Everything you need to know about balance transfer credit cards
Quick summary
Update: Some offers mentioned below are no longer available. View the current offers here.
There are many would-be travelers that are sitting on the sidelines of the points-and-miles game because they're not sure how to get out from under their existing credit card debt.
Although travel rewards credit cards can be incredibly lucrative, the value disappears quickly if you carry a balance with a high interest rate. Excessive debt also damages your credit score and can prevent you from getting the best credit card sign-up bonuses.
Today, I'll explain how you can use balance transfer credit cards to avoid interest charges while you pay off your debt and earn travel rewards at the same time.
What is a balance transfer?
If you've gotten into debt using a credit card, the good news is that it's also possible to use a credit card to get out of debt.
A balance transfer is a valuable option for people with good credit, allowing you to open a new card account that offers 0% APR introductory financing for a specific period of time.
These offers are like sign-up bonuses in that they extend a potentially valuable benefit to encourage new applicants to open a credit card account. Instead of (and occasionally, in addition to) earning points or miles, you receive interest-free financing on an existing balance you transfer to your new account. In addition, most of these offers also feature 0% intro APR financing on new purchases.
To really get the most out of a promotional financing offer, you must combine it with a sound plan to pay off your debt by reducing your expenditures, maximizing your income and making regular payments to pay off the balance. As long as the 0% APR promotional financing offer is in effect, you won't pay interest charges on your balance, allowing you to save money while eliminating your debt as quickly as possible.
The cons
Generally speaking, balance transfers can be a good idea if you want to get out of debt as quickly as possible. That being said, they do come with some cons. In most cases, you'll need to pay a fee to transfer your balance. Additionally, many of these cards are not considered top-tier travel rewards cards, and by signing up for them, you may be limiting your options for future credit cards. Of course, if you're overwhelmed with debt currently, sacrificing a future card is far superior to drowning in interest payments.
By law, these balance-transfer offers with promotional financing must be valid for at least six months. Some of the top offers currently available extend for as long as 18 months. Keep in mind that you can't transfer a balance between two cards from the same issuer.
Related: From debt to over 20 credit cards: The story of my personal finance journey
How much can I save with a balance transfer card?
Because credit card debt is unsecured, it has a higher interest rate than other secured loans such as a home mortgage or a car loan. Credit card debt is also more costly than a home mortgage or a student loan because it's never tax-deductible.
If you're paying interest charges on credit card balances, your priority should be to pay off that debt as soon as possible. A balance transfer can save you thousands of dollars in interest payments while allowing you to pay down your debt more quickly.
A real-world sample
Let's take a quick example. If you owe $20,000 on a credit card with a 17% interest rate and pay only the minimum payment (calculated by interest + 1% of the balance, though this may differ), it will take you more than 34 years to pay off that debt. In addition to the principal balance, you will have paid $27,774.23 in interest. This brings your total out-of-pocket cost to $47,774.23.
While an 18-month balance transfer won't help you erase all of that debt, it can still save you a ton of money. If you were to continue to make the same payments, as shown on this calculator on your interest-free offer, you'd save $4,750.94 over the course of 18 months. This brings your total credit card debt down to $11,939.34 vs. $16,690.28 on an interest-bearing card.
Related: 5 ways to use credit cards responsibly
Should I pay a balance transfer fee?
A balance transfer fee is an amount a bank will charge to transfer your debt from one card to another. It's generally charged as a percentage of your total transfer amount and ranges from 3-5%. Let's take a look at the above example of $20,000 in debt. At a 3% rate, that means you'll pay a transfer fee of $600. Compared to the $4,750 you're otherwise saving, this could make good financial sense.
How do I maximize balance transfer cards?
This question all depends on you. Do you have existing debt that you need to pay down? In that case, each card can offer a unique credit line that will allow you to eliminate your debt as quickly as possible.
Best balance transfer credit cards
The terms and benefits of these offers vary, but all of them feature an intro APR offer on balance transfers, which can help you consolidate other credit card debt.
- Chase Slate Edge
- Citi® Double Cash Card
- Citi Rewards+® Card
- Wells Fargo Active Cash® Card (rates & fees)
- Citi Custom Cash℠ Card
- Bank of America® Customized Cash Rewards credit card
The information for the Wells Fargo Active Cash card has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.
Chase Slate Edge
With the Chase Slate Edge, you'll enjoy a 0% introductory APR offer for 18 months from account opening on purchases and balance transfers (after that a variable APR of 18.74% to 27.49% applies). In addition, Chase will provide an automatic credit line evaluation after making on-time payments and spending $500 in the first six months. Just note that there's an intro balance transfer fee of $5 or 3% of the amount of each transfer, whichever is greater, on transfers made within 60 days of account opening. After that, you will be charged either $5 or 5% of the amount of each transfer, whichever is greater.
Note that Chase (like other card issuers) will not accept balance transfers from other cards that it issues. So if you have debt on one or more Chase cards, you'll have to find another bank that offers a promotional balance transfer.
Citi® Double Cash Card
This Citi card offers 18 months of introductory interest-free financing on balance transfers. There is an introductory balance transfer fee of either $5 or 3% of the amount of each transfer, whichever is greater, on balance transfers completed within the first four months of account opening. After the introductory period, the balance transfer fee will be 5% of each transfer (minimum $5) and a variable APR of 17.74% – 27.74% applies.
This card offers up to 2% cash back on all purchases with no limits. You earn 1% cash back at the time of purchase and another 1% cash back when you pay for the purchase or a total of up to 2%. There is no annual fee for this card. You can also convert rewards earned on this card into transferable ThankYou Rewards points if you carry one of Citi's more premium cards that earn transferable ThankYou Rewards points.
Citi Rewards+® Card
This entry-level travel rewards card offers new cardholders 15 months at 0% intro APR on both new purchases and balance transfers (after that, it's a variable APR of 17.24% – 27.24%), with a intro balance transfer fee of $5 or 3% of the amount of each transfer, whichever is greater. You must complete your balance transfer within four months of account opening, and 5% of each transfer (minimum $5) after that.
You can earn 20,000 ThankYou bonus points after spending $1,500 in purchases within three months of account opening.
The card earns 2 ThankYou points per dollar at gas stations and supermarkets (on the first $6,000 per year; then 1x ThankYou points) and 1 point per dollar spent on other eligible purchases. One of the more unique perks is that the points you earn on each purchase will be rounded up to the nearest 10 points. There's no annual fee for this card.
Wells Fargo Active Cash® Card
The Wells Fargo Active Cash card is an intriguing option for both its unlimited 2% cash rewards and its solid balance transfer offer.
With no annual fee, the card currently offers a 0% introductory APR for 15 months from account opening on new purchases and qualifying balance transfers made within the first 120 days from account opening. After that, it's a variable APR of 19.24%, 24.24%, or 29.24%. There is an introductory balance transfer fee of either $5 or 3% of each balance transfer, whichever is greater, for 120 days from account opening. A different fee applies after the introductory period of up to 5% for each balance transfer, with a minimum of $5.
Even better, the card has a pretty compelling welcome offer of a $200 cash rewards bonus when you spend $1,000 on purchases in the first three months of account opening.
Citi Custom Cash℠ Card
Yet another Citi card makes our list of the top balance transfer cards, the Custom Cash card.
First, you have the unique ability to earn up to 5% back on your top spending category each billing cycle, on up to the first $500 spent (1% on purchases thereafter) with an unlimited 1% cash back on all other eligible purchases.
More importantly, for the purposes of balance transfers, the card has a 0% introductory APR offer on both balance transfers and purchases for the first 15 months from account opening and date of first transfer. All balance transfers must be completed in the first four months of account opening. There is a balance transfer fee of $5 or 5% of the amount of each transfer, whichever is greater. After the introductory period, the variable APR will be 17.74% - 27.74%.
The Citi Custom Cash also offers an easily attainable sign-up bonus — you'll earn $200 cash back after you spend $1,500 on purchases in the first six months of account opening. This bonus offer will be fulfilled as 20,000 Points, which can be redeemed for $200 cash back.
Bank of America® Customized Cash Rewards credit card
Besides being a great balance transfer card, the no-annual-fee Bank of America Customized Cash card offers a unique choose-your-bonus-spending-category rewards structure and an easy-to-hit sign-up bonus.
There is a 0% introductory APR for 18 billing cycles for purchases, and balance transfers made in the first 60 days. Thereafter, a 17.74% - 27.74% variable APR will apply. A 3% (min $10) applies to all balance transfers.
Cardholders earn 3% cash back on one of the following categories of their choosing: gas, online shopping, dining, travel, drug stores or home improvement/furnishings. You'll also earn 2% cash back at grocery stores and wholesale clubs. Note that there's a $2,500 cap on combined 3% and 2% cash-back purchases each quarter. Beyond that, you'll earn 1% cash back.
In terms of the welcome bonus, the Bank of America Customized Cash Rewards credit card offers a modest $200 online cash rewards bonus after spending $1,000 on purchases within the first 90 days of account opening.
A note about travel rewards
It's possible to achieve your goal of reducing debt and also earn travel rewards along the way with careful planning.
For some people struggling with credit card debt, trying to earn rewards while paying down the balance isn't the best strategy because rewards credit cards invariably have higher interest rates than more basic products.
Cardholders who pay down their debt and temporarily avoid interest by taking advantage of a balance transfer offer can safely earn rewards on their spending. If you get a rewards card with a 0% APR offer, you won't earn points, miles, or cash back on the balance transfer amount or any balance transfer fees.
Bottom line
I always advise people to avoid travel and other rewards credit cards when carrying a credit card balance. Credit cards that don't offer rewards will always have a lower standard interest rate than those that do. But with the cards listed above, you can transfer your balance and avoid interest altogether, which is even better than a card with a lower interest rate.
By finding the right promotional offer, you can avoid interest charges while paying off your debt and earn some valuable travel rewards too.
Additional reporting by Chris Dong, Ethan Steinberg and Carissa Rawson.
Updated on 12/1/22.