Many times, a zero-interest balance transfer is financial lifeline that can help you escape a modest credit card debt. But for some, transferring a balance may actually make your debt situation worse. Here's how to know if you should apply for a credit card balance transfer or not.

If you’re dealing with a high-APR credit card balance that’s costing you $50, $75 or even more than $100 a month in interest, a zero-interest balance transfer could eliminate these finance charges for a year or longer—saving you money and allowing to repay the debt faster.

For example, a card like the Citi® Diamond Preferred® Card can offer a 0% intro APR for 21-months on balance transfers from date of first transfer and 0% intro APR for 12 months on new purchases, so you can pay off debt quickly and interest-free. The regular APR is 15.99% - 25.99% (Variable).

Is a balance transfer right for you?

If you’re in a  good financial place (for example, you have a stable job, a good credit score and your credit card balances are modest, not maxed out), transferring a high-APR balance so you can save money and pay it off faster is smart.

Related: Compare the best balance transfer credit cards now.

If, however, most of your credit cards are maxed out or your credit score has suffered from making late payments, you’ll be better off looking at other options. Here’s why:

1. Balance transfers require good credit. You’ll need a very good credit score to be approved for a balance transfer credit card.

2. If your debt problem is too big, a balance transfer may make it worse. While balance transfers provide temporary relief from high interest rates, sometimes they exacerbate the problem by giving you more credit that you’ll end up using when money gets tight.

If it sounds like a balance transfer might not be right for you, read more about how to get out of debt on your own or consider applying for a personal loan to consolidate your debt.

If you do think a balance transfer might help, you can:

How balance transfer credit cards work

A balance transfer is simply paying off one credit card with another.

Hopefully, it’s obvious that a balance transfer doesn’t actually help you pay down debt; it simply moves the debt from Card A to Card B.

So why bother?

Normally, most credit cards charge fairly high interest rates (12, 15, even 20 percent). If you carry a $5,000 balance on a card with a 20 percent interest rate, you could be paying up to $83 a month just towards interest! So if you pay $100 a month towards that debt, only $17 actually goes to pay down the principal…the rest goes to the bank.

But banks compete with one another. So if you’re paying Acme Bank $83 a month in interest, Bob’s Bank thinks “I’d like to get that revenue some day.”

Here’s what happens:

  • Bob’s Bank mails you an offer of 0 percent APR on balance transfers for 12 months.
  • You apply and are approved for the Bob’s Bank balance transfer card.
  • You give Bob’s Bank your Acme Bank account number and balance.
  • Bob’s Bank pays off the Acme Bank credit card.
  • Bob’s Bank charges you a balance transfer fee: between 3 and 5 percent of the amount transferred.
  • You start paying your new Bob’s Bank credit card. The Acme Bank card is paid in full.

With the new card, you don’t pay any interest for a full year. Your $100 monthly payment goes straight towards paying down your debt. Ultimately, you could save hundreds in interest.

Of course, balance transfers don’t always save you money. Depending on how much you owe, your current interest rate, and the cost of transferring the balance (the balance transfer fee), it may not be worth it.

Before you do a balance transfer

Before you transfer a balance, ask yourself the following questions to figure out if it’s the right move for you.

  1. Are you absolutely committed to getting out of credit card debt for good? Or is there a chance you’ll transfer the balance and then start using the old credit card again?
  2. What kind of credit do you have? Will you be approved for a balance transfer?

As we mentioned above, balance transfer cards require excellent credit-–and sometimes, that may not be enough.

Banks also won’t extend new credit if you’re maxed out or very close to the limits on all of your credit cards. You’ll stand the best chance of getting approved for a new balance transfer credit card if your  credit score is 700 or above and you’re credit card debt is less than 50 percent of the combined credit limit on all of your credit cards. This is called your utilization ratio.

Before you apply for a balance transfer offer, ask yourself if you think you will qualify for the credit card.

  • Have you had a credit history for more than a year, two years, or five? (Longer is better.)
  • Have you ever been 30 days late on a payment? (Bad.)
  • Is your $5,500 balance less than 50 percent of your available credit, or are you almost maxed out? (Maxed out is bad.)

If your FICO score is above 720, you are probably good to go. A score from 660 to 720 is a big maybe, and anything under 660 means you might not qualify for an intro rate or a large enough credit line.

Related: What Credit Score Do You Need To Get Approved For a Credit Card?

Is the balance transfer worth it?

Most credit cards charge a balance transfer fee of between 3 and 5 percent of the transferred balance.

An example: If you’re repaying a debt at a 15 percent APR or higher over six months or more, a 0 percent balance transfer with a 5 percent fee starts to make sense. (The actual break even-point depends on your actual APR and your monthly payments, of course.)

If, however, you could repay the debt in less than six months, you might not actually save anything with the 0 percent balance transfer. You would, however, be tempted to let the debt hang around longer because you’re not paying interest…for now. You never know when you might face an emergency or lose your income and get stuck with an unpaid debt and an expiring introductory interest rate.

Balance transfer credit card options

Here are my two top picks for balance transfer credit cards.

IMHO, these are definitely some good options for you.

The Citi® Diamond Preferred® Card is another superb balance transfer card option. It offers 0% intro APR on balance transfers for a whopping 21 months (transfers must be made in the first 4 months of account opening; a balance transfer fee of $5 or 5% applies, whichever is greater). Additionally, this card also offers 0% intro APR for 12 months on purchases. After that the regular APR is 15.99% - 25.99% (Variable).

Again, having 0% intro APR on both for so long is super helpful because imagine you’re trying to pay off old debt and you get a surprise bill, like a healthcare bill or a car repair. With the Citi® Diamond Preferred® Card, you’ll have plenty of time to pay off both, interest-free.

See details/apply.

Intro APRs vs low fixed APRs

Most balance transfer credit cards offer new applicants a 0 percent APR for a certain number of months. Other cards do not offer an introductory 0 percent APR, but a lower regular APR that will not skyrocket after a number of months (regular APRs may still vary slightly based upon the Federal Reserve Prime Rate).

If you have a small balance that you can pay off within a year or up to 21 months, intro 0 percent APR offers are the ideal way to eliminate paying further finance charges on your balance.

If, however, you cannot afford to pay off your entire balance in a year or two, keep in mind that the credit card’s regular APR will kick in on your transferred balance after the introductory rate expires. If that APR is higher than what you’re paying now, the balance transfer may not be such a great deal.

Related: Compare Our Most Recommended Balance Transfer Cards

Important things to remember if you do a balance transfer

You can avoid unpleasant surprises during the balance transfer process by preparing for the following scenarios.

You may not be able to transfer your entire balance.

Although credit card applications will give you space to list multiple balances that you’d like to transfer, they don’t guarantee that they’ll transfer all of them. The bank will give you whatever credit limit they decide you should have, and it may be less than the balance you’d like to transfer.

The balance transfer will still go through, but the new card will pay off some of your old balance, just not all of it.

If this happens: Make minimum payments on the new credit card while you pay off the old card’s balance as quickly as possible.

Read a card’s terms and conditions carefully to determine how long you have to transfer balances to take advantage of the intro rate. Some cards may require you do it at the time of application while others may give you several days or an entire billing period. In the latter case, you may want to apply for the card and then transfer balances once you know your credit limit.

You might be tempted to make new charges.

Finally, you must ask yourself if you can avoid making new charges on the new credit card to which you transfer the balance. This is a big no-no, because the credit card will take your payments and apply them to your low-rate transferred balance before your new purchases, which will be at a higher regular rate (unless the card also features an intro rate on purchases).

Almost always, it’s best to transfer a balance to a card and then keep that card out of your wallet until the transferred balance is paid off.

After weighing the options, if you think a balance transfer is worth it, check out our master list of recommended balance transfer credit cards.

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About the author

David Weliver
Total Articles: 303
David Weliver is the founder of Money Under 30. He's a cited authority on personal finance and the unique money issues he faced during his first two decades as an adult. He lives in Maine with his wife and two children.