When should I take advantage of a balance transfer offer?

Credit cards can be a great tool, with their ability to help you build credit, earn rewards and make purchases easily. However, they also make it easy to rack up debt if you aren’t careful with spending or are in a financial bind. The high interest rate that comes with most credit cards means paying off that debt can be difficult, as a significant portion of your payment will go towards interest and not the principal. If you’re in this position, a balance transfer could be a great option to help you pay down your credit card debt.

What is a balance transfer?

To attract new customers and get more people to use their credit cards, financial institutions will offer a credit card with 0% APR for a limited introductory period on balance transfers. For the duration of the 0% APR offer period (typically between one to two years), you can pay down your credit card debt without paying interest.

Sometimes, a balance transfer fee is associated with the offer that will be charged when you make the transfer. This fee is typically around 3% to 5% of your transfer amount. There is also often a minimum amount you must transfer, but this is usually low, around $5 to $10.

When should I consider a balance transfer?

Balance transfers often make sense if you have a lot of high-interest credit card debt. Not only is high-interest debt difficult to pay off, but the amount you pay in interest will likely be high regardless of your ability to pay. A balance transfer will help you keep more money in your pocket, provided you pay off as much debt as possible during the offer period.

Another benefit of balance transfers is that they simplify your finances. Keeping track of everything can feel overwhelming if you have multiple credit cards and carry a balance on each. With a balance transfer, you can consolidate your debt onto one card, giving you a clear view of your financial situation.

Of course, balance transfers aren’t the right fit for everyone. A lower interest rate doesn’t benefit you If you pay your credit card statements in full every month. And, if you have a small amount of debt, the cost of the fees associated with a balance transfer may outweigh the benefit of lowering your interest rate.

What should I look for when considering a balance transfer?

Not all balance transfers are made equal—there are a few key aspects you should take note of before deciding on any specific balance transfer offer.

Introductory APR

Many balance transfer offers feature a 0% introductory APR, but this isn’t a given. With so many offers with a 0% offer attached, you shouldn’t have much trouble finding one. What’s more likely to vary between offers is how long that 0% APR lasts. Longer is better, but shorter offers are fine, provided you feel confident you can pay off your debt during that time.

Balance transfer fees

If you can find and qualify for a no-fee balance transfer offer, consider taking that. Otherwise, compare the fees of the balance transfer offers you find to see if there is one significantly lower than the others. 3% fees are typical, but you may find fees higher or lower than that.

Other credit card benefits

Beyond the balance transfer offer, credit cards can come with a variety of other benefits. While you should prioritize the best balance transfer offer, if multiple offers are equally good, you can use their benefits as a tiebreaker. Other benefits include rewards/cashback, fraud protection, digital wallet compatibility and no foreign transaction fees.

What the balance transfer process looks like

Once you’ve decided on a balance transfer offer, there are a few simple steps to complete in order to take advantage of it:

1. Apply: Like any other credit card, you’ll need to be approved for the balance transfer credit card you want to use. You should be able to find information online about what kind of profile (credit score, income, etc.) is typically approved for the card you’re interested in.
2. Initiate the balance transfer: Once approved and your card is set up, you can conduct the balance transfer. You’ll need the credit card number of your balance transfer card and the card you’re transferring from. Expect it to take up to three weeksfor the balance transfer to post.
3. Pay down your debt: With the balance transfer complete, it’s time to take advantage of the offer. Ideally, come up with a plan for how you’re going to pay down as much debt as possible while the introductory APR is in effect. Creating or reviewing your budget and putting yourself on a self-imposed payment plan are great ways to do this.

Make a plan to avoid high-interest debt

While balance transfers can be a helpful tool to pay off debt, it can be easy to find yourself in the same position of needing another balance transfer down the line. Sometimes, emergency life circumstances result in an unforeseeable financial bind. For others, credit cards make it easy to overspend on non-essential luxuries. Budgeting and building an emergency fund can help avoid future high-interest debt. If you’re looking for help paying down high-interest debt, balance transfer offers are something to consider. Not only do they simplify your finances, but paying down high-interest debt without the large interest payments will give you a huge advantage in improving your finances.

Learn more about credit cards:

• Financial myths: Is using a credit card always bad?
• Life hack: How to use credit cards like cash
• How to switch to a new credit card

Ben Heinze is a marketing content specialist with a passion for financial education. Instilled with a strong sense of frugality from a young age, he views money as a means to building the life you want, rather than an end in itself. From reading Money Mentor, he hopes you discover new ways money can be used to build your ideal life—whatever that may look like.