Best Credit Card for Balance Transfers

There are many reasons to transfer the balance of one credit card to another. Perhaps you want to cancel a card, or the terms have changed so that they are no longer favorable. Sometimes, transferring a balance frees up space on your credit limit to allow room for a single large purchase. Or perhaps you just want to take advantage of a good offer. No matter the reason, transferring your balance to the right credit card is of the utmost importance.

Function

Transferring the balance of one account to another can serve many ends. However, the basic purpose is essentially the same: to move the balance of one credit account to another without the need to pay off the transferring account with cash.

Identification

To choose the best credit cards for balance transfers consider two factors. The first is the fee charged for performing the transfer. Ideally, this fee will be zero. However, if this is not the case, then the lower, the better. The second factor is the interest rate on the card the funds are being transferred to. Since most balance transfers begin to accrue interest on the balance immediately, it is imperative to have a low interest rate on the receiving card.

Benefits

The primary benefit of transferring credit-card balances is cost savings. Transferring can result in lower interest charges and lower fees. Additional benefits may include better rewards programs, special promotions and the elimination of annual fees.

Warning

Many balance-transfer offers come with a substantial upfront charge. This is particularly true of offers that arrive unsolicited, in the form of checks that can be written against your account. Check the small print (often on the back) to find the transfer fee, which is commonly 3 percent. This upfront fee can easily wipe out any other savings.

Time Frame

Balance transfers are processed by the receiving credit card. The issuer initiates a payoff of the original balance, then places the balance on the new card. The length of time this takes varies, but it usually happens within a couple of weeks. It is important to continue paying the original account until the transfer is final, to avoid any late-payment penalties.

Misconceptions

While many balance-transfer offers come with a very low, or even 0 percent, interest rate, that does not mean you will never pay interest. Since virtually all credit-card companies apply your payments to the lowest interest-rate balance first, that means any new charges will incur the full, undiscounted finance charge every month until the low-interest balance has been paid off.

Resources

• Federal Reserve Board--Choosing a Credit Card
• Office of the Comptroller of the Currency--Answers About Credit Cards