The Best 0% Balance Transfer Credit Cards
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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. (See also: Best Credit Cards for People with Excellent Credit)
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 accept 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 offers currently available.
Discover it® Card
The Discover it card is offering a 0% introductory APR on balance transfers for 18 months (but only 6 months for purchases). After that, the APR will be 10.99%-22.99% (variable), depending on your credit. Balance transfers are subject to a 3% fee. In addition to a great 18 month balance transfer rate, the Discover it card is a great cash rewards card, offering 5% Cashback Bonus for gas and ground transportation on up to $1500 in purchases from Jan. through Mar. 2015 after you sign up for 5% Cashback Bonus (1% cash back on all other purchases), as well as an online shopping portal that boasts 5-20% cash back with their over 200+ retail partners. There is no penalty interest rates, no late fee for your first late payment, and no overlimit fee. Although the Discover card is not as widely accepted as some others, customers rave about their excellent service. There are no foreign transaction fees on any of Discover’s products. Plus, you get a free FICO® Credit Score online and on your monthly statement, online, in their mobile app to help you stay on top of your credit. There is no annual fee.
Citi® Diamond Preferred® Card
The Citi® Diamond Preferred® Card currently offers a 0% promotional APR on both purchases and balance transfers for 18 months. After that, the regular balance transfer APR will be 11.99%-21.99% (variable), based on your creditworthiness. There is a $5 or 3% balance transfer fee (whichever is greater). This card has additional benefits like Citi Easy Deals (get great online deals on brands like Gap, CVS, and Footlocker), Citi Private Pass (get access to exclusive events), and travel benefits like Auto Rental Insurance, Travel Insurance, and Lost Luggage Coverage. There is no annual fee.
Citi Simplicity® Card
Another card from Citi, the Citi Simplicity® MasterCard that offers a 0% APR for 18 months on both balance transfers and new purchases. After that, the regular balance transfer APR will be 12.99%-22.99% (variable), depending on your credit. There is a $5 or 3% balance transfer fee (whichever is greater). Instead of granting the travel benefits of the Diamond Preferred, this card offers no late fees or penalty interest rates, as well as services like Citi Price Rewind. There is no annual fee.
Blue Cash Everyday® Card from American Express
The Blue Cash Everyday® Card offers 0% Intro APR on purchases and balance transfers for 15 months. After that, your APR will be a variable rate, currently 12.99%-21.99% based on your creditworthiness and other factors. The balance transfer fee is a $5 or 3% of the amount of each transfer, whichever is greater.
This card is also offers great cash back rewards: 3% US supermarkets up to $6,000 per year in purchases (then 1%), 2% at US gas stations & select US dept stores, 1% on other purchases. Terms and limitations apply. There is no annual fee.
- Get one year of Amazon Prime plus $50 back after you make $1,000 in purchases with your new Card in the first three months.
- You will receive $50 back in the form of a statement credit.
- Hassle-free cash back: no enrollment required, the same great reward categories year-round.
- Earn Cash Back: 3% US supermarkets up to $6,000 per year in purchases, 2% at US gas stations & select US dept stores, 1% on other purchases. Terms and limitations apply.
- Cash back is received in the form of Reward Dollars that can be redeemed as a statement credit.
- No annual fee. Plus, 0% intro APR on purchases and balance transfers for 15 months, then a variable rate, currently 12.99% to 21.99%, based on your creditworthiness and other factors.
- Terms and restrictions apply.
Note: This card is currently unavailable.
The Chase Slate card is catered specifically for balance transfers. There are no rewards for purchases or travel benefits. You get 0% Intro APR for 15 months on balance transfers. What makes this card uniquely suited for balance transfers is the zero balance transfer fee when you transfer a balance during the first 60 days your account is open. After that, the fee for future transactions is 3% of the amount transferred, with a minimum of $5. This is a great deal if all you need is a card to transfer a balance to and get a 15 month relief from interest.
Capital One® Platinum Prestige Credit Card
The Capital One® Platinum Prestige Card offers a 0% introductory APR until May 2016 on balance transfers and purchases. After that the APR will be 10.9%-18.9% (variable), depending on your credit. There is a 3% balance transfer fee, and there are no foreign transaction fees on any Capital One products. There is no annual fee.
A 0% balance transfer is not an instant solution to the problem of credit card debt. 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. (See also: 6 Hidden Dangers of Credit Card Balance Transfers)
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.