In theory, transferring a balance from a credit card with a high interest rate to a card with a low interest rate makes financial sense -- especially if you can move your debt to a card with a promotional 0% annual percentage rate. If you have a reasonably good credit score and discipline, you can use a balance transfer to pay off debt faster and less expensively than you can with a credit card with a typical interest rate. That noted, there are balance transfer fees, limited promotional interest rate periods and other risks to consider. Here’s everything you need to know about making multiple balance transfers to avoid paying interest.
What is a balance transfer?
A balance transfer lets you move a credit card balance from a card with a high APR to another one with a lower APR. In the best-case scenario, you transfer your balance to an introductory 0% APR credit card that won’t charge any interest for a set period of time -- typically between 12 and 21 months. Once the promotional period ends, however, you’ll be subject to the card’s regular APR. The average credit card APR currently stands at approximately 19%, according to CNET’s sister site Bankrate.
But that’s just the average APR; credit card interest rates can be even higher. A high interest rate will increase your balance and eat into the monthly payments you make, slowing down your progress in paying off your debt. The lower your APR, the more quickly you can pay off your debt and the more money you will save over time.
There’s a wrinkle with balance transfers, however: They nearly always require you to pay a fee. Credit card issuers typically charge between 3% and 5% for a balance transfer, with a $5 or $10 minimum. Still, in cases where you’re moving your balance to a 0% APR card, the 3% balance transfer fee may be less than what you’ll pay in one month’s interest with a high APR card. There are credit cards with no balance transfer fees, but their introductory APR periods are usually considerably shorter, so you’ll have to weigh the pros and cons of your specific situation.
Can you repeatedly transfer credit card balances?
It’s possible to transfer your balance to another introductory 0% APR card once the promotional period for your existing card ends. But you’ll need to maintain a good credit score to qualify for a series of introductory APR cards, be disciplined in making all of the minimum payments promptly and time your transfers carefully.
If you can take advantage of 12 months at a 0% introductory APR, the 3% balance transfer fee may be a low price to pay compared to the interest charges on a typical credit card or personal loan. As such, a promotional credit card APR can be one of the least expensive ways to finance your debt.
If you’re transferring your balance to a card without an introductory 0% APR, it’s unlikely to be worthwhile. The balance transfer fee may be higher than the interest charges you would have accrued. It’s also worth noting that each time you apply for a new credit card, your credit score may take a small hit. And each credit card you acquire increases the potential for even higher debt.
Should you transfer a balance multiple times?
Transferring a credit card balance multiple times is risky. Though it can help reduce the costs of paying off debt or financing a big-ticket purchase, it can quickly turn into a financial disaster if you add to your overall debt. If you don’t have excellent credit and are not confident in your ability to manage your finances, you may be better off applying for a personal loan in order to consolidate your debt and streamline your monthly payment responsibilities.
Can you transfer more than one balance to a 0% APR card?
You can transfer multiple balances to a single 0% introductory APR credit card, as long as your credit limit can accommodate the combined balance (plus transfer fees). This can help you simplify your monthly payment, especially if you already have multiple credit cards with revolving balances.
Pros
Low-cost or free financing with introductory APRs
Predictable minimum payments
Quicker debt payoff
Cons
Balance transfer fees
Accumulation of new debt
Multiple credit card applications can hurt credit score
To see specific recommendations, check out our best credit cards for balance transfers.
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