The Golden Rules of a Balance-Transfer Credit Card

If you’re saddled with debt and looking for ways to pay it off, a balance-transfer credit card may be able to help. These useful pieces of plastic, which typically grant cardholders a promotional period of interest-fee financing for up to 15 months, are designed with people like you in mind: those who want to get out of debt.

So how do they work? In theory, customers transfer their balance from an interest-bearing card to the new one, then work to pay off their debt before the promotional APR ends (and the new one kicks in). Of course, not everyone’s a pro at this, and if you’re not careful, you can damage your credit and still be stuck in debt. To help you avoid such a poor-credit mishap, we’ve compiled a list of golden rules for using your balance-transfer card wisely.

Don’t Add to Your Balance

There’s a reason you got into debt in the first place, so the last thing you want to do is make it worse. Remember, if you add more debt to your already hefty balance, you’ll have a tougher time paying it off before the promotional interest-free period ends, and your credit could suffer as a result, because high levels of debt are a red flag to lenders. (You can see where your finances stand by viewing two of your free credit scores on Credit.com.)

Another reason to leave that balance alone once you transfer it to the new card? Many people find it easier to budget for fixed costs than moving targets.

Find a Card Without a Balance-Transfer Fee

Once upon a time, creditors waived fees for transferring a balance from one card to another. Nowadays, many creditors tack on 3% to 5% interest just for doing the job. If you’re already in debt, you don’t want to worsen the burden. Research all the balance-transfer cards out there, and look for a card that doesn’t charge fees just for making a transfer. Trust us, your wallet (and future self) will thank you.

If You Can’t Ditch the Fee, Try to Save on Interest

Sometimes, despite all your research, you end up applying for a card that charges a fee to transfer a balance. That’s OK. But while you’re working to pay off your debt, it’s a good idea to do what you can to save some money on interest. How? By paying down your balance as much as you can — at least before the promotional period ends and the newer (higher) APR comes into play. Remember, the greater your interest, the quicker your debt is going to pile up. (Consider using this credit card payoff calculator tool to find out how long it might take you to relieve yourself of that debt.)

Pay it Off Before the Promotion Ends

As we’ve mentioned several times, it’s imperative that you work to pay off your card before the promotional period ends, lest you wind up saddled with higher interest — and more debt, if you can’t pay it off. For this reason alone, you may want to choose a card with 21 months of 0% APR, such as the Citi Simplicity, whose review you can read here. As an added incentive to apply for the card, Citi Simplicity doesn’t charge any late fees. (Full Disclosure: Citibank advertises on Credit.com, but that results in no preferential editorial treatment.)

Read the Fine Print

As with any credit card you’re applying for, fees and policies are subject to change at a moment’s notice, so you’ll want to make sure that the card you choose has the best plans for you and your budget. Some balance-transfer cards charge penalty rates for late payments, taking away the introductory rate entirely when you make a late payment. (Some of those eye-popping penalties can climb as high as 30%.) Finally, it helps to know what your credit card’s APR will be once the interest-free financing period ends. You don’t want to get hit with sticker shock when you carry a balance on a card with a 23.99% APR.

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

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