Are Balance Transfers Worth It? Pros and Cons of Doing One
-
Written by
David McMillin
-
Edited by
Jasmin Baron, CCC™
If you feel overwhelmed when you review your credit card bill each month, a 0% APR balance transfer offer can look very appealing. You will stop paying extra money in interest and redirect that cash to the ultimate prize: getting your balance down to zero.
However, balance transfer credit cards also come with fees and deadlines to consider. So, are balance transfers worth it? Read on to weigh the pros and cons before you apply for a new card.
400+ Credit Cards
Analyzed independently across 50+ data points in 30+ product categories
Reviewed
By a team of credit card experts with an average of 9+ years of experience
Trusted by
More than one million monthly readers seeking unbiased credit card guidance
CardCritics™ editorial team is dedicated to providing unbiased credit card reviews, advice and comprehensive comparisons. Our team of credit card experts uses rigorous data-driven methodologies to evaluate every card feature, fee structure and rewards program. In most instances, our experts are longtime members or holders of the very programs and cards they review, so they have firsthand experience maximizing them. We maintain complete editorial independence — our ratings and recommendations are never influenced by advertiser relationships or affiliate partnerships. You can learn more about our editorial standards, transparent review process and how we make money to understand how we help you make informed financial decisions.
Are Balance Transfers a Good Idea?
Balance transfers can be a great strategy for paying off your credit cards. By shifting your balance to a card with a lower interest rate — ideally 0% — the pathway to being debt-free feels more manageable. The key to knowing whether one is right for you is whether you can pay off the balance within the specified timeframe.
Typically, that window ranges from 12 to 24 months. If you’re confident that you’ll be able to make some lifestyle adjustments to commit more money to your monthly payments, a balance transfer can be one of the best low-cost tools to reset your finances.
For example, the Wells Fargo Reflect® Card offers a 0% intro APR for 21 months from account opening on purchases and on qualifying balance transfers, then a 17.49%, 23.99%, or 28.24% Variable APR. However, it doesn’t earn rewards. To compare, the Citi Double Cash® Card, an advertising partner, has a shorter intro period: 0% Intro APR on balance transfers for 18 months, then 17.49% - 27.49% (Variable). A 17.49% - 27.49% (Variable) APR will apply for purchases.. It also earns 2% cash back on purchases: 1% when you buy, and 1% when you pay.
Pros of a Balance Transfer
- You can save a ton of money: The biggest appeal of a balance transfer offer is simple: You can press pause on any additional interest racking up. For example, let’s say you’re carrying a balance of $7,000 on a credit card with a 21% APR. Paying off that balance over the next 18 months would require a monthly payment of $456, but over that period, you would also pay an additional $1,220 in interest. With an 18-month 0% balance transfer offer, you could make a smaller monthly payment — around $389 — while cutting that interest to nothing at the same time.
- You can streamline your payments: If you’re juggling debt across multiple credit cards, life can get confusing as you set different reminders for all those due dates. By consolidating all your balances onto a single card, you can simplify your life and reduce the risk of missing a payment.
- You can improve your credit score: Opening a new credit card can create a positive long-term impact on your credit score. With a higher collective credit limit across all your cards — assuming you don’t cancel the old cards after you transfer the balances — you can improve your credit utilization ratio, which plays a critical role in the health of your credit.
When Not To Do a Balance Transfer
While taking advantage of a balance transfer offer can be a wise move, it isn’t the right fit for everyone.
Cons of a Balance Transfer
Despite all the potential upsides of a balance transfer, it isn’t automatically the best option to help you feel better about your financial situation. Be sure to consider these drawbacks before you compare balance transfer credit cards.
- You’re probably going to pay an upfront cost: It takes money to save money. The best balance transfer credit cards all charge an upfront fee between 3% and 5% of the balance. If you’re shifting $7,000 to the new card, that means you’ll pay between $210 and $350 in balance transfer fees. However, in the “are balance transfers worth it?” internal debate, it’s important to keep in mind that $350 may be significantly cheaper than paying interest for another year.
- You may not be able to transfer all your balances: Balance transfer credit cards have credit limits that may be lower than your total outstanding debt. Chase, for example, caps balance transfers at $15,000 within a 30-day period. Other issuers may impose even lower thresholds — particularly if your credit isn’t in excellent condition — which means you may not be able to enjoy the benefit of a streamlined payment.
- You’re getting a new card, which can tempt you to spend: Ask any financial expert about balance transfers, and they will caution you to consider the spending pattern that put you in debt in the first place. You’ll have more available credit if you open a new card, which can easily lead to overspending. Before you opt for a balance transfer, you’re going to need to have a strategy to avoid making new purchases on any of your cards.
Alternatives to a Balance Transfer
A balance transfer isn’t the only route to get out of debt. Depending on your needs, you may be better off exploring one of these two popular options.
- Personal loans: Personal loans won’t offer the appeal of a 0% APR, but the best personal loan rates are still below 10%, which means you can cut your interest charges in half compared with average credit card rates. Personal loans are a better route than a balance transfer if you’re carrying a larger debt load, as some lenders offer maximum amounts between $50,000 and $100,000.
- Debt management plans: Non-profit credit counseling services can help you set up a debt management plan that may be able to lower your interest rates. These companies charge setup and monthly fees, but the costs tend to be much lower than sky-high credit card interest rates. For example, GreenPath, a well-known debt management provider, charges an average enrollment fee of $35 and a monthly fee of $31.
Frequently Asked Questions About Balance Transfers
What happens if I don’t pay off my balance during the introductory period?
If you reach the end of your introductory APR period and you still have outstanding debt, the amount will accrue interest at the card’s standard APR.
Will I earn rewards on my balance transfer?
While rewards credit cards can look appealing, you aren’t going to earn cash back or points on any balances you transfer. Credit card issuers typically only offer rewards on new purchases.
How long does it take to transfer a balance?
It depends, but don’t expect to see zero balances on your existing cards overnight. Citi, for example, typically takes at least 14 days to process balance transfers, while Chase says some transfers can take up to 21 days. Make sure you continue making on-time payments on your old cards until the transfer is complete.
Are there any balance transfer credit cards that don’t charge a balance transfer fee?
Yes, some credit unions, like Navy Federal Credit Union and BECU, offer cards with no balance transfer fees.
How can I pay lower fees on a balance transfer?
Transfer the balance as soon as you open the account. Some credit cards charge a higher balance transfer fee after a certain period.
