A balance transfer offer is not a one-size-fits-all solution to paying off a credit card. There are several considerations to keep in mind.
Balance Transfer Fees
Balance transfer fees typically range from 3% to 5% of the amount being transferred. If you transfer $10,000 to a card with a 0% intro APR offer that charges a 3% balance transfer fee, you’ll add another $300 to your debt. It may make sense to choose a card with the lowest balance transfer fee possible.
Even if you must pay a balance transfer fee, it could still help you save money overall depending on how much debt you have, your card’s interest rate and how long you need to pay off your debt. It always makes sense to do the math for your situation before deciding.
For example, paying a $300 balance transfer fee, for the example above, makes sense on a high interest card. The interest on those charges could easily be over $1,750 if you’re committed to paying off the card early and can amount to several thousand if you make minimum payments. Just stick to a disciplined repayment plan to zero out your balance before the intro period ends; otherwise, you’ll begin accruing interest on any remaining balance at the regular APR.
You Can’t Pay Off One Card Using Another Card From the Same Bank
Banks make money when you pay interest and other fees and generally won’t allow you to pay off one card using another card from the same bank. If you’re interested in a balance transfer offer, your best bet is to shift the balance from one bank-issued card to one with a 0% intro APR offer from a different issuing bank.
Your Credit Score Matters
Although a balance transfer offer can give you a leg up on paying down your existing debt, the best balance transfer offers are typically reserved for those with strong credit scores. If you’re new to credit or have a less than stellar credit history, you might not qualify. Even those with excellent credit should be aware that every time you apply for a new line of credit, it can affect your credit score.
The 0% Intro Period Will End
Eventually, that introductory interest-free period will end. If you haven’t made much progress in paying off your debt, you could be stuck paying the full regular APR. Before transferring a balance to a new card, make sure you can pay it off within the 0% intro APR period.
Credit union credit cards are a great solution if you need to pay down debt but know you can’t pay off the full amount within the intro period. Cards like the PenFed Gold Visa® Card* or the Navy Federal Credit Union Platinum Credit Card may offer more ongoing value for extended debt repayment.
You Don’t Know How Much Credit You’ll Get
If you’re looking to transfer a large amount of debt, there’s no guarantee you’ll be approved for the full amount on a new card. If you can only transfer a portion of your current balance, then you’re stuck with two card balances to keep track of and make payments on.