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Balance transfer credit card seekers have more options to avoid paying a fee to shift debt between cards, according to a new CreditCards.com survey.
However, the average standard APR for balance transfer cards has risen by 1.65 percentage points – from 19.33 to 20.98 percent – in the past 13 months. So while 0 percent introductory APRs are still plentiful and lengthy (46 surveyed balance transfer cards offer them to new cardholders, with the most common length being 12 months), it’s more critical than ever to pay off the transferred balance before the standard interest rate kicks in.
“I think it’s pretty common with a credit card – it just becomes so easy to say, ‘We’ve got a zero interest rate, we’ve got breathing room now,’ and we become a little more complacent,” said Todd Christensen, education manager at non-profit credit counseling firm Money Fit. “By the time that 12 months passes, it catches people by surprise.”
The CreditCards.com survey of 100 credit cards from major issuers – including 90 that allow balance transfers – found 15 cards that offer no-fee transfers, up from only nine in our most recent survey in December 2017. And eight other cards offer an introductory lower fee or waive the fee entirely if you transfer your balance within a set time frame. The most common fee structure is $5-10 or 3 percent of the balance (whichever is greater), charged by 44 cards.
Here’s what else our market-representative survey of balance transfer cards found:
- Most balance transfer cards give you plenty of time to pay with no interest: Thirty-six cards in our survey offer 0 percent APR periods of 12 or 15 months. Only five offer zero interest for six or nine months, and three offer 0 percent APRs for 18 months or longer.
- Act quickly if you’re banking on a promotional offer: Forty-nine balance transfer cards require you to transfer your balance within a specific time frame under their introductory offers. However, your new card’s issuer likely won’t be in such a hurry – there is often a delay in processing your transfer that could last several days or a few weeks.
- Zero percent offers not limited to balance transfers: Thirty-four cards in our survey offer 0 percent introductory APRs for both balance transfers and purchases. However, making purchases on a card that already has a transferred balance defeats the purpose of getting the card – to pay off debt more quickly without incurring interest.
- Standard balance transfer APRs are all over the board: The standard APRs for the balance transfer cards we surveyed range from 7.99 to 28.99 percent.
See related: Can you really win the balance transfer game?
The key to balance transfer success: Avoid interest
Balance transfer cards have remained a steady staple of the credit marketplace in recent years. And if you have good credit, there are many options available to save on interest payments by moving a balance from one card to another, without even incurring a transfer fee.
Of course, getting out of debt takes discipline, especially with a balance transfer card.
“The [credit card] companies know a certain percentage of people are going to mess this up,” said Ryan Frailich, a certified financial planner and founder of Deliberate Finances. “You need to not be in that percentage. You’re playing a probability game here, and if you’re giving yourself any way of making it harder on yourself, it’s easy to mess it up.”
Failure to pay off an old balance during your promotional no-interest period can result in being slammed with an APR north of 20 percent.
That’s not such a big deal if you’ve winnowed your transferred balance to, say, $200. But if you started with a $5,000 balance on a card with a 20.89 percent regular APR and only managed to pay off $2,000 of it within a 12-month promotional period, you would be charged more than $50 in interest on the remaining $3,000 balance on your next statement.
One year is not a lot of time to pay down a big balance, unless you’ve got plenty of cash available each month to spare for sizeable payments. Fortunately, many cards offer you more time to pay with no interest, if your credit is good enough to qualify.
The Citi Simplicity Card is the clear winner in terms of lengthy no-interest deals, offering a 0 percent APR for 21 months. Citi Simplicity has no annual fee and it won’t penalize you if you slip up and miss a payment (your credit score, on the other hand, may suffer). However, the card charges a 5 percent transfer fee and it won’t earn any rewards if you decide later on to use it for purchases.
Other cards with long-term no-interest periods include the Citi Double Cash Card and the U.S. Bank Visa Platinum Card, each of which offers a 0 percent APR for 18 months.
The Citi Double Cash Card is the only one of these three generous 0 percent balance transfer cards that offers rewards for purchases (2 percent cash back on all spending – 1 percent when you buy, and another 1 percent when you pay).
“The [credit card] companies know a certain percentage of people are going to mess this up. You need to not be in that percentage.”
Capital One leads the pack in fee-free balance transfer cards
Introductory no-interest deals are a key selling point of balance transfer cards, but other terms must not be overlooked. Most cards that allow balance transfers will charge you 3-5 percent of the balance to move your debt, but consumers have many options to do so without a paying a fee.
As in years past, Capital One is the leader in fee-free balance transfer cards, with 10 included in our survey. The Navy and Pentagon federal credit unions have three between them, and American Express and Barclays each offer one.
However, some of these “fee-free” cards come with caveats. For instance, the Capital One Quicksilver Cash Rewards Credit Card charges no fee for transferred balances at the purchase APR after the first 15 months that your account has been open. But if you transfer a balance during your first 15 months of card membership or at a promotional APR, there’s a 3 percent fee.
Similarly, the Capital One Venture Rewards Credit Card charges no fee for balances transferred at the APR listed for transfers in the card’s terms and conditions. But there’s a 3 percent fee if you transfer a balance at a promotional APR that has been offered by Capital One. (This card also has a $95 annual fee that is waived in the first year.)
Meanwhile, the Barclaycard Ring Mastercard does not levy a fee for a balance transfer that posts to your account after 45 days of opening. For balance transfers posted during the first 45 days, the fee is either $5 or 2 percent of the transferred balance – whichever is greater.
Cards that offer fee-free balance transfers
There are also eight cards in our survey that offer introductory lower-fee or no-fee balance transfers (in addition to 0 percent APR promotions) to new cardholders. For instance, Chase Slate does not charge a fee if you transfer a balance within 60 days of account opening, and it offers 0 percent interest for the first 15 months.
Cards that offer balance transfers with no fee or a lower fee, as an introductory offer to new customers
See related: What to do when your balance transfer is denied
Fed not yet done with rate hikes
Credit card APRs have been on the rise over the past couple of years amid a spate of Federal Reserve interest rate hikes. A strong U.S. economy prompted the Fed to raise its federal funds rate by a quarter of a percentage point four times in 2018. Chairman Jerome Powell indicated during a December 2018 meeting that two more rate hikes could come in 2019.
If you plan to transfer a hefty balance to a new card, look for one with a promotional APR that gives you enough time to pay it off without incurring interest charges. Figure out how much you would have to pay each month to knock out the debt during the promotional period, and earmark it in your budget. And avoid spending any more on the original card from which you transferred the balance, if at all possible.
“The biggest risk is people will transfer their balance and have this previous credit card that now has a whole credit limit available to them, and they end up racking up debt again,” said Corinne McKenna, personal financial manager at Marine Corps Community Services. “Now they have balances on two cards that will just snowball.”
Additionally, check into your prospective balance transfer card’s fee structure to ensure it makes financial sense. If you’re currently getting hit with high interest charges to keep a balance on your old card, it might be worth paying a one-time fee to save money in the long run.
“If a couple hundred dollars gives you the opportunity to be debt free at the end of the term rather than being unable to pay it and having to do another [balance transfer] … that’s a couple hundred dollars well spent,” Frailich said.
The 2019 Credit Card Balance Transfer Survey of 100 U.S. credit cards was conducted in January 2019 by CreditCards.com. The 100-card survey pool is a representative sampling of cards from all major U.S. card issuers. Information was gathered from the cards’ terms and conditions documents, any publicly available cardholder agreements and phone calls to issuers.