Few things are as dangerous for your financial health as high-interest rate credit card debt. Paying down such debt should be a priority, and transferring your balance owed to a new card with better terms can be a great help.
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Remember, maintaining credit card debt is very much like investing in reverse. Instead of your investment growing in value, your balance owed can grow in value, delivering profits to the card issuer, not to you.
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What to know about balance-transfer credit cards
Balance-transfer credit cards vary in several ways. Each will tempt you with an ultra-low initial interest rate -- typically 0%. That interest rate will be in effect for you for between six and 21 months, after which a more standard interest rate applies -- and note that it will likely be in the double-digits and very possibly the high double digits. Thus, it's good to seek out cards with relatively low interest rate ranges following your teaser-rate period. (It's also ideal, of course, to simply get your debt paid off during that period.) Note that your credit score will likely influence the interest rate you're given after the 0% rate expires.
Most balance-transfer cards will also charge a balance-transfer fee. It will typically be between about 3% and 5% of the sum you're transferring or $5 to $10 -- whichever is greater. Thus, if you're transferring $10,000 in debt and paying a 4% balance-transfer fee, it will cost you $400. That's a lot, but it can be worth it if you were previously paying, say, 17% on the card.
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Look into the fine print of any balance-transfer card you're considering to find out what your credit limitwill be with the card. Many times, you won't be able to know until you get approved for the card. You won't be able to transfer more than that limit (less the balance-transfer fee, if there is one), and if you exceed the limit you might face a fee. Find out if there's a penalty APR, too. That's when the card company jacks your interest rate up to 25% or even 30% if you pay a bill late or commit some other transgression. Many cards don't feature them, and that's preferable.
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Best balance-transfer cards
Below are some strong balance-transfer cards to consider. Note that each is generally best for many people who seek low rates -- but each will vary in how perfect it is for you. Read up, to see which one(s) make the most sense for you, given your needs and your preferences. Each offers a suite of other benefits, as well.
- Barclaycard Ring MasterCard: This card chargesno balance-transfer fee ever,and its initial APR is 0% for the first 15 months for transfers made within 45 days of opening the account. After the introductory period, the APR for purchases, balances owed, and balance-transfer sums (but not cash advances) will be variable, tied to the Prime Rate. Its rates are quite competitive -- and it doesn't levy a penalty APR, either. The Barclaycard Ring MasterCard also offers online access to your FICO credit score, which can be handy if you're working hard to pay off debts and beef up your score -- perhaps in preparation for getting a mortgage or taking on other debt. It doesn't charge foreign transaction fees, either, which is nice if you travel outside the U.S. There's no annual fee.(Read our full review of theBarclaycard Ring MasterCard.)
- Citi Simplicity Card -- No Late Fees Ever: This card featuresno annual fee, along with "no late fees ever" and "no penalty rate ever." For balance transfers, it charges a fee of 3% of the value of your transfer or $5 -- whichever is greater. Its initial APR is 0% for a generous 21 months for both purchases and balance transfers. After that, its low variable APR applies. The Citi Simplicity Carddoes not feature a penalty APR. (Read our full review of theCiti Simplicity Card.)
- Discover it Card: This carddoesn't have the lowest interest rates around, but its rates are still relatively low -- plus it offers some cash back. That makes for a very appealing combination. (Although if you're deeply in debt, you shouldn't be spending very much and should be aiming to be charged as little interest as possible.) The Discover it Card charges no annual fee and it includes your FICO score on each statement. The cash-back feature pays you 5% back on purchases in rotating categories (such as restaurants, gas stations, or Amazon.com) and 1% back on all other purchases. Spend $1,000 per month and you can expect at least $10 back per month, or $120 per year. (Read our full review of theDiscover it Card.)
- Chase Slate: This card is ideal if you're saddled with credit card debt that you're trying to pay off. It offersa 0% initial APR for the first 15 months on balance transfers and purchases. Better still, there's no balance-transfer fee on transfers made within the first 60 days. Chase Slate also offers Blueprint financial plans to its card holders to help them with debt-reduction strategies and it makes your FICO score available, too. Once the 0% teaser rate expires, the APR it charges isn't among the lowest you'll find, so aim to get a lot of debt paid off in those first 15 months. There's no annual fee and no penalty APR, either. (Read our full review ofChase Slate.)
- USAA Rate Advantage Platinum: USAA is a financial services company with a great reputation, serving military-related customers. This card, with no annual fee and no penalty APR, featuresUSAA's lowest rates -- recently as low as 7.4%. It does levy a 3% balance-transfer fee, but caps that at $200 per balance transfer. It doesn't offer a teaser 0% rate, though. Still, it may be a good option for many people, especially those who expect to take a long time paying off their debt. Cardholders can get a 4% rate when deployed or on active military duty, too, along with otherbenefits. (Read our full review of USAA Rate Advantage Platinum.)
Credit cards all have the same shape, but their terms vary significantly. Be sure to only get and use the ones that will serve you best. Remember that the higher your credit score, the better terms you'll likely get, so it can be worth spending some time improving your score if it's not where it could be.
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