The Best 0% Balance Transfer Credit Cards
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. Citi® Diamond Preferred® Card
This card currently offers a 0% promotional APR on both purchases and balance transfers for a market-leading 18 months (review here). 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.
2. Citi Simplicity® Card
This is another card from Citi that offers a 0% APR for 18 months on both balance transfers and new purchases (review here). 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.
3. Discover it® Card
The best offer for this card (review here) has a 0% introductory APR on balance transfers for 18 months. Balance transfers are subject to a 3% fee. 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. Plus, you get a free FICO® Credit Score on your monthly statement to help you stay on top of your credit.
4. Capital One® Platinum Prestige Credit Card
Rounding out our list, this product offers a 0% introductory APR until July 2015 on balance transfers and 0% introductory APR until July 2015 on all 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.
5. Slate® From Chase
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.
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.
Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author’s alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through the credit card issuer Affiliate Program.