The best balance transfer credit cards
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Editor’s note: This post has been updated with the latest credit card information and benefits.
Many would-be award travelers 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 keeps you from getting the best credit card sign-up bonuses.
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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 used a credit card to get into debt, then 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 an account that offers 0% APR introductory financing. These offers are like sign-up bonuses in that they extend valuable benefits 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 the new account. In addition, most of these offers also feature 0% 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 any interest charges, allowing you to save money while eliminating your debt as quickly as possible.
Related reading: The best balance transfer credit cards
Generally speaking, balance transfers can be a good idea if you’re wanting 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 in order to transfer your balance. Additionally, a lot 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.
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 first 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. Let’s give an 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 the meantime, 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’ll 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 reading: 5 ways to use credit cards responsibly
Should I pay for a balance transfer fee?
A balance transfer fee is the 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 makes 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. If you’re really struggling, you can try applying for multiple credit cards as you go in order to maximize your interest-free payments.
Best Balance Transfer Credit Cards of 2020
- Chase Slate
- Citi® Double Cash Card
- Citi Rewards+℠ Card
- Chase Freedom
- Chase Freedom Unlimited
- Amex EveryDay® Credit Card from American Express
- Amex EveryDay® Preferred Credit Card from American Express
The information for the Citi Double Cash Card, Amex EveryDay, Amex EveryDay Preferred, Chase Slate, Citi Rewards+ Card have been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.
Best Balance Transfer Credit Cards
These offers vary in the terms and benefits offered, but all of them feature a 0% APR on balance transfers, which can help you consolidate other credit card debt.
Although not a travel rewards card, the Chase Slate is one of the only cards with 0% APR promotional financing on balance transfers that doesn’t charge a fee if the transfer is completed within 60 days of account opening. Slate cardholders receive 15 months of interest-free financing on balance transfers and new purchases, and there’s no annual fee. Transfers made after the first 60 days have a 5% balance-transfer fee with a $5 minimum. A variable APR of 14.99% to 23.74% applies after the introductory period.
Note that Chase (like other card issuers) will not accept balance transfers from 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.
This Citi card offers 18 months of interest-free financing on balance transfers made within the first four months of account opening. There is a balance-transfer fee of either $5 or 3% of the amount of each transfer, whichever is greater. After the introductory period, a variable APR of 13.99% – 23.99% 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’s no annual fee for this card. As of September 2019, you can also convert rewards earned on this card into transferable ThankYou Points.
This entry-level travel rewards card offers you 15 months of interest-free financing on both new purchases and balance transfers (after that, it’s a variable APR of 13.49% – 23.49%), with a balance-transfer fee of $5 or 3% of the amount of each transfer, whichever is greater. It also features 2x points at gas stations and supermarkets (on the first $6,000 per year; then 1x), and 1 point per dollar spent elsewhere. The points you earn on each purchase will be rounded up to the nearest 10 points. Rewards+ cardholders can redeem these points for about 1 cent each toward travel, gift cards and other options, and you can also convert 1,000 points to 800 JetBlue TrueBlue points. JetBlue points are worth 1.3 cents each, according to TPG’s latest valuations. This works out to slightly more value than other options. There’s no annual fee for this card.
The Chase Freedom offers 15 months of interest-free financing on both new purchases and balance transfers (after that, it’s a variable APR of 14.99% – 23.74%). It has a 3% intro balance transfer fee when you transfer a balance during the first 60 days your account is open, with a minimum of $5. After that, the fee for future balance transfers is 5% of the amount transferred, with a minimum of $5.
There’s also a $150 sign-up bonus (equal to 15,000 Ultimate Rewards points when paired with the Chase Sapphire Reserve, Chase Sapphire Preferred Card and the Ink Business Preferred Credit Card) after you spend $500 on purchases within three months of opening an account.The standard Chase Freedom card offers you 5% cash back on up to $1,500 spent each quarter on purchases made from featured merchants and merchant categories (activation required), and 1% cash back on all other purchases. The Freedom also sports the benefit of having no annual fee.
The Chase Freedom Unlimited also offers 15 months of interest-free financing on new purchases and balance transfers (after that, it’s a variable APR of 14.99% – 23.74%). It has a 3% intro balance transfer fee when you transfer a balance during the first 60 days your account is open, with a minimum of $5. After that, the fee for future balance transfers is 5% of the amount transferred, with a minimum of $5.
Similarly, the Unlimited also has a $150 sign-up bonus (equal to 15,000 Ultimate Rewards points when paired with the three Ultimate Rewards credit cards) after you spend $500 on purchases within three months of opening an account, making these cards very comparable, at least from a balance transfer standpoint.
The Freedom Unlimited features 1.5% cash back on all purchases. There’s no annual fee for the Unlimited card, either.
The standard, no-annual-fee EveryDay card offers 15 months of 0% APR promotional financing on both new purchases and balance transfers (after that, it’s a variable APR rate of 12.99% to 23.99%). There is no fee for transfers made within 60 days of account opening. It also offers you 10,000 Membership Rewards points after you spend $1,000 on purchases within the first three months of opening your account. This card features double points at U.S. supermarkets on up to $6,000 spent each year (1x thereafter), plus a 20% points bonus when you use your card to make at least 20 transactions per statement period. There’s no annual fee for this card.
EveryDay Preferred offers 12 months of 0% APR promotional financing on both new purchases and balance transfers (after that, it’s a variable APR rate of 12.99% to 22.99%), with a 3% balance-transfer fee ($5 minimum). It offers a welcome bonus of 15,000 Membership Rewards points after you spend $1,000 on purchases within three months of account opening. You’ll also earn 3x points at U.S. supermarkets on up to $6,000 per year in purchases (1x thereafter) and 2x points at U.S. gas stations. In addition, you receive a 50% points bonus when you use the card to make at least 30 transactions per statement period. There’s a $95 annual fee.
Additional Options for Balance Transfer Cards with Rewards
Discover it chrome
The Discover it chrome card offers you 2% cash back on up to $1,000 spent each quarter on combined purchases at gas stations and restaurants and 1% on all other purchases. Both versions of this card feature Discover’s Cashback Match program, which will automatically match all of the cash back that you’ve earned after the end of your account’s first year.
Related reading: Your ultimate guide to Discover cards
Barclays travel rewards cards
Nearly all travel rewards card issued by Barclays currently include 12 to 15 months of 0% APR financing on balance transfers that post within 45 days of account opening. Of the travel-related cards that have this offer, my favorites include:
- Frontier Airlines World Mastercard
- JetBlue Plus Card
- AAdvantage® Aviator® Red World Elite Mastercard
- Miles & More World Elite Mastercard
- Wyndham Rewards Visa Card
Travel rewards and financing offers
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. 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 amount of the balance transfer or any balance-transfer fees. Occasionally, some card issuers offer a welcome bonus on the amount transferred, but that’s not the case with any current offers.
I always advise people to avoid travel and other rewards credit cards when they’re 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.
I would recommend these cards with 0% APR financing only for those who are doing everything possible to pay off their credit card balances. The worst thing that you can do is to continue carrying the debt, which is not just a bad habit — too much debt will also hurt your credit score and make it harder, or impossible, to qualify for another similar offer later.
The best way to retire your debt is to pay a percentage of your remaining balance each month so that you will have no outstanding balance by the time the promotional financing offer expires. For example, if you have a $5,000 balance transferred to a card with a 15-month introductory financing offer, then you’ll need to pay off at least $333 a month to get out of debt before the standard interest rate applies.
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 Ethan Steinberg and Carissa Rawson.
Featured photo by Fairfax Media via Getty Images.
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