This posts lists the best 0% balance transfer credit cards on the market today, and having the list in the first place was motivated by a reader who managed to pay off her debt with these 0% balance transfer offers. Below is her story along with the different choices out there on the market today, including a couple options with no balance transfer fees.
During the 0% balance transfer credit cards craze of recent years, many of my friends were calling me ignorant for not taking advantage of these balance transfer offers. The idea was simple in that all you needed to do was apply for a few credit cards offering 0% balance transfers, send the money to a high yield savings account and pocket the difference in interest.
The 0% balance transfer tactic worked well, with each card earning a couple hundred dollars before taxes with minimal effort. I never bothered, though. The tactic seemed weird. It just wasn’t me and subsequently, I never talked about it here.
Now that the credit card companies are offering these 0% balance transfer offers in full force again, a reader took the plunge and wrote me an email that really changed my perception of these 0% balance transfer cards.
David, you have to write about these 0% balance transfer credit cards. I used one and it helped pay off my debt a year ahead of schedule!
Whoa. That got my interest.
The 0% Balance Transfer Story
Apparently, reader Shelby (fake name as she requested to stay anonymous), used these cards to transfer all her credit card debt onto 2 cards with 0% interest. Then she made every effort to pay off the balance. It was a great strategy because based on her calculation, the lack of interests helped her reach her credit card debt free goal 394 days ahead of time.
She said more people should take advantage of these offers to get out of debt and I totally agree. All you need to do is apply for 0% balance transfer credit cards and watch your debt shrink much more rapidly. Here are a few choices you should consider.
The Citi Simplicity credit card lets you take balance transfers with a 0% APR for 18 months. After the introductory period, the variable APR will be 12.99% – 21.99% based upon your creditworthiness. You also get 0% Intro APR on purchases for 18 months too. There is a balance transfer fee of either $5 or 3% of the amount of each transfer, whichever is greater. The average Transunion credit score approved for the card is 706 based on Credit Karma data, with the the lowest being 650.
The Slate card is offering a 0% Intro APR on balance transfers for up to 15 months, or March of 2015. There is a balance transfer fee of 3% with a minimum of $5, but the best feature of this card is that there is no balance transfer fee upfront if you make your transfer in the first 60 days. This card also has no annual fee. For those wondering, Credit Karma has done research that the average Transunion credit score of consumers approved for this credit card is 725 with the lowest credit score approved at 656.
This Discover card allows a 0% intro APR on balance transfers for 18 months, or as late as June of 2015, then the variable standard purchase APR of 10.99% – 22.99%. The balance transfer fee is 3% for each balance transfer, but there are no annual fees, no foreign transaction fees and no late fee on your first late payment. You get 5% cash back on select categories (it’s online shopping in Q4, 2013 up to $1,500 in purchases with free and easy sign up) and 1% on everything else. Plus, you will always know your FICO credit score now because it’ll show on your card’s monthly statement for free. The average Transunion credit score of the applicants who were approved for this card is 729, with the lowest being 682.
I’ve been waiting patiently for AMEX to join the balance transfer arena and they finally have a solution. The Blue Cash Everyday card has a 0% balance transfer period of 15 months. The card is also great if you do a bunch of grocery shopping because it gives 3% back on stand-alone supermarket purchases, 2% back on gas stations and select major department stores, and 1% on everything else. On top of that, you can get a $50 bonus if you spend $1,000 within the first 3 months, and a Amazon Prime membership for 12 months. You get a 0% APR the first 15 months of your purchases as well.
You may not be familiar with Barclays but this institution is actually one of the bigger players in the global marketplace. This rewards card offers a 12 month 0% APR on balance transfers, or until December of 2014. The balance transfer fee is 4% upfront with a $10 minimum, but you get 10,000 bonus points if you spend $1,000 in the first 90 days. You also get 2 points for every dollar spent on gas, grocery, or utilities and 1 point for everything else. A nice perk is that the Barclaycard offers free FICO scores to its card members, so you don’t have to pay for that from another source. The averaged person approved for the credit card has credit score of 723 with lowest being 675.
Finally, some of you may be happy to learn that one of the more responsible banks out there also has a 0% balance transfer credit card offering. This US Bank Visa Platinum card has all the usual perks – 15 month balance transfer with a 4% upfront fee or $5 minimum but being one of the few banks who didn’t irresponsibly lend money to everybody before the financial crisis, they are a very strong financial institution. Note though you need to take advantage of the 0% transfer within 30 days of account opening to get the full benefit of the introductory 0% period and the fees I mentioned. The average credit score approved for the card is 729, with the lowest being 661.
Note: The only way to take advantage is to make sure you still try to pay off your debt as quickly as possible. Do just that with these 0% balance transfer credit cards and you will be debt free like Shelby in no time.
What is a 0% Balance Transfer?
An insightful and exciting way to decrease the burden of credit card debt, while at the same time not having to pay exorbitant interest fees, is to take advantage of a 0% balance transfer credit card offer. Sure, this may seem like a foolish exercise in futility at first glance – taking out a new credit card account to get rid of credit card debt – but nevertheless, the fact remains that this can be a remarkably effective tool in your arsenal when you want to save money and diminish credit card debt.
A 0% balance transfer is a marketing tool used by credit card companies to increase the number of customers holding accounts with them, and also increase the amount of debt held within those accounts. While these balance transfers are effective for the credit card companies, they also can be a powerful aid to customers who wish to save money and pay off credit card debt. This is how the process works:
First, a customer opens a new credit card account that offers a 0% interest balance transfer program. These are not usually difficult to find, although there are variables about which customers should be aware. Some balance transfer offers are considerably longer than others, and in this case, longer is definitely better. In addition, customers would be well advised to pay close attention to the interest rate after the period of zero interest expires. It will, of course, be increased. However, some companies will charge incredibly high rates after the end of the initial period with no interest. Because of the importance of these types of details, it is absolutely vital that a customer read the fine print very carefully before deciding which credit card offer to accept.
Once the new account has been opened, customers will usually find the telephone operators with their new credit card company more than willing to assist them in transferring the balances to their new account. This is to be expected, of course, because they want as much of that money transferred into that account as possible – right up to the limit. How that account is managed after the transfer is what will make the difference in how much money is saved over the course of the zero interest period.
Once the new account has high-interest funds transferred in, this is the best time to pay down that balance as aggressively as possible. By doing this, customers may be able to completely pay off much of the credit card debt without incurring any interest fees at all, saving significant amounts of money. It is, however, vital to remain aware of when the zero interest promotion ends. In the event that there is still a balance remaining on the transferred balance as this time period comes to a close, it may be possible to open a 0% balance transfer credit card with another company, and continue the cycle further. Again, looking out for the longest period with a 0% balance will help you to diminish debt and save money.
How to Calculate When Using a 0% Balance Transfer Makes Sense
When deciding what to do about your debt, one common question is how to calculate when using a 0% balance transfer makes sense. 0% balance transfer credit cards are promotional offer that creditors extent to attract customers. The offer permits you to transfer balances from other credit cards onto the new card at an amount up to your credit limit. You will pay 0% interest on the money transferred for a set period of time, usually between six months and one year. After this period of time, any remaining balance will default to the normal interest rate, under the terms of most cards. Most 0% balance transfer credit cards charge you a fee to transfer the balance. The industry standard is a 3% fee. This fee used to be capped, which meant that there was an upper limit maximum that would be charged. However, with the recent credit crunch
Calculating Whether 0% Balance Transfer Credit Cards Makes Sense
Your first consideration when calculating whether the 0% balance transfer credit cards make sense should be determining whether you will save enough in interest to make the 3% fee worthwhile. This will depend on the amount of money you owe and the interest rate you are currently paying.
Interest rates on credit cards can vary widely from around 5% to upwards of 25% depending on your credit score and a number of other factors. This will make a vast difference in determining whether a balance transfer makes sense in your situation or not.
Assume, for a moment, that you have a 5% interest rate. If you have a $1000 balance, that means that you are paying 5% annually on a $1000.00 balance. Although there is some variation on how creditors charge interest – some charge interest on a double month cycle- you will pay approximately $23.37 in interest over a 6 month period. This number was calculating assuming you are making minimum payments of 3% per month of the balance remaining. If you are making larger payments, you will pay less in interest. Over a one year period of time using the same calculations and assuming the same payment rate, you will pay $42.79 in interest over the course of the year. This means that if the balance transfer offer is good for six months, a balance transfer may not be right for you, since you will pay a $30.00 fee (3% of $1000) to save $23.37 in interest. However, if the balance transfer offer is good for one year, then a balance transfer will safe you about $12.00. While this is a savings, only you can decide whether that amount of money is worth the hassle of transferring a balance.
If your interest rate jumps to 15% on your credit card, the numbers look a bit different. Again assuming a $1000 balance and payments at 3% per month, you are now looking at $71.66 in interest over six months and $134.94 in interest over the course of a year. Assuming a 3% balance transfer fee of $30.00, the offer begins to look a bit more attractive.
If your credit card interest rate is 20%, with all other factors the same, you will pay $96.59 in interest over 6 months and $184.48 over one year. In this situation, a balance transfer begins to look as though it might make sense.
Therefore, it seems clear that the higher the interest rate, the wiser it is to do a 0% balance transfer. The same rule applies for high balances. If you had an $8000 balance on that same 20% card, over the course of a year you would pay $1475.89 in interest. This is quite a bit more then the $240 balance transfer fee you would pay.
Other Things to Consider about 0% Balance Transfer Credit Cards
One other major factor to consider when making the calculation of whether a 0% balance transfer credit cards make sense is whether you can actually pay the balance back within the promotional period. If you have, for example, an $8000 balance, you would need to make credit card payments of over $1330.00 per month in order to have that balance paid off within a six month promotional period. If you do not have that kind of cash lying around, you need to consider what happens when the promotional rate ends.
Typically, when a promotional rate ends, you will just have to begin paying at the regular interest rate on the remaining balance. Thus, you would need to look at what that standard interest rate was in order to determine how much you should expect to pay in interest on the remainder of the transferred balance after your promotion ends. You can do this by figuring out how much you can pay per month and subtracting that amount form the total owed. So, if you were able to pay $200 a month on your $8000 balance, at the end of six months you would still have $6800 remaining on your card. Find out what rate will be charged on that remaining balance. If the rate is higher then the rate you have now, it might not be advantageous for you to take the balance transfer offer unless you are absolutely confident that you can pay off the balance within the promotional period.
Be diligent about ensuring that you really can pay off the money within the promotional period. Do not be late on your payments or otherwise default on any agreement with the credit card company or you may find yourself spending much more money when your rate defaults to a penalty rate under the terms of the contract. Finally, do not count on simply being able to transfer the balance again at the end of your promotional rate. After the economic crisis of 2009, the days of easy credit and endless balance transfer offers are no more and there is no guarantee that at the end of your promotional term, another balance transfer offer will come along.
Before you decide to sign up for a card, please note that MoneyNing has financial relationships with some of the credit card merchants mentioned here. This means that MoneyNing may be compensated if you choose to utilize the links on this site to sign up for any particular credit card mentioned above. However, rest assured that the content is not provided or commissioned by the credit card issuers. Opinions expressed here are author’s alone, not those of the credit card issuers, and have not been reviewed, approved or otherwise endorsed by the credit card issuers.