months.
2. 0% Balance Transfer Offers
When most people think of balance transfer offers, they have in mind those that offer no interest for some number of months. Several years ago, zero interest transfer offers were available for 15 months or even 2 years. Today, these offers are no longer available.
Currently, 0% balance transfer deals are available ranging from 6 months to 12 months. You can see a current list of these offers on our 0% balance transfer offer page.
3. Balance Transfer Fees
Balance transfers that offer an introductory 0% APR charge what is known as a balance transfer fee. The fee is generally a percentage of the amount transferred, with a minimum fee of $5 or $10. The amount of the fee varies from card to card, but the typical fee ranges from 3% to 5% of the transferred balance.
The balance transfer fee is typically added to the balance transferred and does not accrue interest charges during the introductory period. When evaluating a balance transfer offer, it is important to consider this fee in determining whether transferring higher interest debt is a smart move.
4. No Fee Balance Transfers
Several years ago no fee balance transfer offers were available from several credit card issuers. Today, all 0% balance transfers charge a fee. In addition, some cards capped the fee at $50 or $75, but these offers are no longer available.
There still is a method to achieving the equivalent of a no fee balance transfer. If you follow the link, you’ll see that the method involves using a 0% on purchases offer to obtain the cash you need.
5. Balance Transfer Arbitrage
Balance transfers do not have to be used to pay off other debt. In some cases, you can deposit the cash in a savings account during the 0% period and pocket the interest. When the 0% offer expires, withdraw the funds and pay off the credit cards. Making money with balance transfers is often referred to as arbitrage.
Today, balance transfer arbitrage is much more difficult than it was just a few years ago. First, balance transfer fees combined with low interest rates on savings accounts make it very difficult to profit from a balance transfer. In addition, many balance transfer cards will no longer send you a check, instead insisting on transferring the balance directly to the credit card debt you want to pay.
Perhaps the only way left to make money on balance transfer offers is to use the no fee transfer approach described above.
6. Balance Transfers & Credit Scores
Will applying for a balance transfer credit card hurt your credit score? While the answer depends on a number of factors, generally any negative impact is minimal. First, applying for any credit card requires an inquiry on your credit history, which will have a small negative impact on your score. If you are transferring other debt, however, the balance transfer won’t increase your overall debt. As a result, balance transfers generally don’t have a big impact on your score.
Because every situation is different, however, it’s important to recognize the actual affect on your score will vary from person to person. Fortunately, there is a way to estimate how a BT offer may affect your score. MyFICO, the creator of the official FICO score, offers a credit score simulator that includes how a balance transfer may change your FICO score. You can use the simulator if you sign up for MyFICO’s 30-day free trial of Score Watch.
7. Fixed APR Balance Transfers
Fixed APR or balance transfers for life are generally a thing of the past. There were some balance transfer for life offers that fixed the transfer rate at about 2.99% for the life of the balance. These offers are no longer available. If new offers become available, we’ll update this page to let you know.
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