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How to Choose a Balance Transfer Credit Card
A balance transfer credit card enables you to move debt from one or more credit cards into a new account, which most often charges no interest or a very low interest rate for a certain amount of time.
Here's how it works: the typical balance transfer card offers a low introductory rate, sometimes even a 0% introductory rate, during a set promotional period for new customers. The introductory rate gives the new cardholder a chance to pay down the balance faster and pay less interest. The card issuer commonly charges a balance transfer fee—a small percentage of the amount transferred or a fixed amount, whichever is larger.
To make the most of this type of credit card, it helps to compare the many options in the marketplace. Read on to learn how to choose a balance transfer credit card.
What are the benefits of a balance transfer credit card?
Balance transfer credit cards are popular because they offer many
important benefits.
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Save on interest charges. When you transfer existing high-interest debt to a new card with a lower annual percentage rate, you can spend less on interest while you pay down the balance. With 0% introductory and promotional offers, interest charges are reduced to zero for the duration of the interest-free period
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Consolidate debt. When you consolidate debt from multiple cards onto a single card, it's easier to keep track of payments and balances. This tends to reduce the possibility of late or missed payments and lets you focus on payments to one creditor instead of tracking and paying multiple creditors
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Pay off debt faster. With a low- or no-interest rate during the introductory period, more of your monthly payment goes toward the principal—rather than interest charges. This gives you a chance to pay off the debt faster
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Improve financial stability. Managing your debt effectively tends to lower your financial stress while helping you build stronger long-term money management practices. A balance transfer credit card may help you improve your credit utilization, which can have a positive effect on your credit score
How to choose the best balance transfer credit card for your needs
Once you decide to use a balance transfer credit card for debt consolidation, it's a simple process to choose the right one.
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Check the intro APR. Search for balance transfer credit card offers that provide the lowest possible introductory or promotional APR (annual percentage rate) — ideally 0%. The lower the intro APR, the lower your interest charges
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Check balance transfer fees. Many cards charge a transfer fee of 3% to 5% of the total amount transferred. Factor this cost into your decision and make sure your overall savings outweigh any balance transfer fees
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Compare promotional period lengths. Every credit card issuer has their own terms and conditions. Some may offer a shorter introductory period of only 12 billing cycles. Others offer a promotional rate for the first 18 billing cycles or more after the account opening. The longer you take advantage of the low promo rate, the longer you save interest charges — especially important for larger balances
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Review the regular APR. At the end of the promotional period, the APR will change to the interest rate specified in the card account agreement. Make sure that this higher rate is manageable for you if you plan to carry a balance past the promo rate period
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Know the annual fees. Closely examine the balance transfer offer to make sure there won't be an annual fee charged every year. Then, determine if the fees and any other charges the credit card has, might outweigh other benefits you'd gain through a zero-interest period
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Compare extras that different cards might offer. To help with your decision, see if any balance transfer cards include extra perks and benefits like cash back rewards, travel miles, warranty protections, or special deals on tickets. Your lifestyle will determine which of these perks are most appealing so you can choose the best balance transfer credit card
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Know your credit score. Having a strong credit score may improve your chances of qualifying for offers. Perform a credit inquiry on yourself before applying for a new card. You can review your credit history for free at https://www.annualcreditreport.com/. Address any issues or errors you might find and then apply for your transfer card of choice
Tips for using a balance transfer card
Balance Transfer cards can be very helpful for you to meet financial goals, but you can get maximum value by following some best practices, such as:
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Pay on time. Missing a payment may lead to cancellation of your low intro rate or promotional rate as well as late fees. Always pay the required minimum amount by the payment due date to avoid extra charges or fees
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Be careful with new purchases. Adding to your balance with new purchases could make it more difficult to pay off the transferred balance within the introductory or promotional period. It might help to make only new purchases that you can afford to pay off entirely by the payment due date, which would minimize any possible interest charges
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Have a plan for how quickly you can pay off the balance. Divide your total balance by the number of promo period months to create a realistic payment schedule. If you can meet that payment plan, you should avoid having leftover debt that would incur higher APRs and added interest charges
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Keep old cards open after the transfer. Keeping your existing cards open helps your credit utilization ratio and adds to the length of your credit history, which could ultimately improve your credit score. However, it's best to try to avoid using that available credit to accumulate even more debt while those accounts remain open
Credit Cards offered at TD Bank
Explore TD Bank credit cards to find the right offer for you and your financial goals.