As many credit card companies are offering zero percent interest for up to 18 months, you might be contemplating a balance transfer—a type of credit card transaction where debt is moved from one account to another. If you’re carrying a balance on a high-interest credit card that can top 20%, not having to pay interest until 2022 can help crush your credit card debt once and for all.
But balance transfer offers aren’t a cure-all for your debt. You should be confident that you can pay off your balance before the no-interest timeframe expires, otherwise you risk making your debt situation even worse, possibly at a higher interest rate than your previous card. Before signing up for a card offer that lures you with no interest for several months, ask yourself these few questions:
What expenses do you have coming up?
Are you preparing to apply for a mortgage or other sizable loan? Opening a new line of credit can reduce your credit score, although having more credit available could cause that score to increase within a couple of billing cycles. Before you open a new card for the balance transfer offer, take a good look at your financial needs for the promotional period and beyond.
How long is the promotional period?
Look for an introductory period of 12 to 18 months for a new card application offering a zero-percent balance transfer. If you’re lucky, you might spot an offer for 21 months interest-free. It’s worth doing some quick math to see how much of your balance you can realistically pay off before that window closes.
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What’s the interest rate after the promotional period?
Some cards will show a range for the variable interest rate (it’ll fluctuate when the Federal Reserve raises or lowers the Federal Funds Rate). For example, HSBC Gold Mastercard lists its regular balance transfer variable APR between 13.99% to 23.99%. The national average right now is 16.04%. Some cards will spell out benchmarks depending on your credit.
If you’re confident you can pay off your balance before the promotional period ends, you may not care much about the interest rate. But if this is a card you want to keep in your financial rotation past the promo, keep a lower interest rate in consideration.
You may also find that a card offering a balance transfer has different interest rates specifically for balance transfers after the promotional period, so double-check for that, too.
What’s the balance transfer fee?
It’s common to see a fee of 3-5% of the amount you’re transferring, with some cards requiring a minimum transfer fee of $5 or $10. Some cards charge a transfer fee of a certain percentage for the first few months of the transfer before charging a different percentage for the remainder. For example, The Wells Fargo Cash Wise Visa Card has a 3% ($5 minimum) balance transfer fee for the first 120 days, then 5% ($5 minimum) after that.
Is there an annual fee?
Annual fees can range from $25 per year to $550. Unless you’re using the benefits your card offers in exchange for that fee, you would be wise to steer clear of a card that has an annual fee. Don’t spend more to pay down your debt.
This isn’t the last offer you’ll get
Beyond what winds up in your mailbox, you can check for balance transfer card offers through credit score websites like Credit Karma and Credit Sesame, and through review portals like Bankrate. If you’ve received an offer for one, you’re surely eligible for another, so don’t feel like that latest offer you got in the mail is the only option.
This story was originally published in 2019 and was updated on November 19, 2020.