I know most people who decide to attempt the balance transfer as a strategy for debt reduction have the best intentions. But statistically it seems human nature takes over and those best intentions fall by the wayside and the uncontrollable urge to spend more overtakes them, or the money they would put toward the payoff now goes to some other cost of living expenses. It takes a strong will, and solid strategy for this to be successful.
The Best 0% Balance Transfer Credit Cards
Top 5 Balance Transfer Cards
Updated May 2013
Those who live under a mountain of credit card debt quickly realize that their suffering has two components. First there is the principle, the actual amount of goods and services that was charged to their credit card. Secondly, there are the financing charges imposed each month on their balance. With each statement cycle, their average daily balance is multiplied by one twelfth of the card’s Annual Percentage Rate (APR). Therefore, if you owe $10,000 on a card with an APR of 12%, you are incurring $100 in interest each month. Due to the effect of compounding interest, the finance charges incurred each month add to your balance, resulting in more interest being accrued with each passing month. (See also: What You Must Know Before Transferring Credit Card Balances)
How a Balance Transfer Works
To help relieve the burden of debt and acquire new customers, banks have long offered credit cards with a 0% promotional APR, for a limited time, on balance transfers. Applicants who qualify for a new card with these promotional rates can have their existing balance paid off by their new card. During the time that the 0% promotional rate applies, interest is not being accrued on the balance transferred; however, the amount transferred is almost always subject to a one-time balance transfer fee. This fee, typically 3% - 5%, is added to the new balance. Also, cardholders are still responsible for making minimum payments on their account. New transactions may incur interest at the standard rate, although in some instances, the 0% promotional rate also applies to new purchases as well. Finally, no matter how much you are struggling with your debt, it is critical that you continue to make all of your payments on time, as only applicants with the excellent credit will qualify for most of these excellent promotional credit card offers.
How to Save Money With a Balance Transfer
First, it is crucial that those seeking a balance transfer do so as part of a comprehensive plan to eliminate their credit card debt. Such a plan should focus on maximizing their income, minimizing their expenses, and regularly paying down their entire credit card before the promotional rate expires.
As part of an overall plan to eliminate debt, the benefits of a balance transfer are clear. For example, if a cardholder has an existing credit balance of $10,000 on a card with a 15% APR, that cardholder is currently accruing $125 in interest each month. If the cardholder continues to pay interest while reducing the balance by $500 each month, that person will still have accrued $1,250 of interest over the 20 months it took him or her to pay off the balance (15% interest applied to an average daily balance of $5,000 over 12 months). Alternatively, that person could begin by accepting a balance transfer offer of 21 months at 0% interest with a 3% balance transfer fee. In this case, that person’s old balance of $10,000 will be paid off, while they will incur a new balance of $10,000 plus $300 in balance transfer fees. If all goes according to plan, at the end of the 21 months, the new balance will be paid off and the cardholder will have saved nearly $1,000 in interest.
Top Five 0% Balance Transfer Cards on the Market
Like every aspect of the credit card industry, we are fortunate to enjoy an extremely competitive market for 0% balance transfer credit cards. Here are the top five offers currently available.
1. Chase Slate
Chase shook up the market recently by returning to a type of balance transfer offer that had not been seen in years. With this offer, new cardholders will receive a 0% APR on balance transfers for 15 months, with no balance transfer fee on transfers performed within the first 60 days of opening an account. This offer’s terms also include 15 months of 0% financing on purchases, but only for applicants with good and excellent credit. Applicants with average credit will only receive a six month, 0% rate on new purchases. Furthermore, this card is eligible to participate in Chase’s fantastic BluePrint program, allowing cardholders with a balance to pay off new charges in full without incurring interest on them. There is no annual fee for this card.
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2. Citi® Diamond Preferred® Card
This card currently offers a 0% promotional APR on both purchases and balance transfers for a market-leading 18 months. After that, the variable APR will be 11.99% - 21.99%, based on your creditworthiness. There is no annual fee for this card, but there is a $5 or 3% balance transfer fee. Citi has this same offer available for their similar Platinum Select card as well. Nevertheless, I recommend the Diamond Preferred card, as it features perks such as trip cancelation insurance, lost luggage coverage, and a personal concierge service.
3. Citi Simplicity® Card
This is another card from Citi that offers a 0% APR for 18 months on both balance transfers and new purchases. After that, the variable APR will be 12.99% - 21.99%, depending on your credit. Instead of granting the travel benefits of the Diamond Preferred, this card offers no late fees or penalty interest rates. Missing payments is still a bad idea, as your credit will suffer and your account may be closed. But at least your debt will not spiral out of control. There is no annual fee for this card, but there is a 3% (or $5, whichever is greater) balance transfer fee.
4. Discover More
The best offer for this card has a 0% introductory APR on balance transfers for 18 months, as well as a 6 month, 0% promotional rate on new purchases. Balance transfers completed in the first six months of a new account are subject to a 3% fee although a 5% fee applies thereafter. Although the Discover card is not as widely accepted as some others, customers rave about their excellent service. Finally, I am reluctant to mention that this is also a rewards card. Those who carry a balance should ignore that aspect and focus on paying off their debt as quickly as possible. There is no annual fee for this card, and there are no foreign transaction fees on any of Discover’s products.
5. Capital One® Platinum Prestige Credit Card
Rounding out our list, this product offers a 0% introductory APR until August 2014 on balance transfers and 0% introductory APR until August on purchases. Customers will have to pay a 3% balance transfer fee, but there is no annual fee for this card and no foreign transaction fees on any Capital One products.
A 0% balance transfer is not an instant solution to the problem of credit card debt. In fact, unless you receive the Chase Slate card without the balance transfer fee, you will actually owe more money after your balance transfer than you did before. You should think of these offers as a significant push up a big mountain, but you will still have to do most of the work yourself.
I agree.
I have worked at a bank for the last 6 years, and it is very common for those balance transfers to end up working against the customer after a while. People transfer the balance, then feel the urge to spend again.
If they stick to the initial plan, and use the transfer to lower the rate and get the card paid off, then its a benefit.
I looked at the Chase Slate card because you mentioned it had no transfer fee. That is incorrect. It has a 3% transfer fee.
Discover's new no fee balance transfer card that came out January 1st is defintely a good contentender for this list
I've used 0% promos for years. I call it free money (of course, its only free after you exclude the typical 3% transaction fee). Still $5k at 3% is better than 5k at 7% or 19%.
Here's some advice: If you have a large, high-rate balance pick a portion of it that you feel you can reasonably pay off month-by-month in 12-18 months (the term of the 0% offer).
Say you owe $9,000 at 12%. You feel you are disciplined enough to pay $300 a month for 12 months. Take advantage of a 0% 12-month balance transfer offer and transfer $3600 to that card.
Stick to your guns and make those $300 payments (plus the $108 3% transaction fee/12=$309 total monthly payment). In those 12 months you'll save around $300 in interest payments on the $3600 you transferred.
You're not going to get rich, but these free money offers are a great way to chip away at your debts.
Bottomline: anytime you can reduce your interest rate, do it. You help yourself and you beat the banks.
jcole2001
I used this strategy to payoff my credit cards completely. You must be diligent, and throw everything at your balances to pay them off as quickly as possible.
Also, make sure you don't close out the account after you've paid it off....I explain why here: http://go2mortgageguy.wordpress.com/2012/08/17/leave-your-credit-card-ac...
If you use a 0% transfer, make sure you have a plan to pay it off by the time regular rates kick in. Banks are counting on you to miss the opportunity. That means, until the card is paid off, keep to your budget and wait to put money into investments (it's nearly impossible for the average investor to beat the 15% your credit card will charge you).
Great review on these cards. You are right that most of the work is on the part of the one owing the money. Still, if you stick to a budget, at least the payments are will go farther.
I have a Orchard bank card and I pay 59.00 every year to keep it. I have had it for a little over 2 years with no problems whatsoever. Never late....Capital One has bought this company. Is there anyway that I can go with capital one and not have to pay the 59.00 fee every year. If I can't I will probably just start with a new card that doesn't have the fee. I would like to keep this one because I origianlly started it to rebuild credit. Please respond back to me concerning this matter. thanks, Kathy Yarbrough
I attempted to apply for the Chase Slate card this morning and got an error message that the offer is no longer available.
We did this and moved a Parent Plus Loan of about $40k to two cards (Chase Slate and Penfed AMEX.) Penfed is running a 0 percent for 18 months on all B/T's with a 3 percent B/T Fee that maxes out at $250. The main goal is to pile up cash and earn as much interest as possible before wiping out the 0 percent debt. If we have an emergency and need to access the cash we can do that.
