Pros and cons of balance transfer credit cards — a guide (2024)

The best balance transfer credit cards can be great tools for managing debt. Transferring debt to one of these cards can temporarily reduce or eliminate interest charges and help you pay down debt faster.

However, balance transfer credit cards can have complicated terms and restrictions, so it’s important to understand the fine print to avoid getting a card that doesn’t help you at all.

What are balance transfer credit cards?

A balance transfer credit card is designed to help you pay off debt. These cards often come with a 0% introductory annual percentage rate (APR) on the balances you transfer onto the account, which means you won’t be charged interest on the debt for a period of time.

However, you will have a minimum monthly payment and may be charged interest on purchases starting from the first billing cycle. After the introductory period on a balance transfer credit card ends, you’ll also pay interest on any remaining transferred balances.

How a balance transfer works

Each credit card has different guidelines for how to make balance transfers. This is the general process to expect:

1. Assess your debt and determine the total amount you want to transfer.
2. Check to see if you already have a card that allows for balance transfers or apply for a new balance transfer card.
3. Provide the credit card company with details on the debt you want transferred, including account numbers and balances. You may be able to complete this step during the application process.
4. Wait for the transfers to process.
5. Cover any payments due on old debt before the transfer is complete.
6. Start making monthly payments on the new account.

Benefits of using balance transfer credit cards

A balance transfer card can be a helpful tool when used properly.

“Combining debt can simplify your life by allowing you to focus on fewer creditors and fewer cards,” said Brent Reinhard, managing director and general manager of Chase Freedom and Chase Slate Credit Cards. “Balance transfers are a good step toward debt repayment as long as you do not incur additional debt within the time frame of repayment.”

Here’s how a balance transfer credit card can help:

• Lower interest charges: You can save money on interest charges by transferring debt to a low or no APR card.
• Cash flow management: Lower monthly interest charges and payments let you redirect funds to other debt or expenses.
• Debt consolidation: You can transfer multiple debts onto the new account and consolidate them into one.
• Faster debt payoff: You can get out of debt sooner since more of your payment will go toward the balance.

Downsides of balance transfer cards

Transferring your debt has its drawbacks. Balance transfer credit cards often have a host of pitfalls that can potentially offset the benefits, including:

• Fees: Most credit cards have a 3% or 5% balance transfer fee.
• Temporary 0% APR: The 0% intro offer will eventually expire, and your regular APR may be 20% or higher.
• Credit card limits: The credit limit on your new card may be lower than the amount you want to transfer, and your balance transfer fee will be deducted from your available credit. Additionally, you may not be allowed to transfer an amount equal to 100% of your available limit.
• Transfer limits: The creditor may have a limit on the total amount you can transfer and/or the total number of transfers you can make.
• Issuer restrictions: Transfers from accounts with the same creditor aren’t typically allowed.
• Type of debt restrictions: The creditor might not allow you to transfer loan debt.
• Credit requirements: If you have bad credit, you’re unlikely to qualify for a balance transfer credit card.
• Penalty APR: Missing a payment could mean forfeiting your introductory APR and triggering a penalty APR.
• Bad for some debt: It’s unwise to transfer low-interest debt to the card if you can’t pay the balances off before the introductory offer expires since you may end up paying higher interest rates than before.
• Purchase APR: The introductory offer doesn’t always apply to purchases.
• Time limits: There may be a small window in which balance transfers are allowed at the promotional rate.
• No rewards: Balance transfers aren’t eligible for credit card rewards, and they reduce the amount of credit you have available to earn rewards.

Eligibility for balance transfer credit cards

You need good credit or better to qualify for most balance transfer credit cards, and the higher your scores, the more likely you are to get a card with a long 0% APR period. According to FICO, a good credit score is 670 to 739.

If your credit scores are less than stellar, try getting preapproved before you apply for a new credit card.

There will also be restrictions on the debt eligible for a credit card balance transfer. Before applying, make sure you understand:

• The total amount of debt you can transfer
• Type of debt allowed
• The window of time to initiate a transfer

Should you use a balance transfer credit card?

These cards can be a great option for someone who wants a temporary reduction in interest charges to help them achieve their debt-payoff goals sooner. They also have the added benefit of allowing you to consolidate multiple accounts.

But you might need to consider another solution if you have bad credit, since there’s a chance you won’t qualify. It’s also worth exploring other financial or legal solutions (more on these below) if you can’t pay off the transferred balance before the introductory rate expires, or if you can’t afford your monthly expenses even with the balance transfer.

Ultimately, determining if a specific balance transfer card is right for you comes down to reading the fine print. Review the card’s terms to make sure it’s a good alternative to your current debt, can save you money overall and allows you to pay off the debt before any introductory offer expires.

Alternatives to balance transfer credit cards

If you’re looking for ways to manage debt, there are other options that might be more fitting. For anyone struggling to stay on top of bills or pay down their credit card debt consider one of these avenues:

• Consolidation loan: A debt consolidation loan can be used to pay off multiple debts. These loans don’t typically have 0% introductory APRs, but the regular APR may be much lower than on a balance transfer credit card.
• Bankruptcy: As a last resort, Chapter 7 and Chapter 13 bankruptcy give legal relief to people who can’t afford to pay off their debt. However, you’ll have to pay legal fees, and your credit scores will be negatively impacted.
• Negotiation: If you’re behind on debt payments, you might be able to negotiate lump-sum offers with your creditors for less than the full amount you owe. Just be prepared for your credit scores to drop afterward and to pay income taxes on the forgiven amount.
• Credit counseling: You may be able to get free or low-cost advice on all of your debt management options through a nonprofit credit counseling agency.

Frequently asked questions (FAQs)