One of the credit card categories listed on all of the major credit card websites is always the balance transfer credit card. But what benefits does a balance transfer credit card actually provide? We've compared the best credit cards in the market to explain this very useful tool for debt problems in order to help you understand this complicated function better.
What is a balance transfer?
Balance transfers, or balance transfer credit cards, refer to leveraging the introductory period with no interest rate for carrying a balance month to month on a new credit in order to take time to pay off a previous debt. Sound complicated? It isn't! Find an example below :
- Cardholder A has been using a credit card for the past few years, and recently purchased an expensive car using your credit card for financing. He just got hit with a $10,000 credit card balance, but currently only has $5,000 in the bank, and it's going to take him a few months to pay it off.
- Because Cardholder A didn't have the greatest credit history, he currently has 20% monthly purchase balance interest rates - which means each month he owes $1,000 in addition to the current balance on his credit card.
- Pretty soon the $5,000 balance becomes a $10,000 balance, and at that point the interest is costing more than Cardholder A's income!
For the average American, this situation has unfortunately become all too common. Fortunately, many banks offer balance transfer cards to help alleviate this compounding debt issue! A balance transfer card allows the cardholder to transfer the balance from one credit card to another, and the new balance transfer card typically has no interest rate for an extended period of time, sometimes over 12 months!
What are the best balance transfer credit cards?
When someone is considering using a balance transfer credit card, there are a ton of important things to take into account. Unlike any other type of credit card, these credit cards are not typically assessed on the same values that other credit cards might be. For instance, if someone has debt problems, their credit score might suffer as a result - which means they might not be able to qualify for the most prestigious Rewards credit cards. Additionally, even if they do qualify, they might end up paying high interest rates because of the credit risk. Thankfully, balance transfer cards usually only require good credit, and offer a number of different types of benefits to help people get back on track. We've broken balance transfer credit cards into two different categories below to pick our favorite for each :
- Rewards Balance Transfer Credit Cards provide extensive rewards in addition to providing longer periods of reduced or eliminated interest rates for those with debt problems
- Extended low APR balance transfer credit cards provide longer periods of reduced or eliminated interest rates
Best Credit Cards - Overall Balance Transfer
WINNER! - Discover It Credit Card with Promotional 18-Month Balance Transfer
The Discover It Credit Card is part of the new line of credit cards from Discover. These cards are unique because they combine a number of the desirable traits from the previous Discover Credit Cards, including the industry best 18 month balance transfer period. But not only does this Discover credit card have an extended introductory period, it includes the following benefits :
- 5% Cash Back in rotating categories
- Relaxed late fees for the first late payment
- Understanding Customer Service - reassessed rates and payment plans for the recently unemployed
This is a great credit card not only for people with debt problems, but also for anyone generally interested in a top rewards credit card with low interest rates. Find more information on the Discover It site.
Best Credit Cards - Rewards Balance Transfer Credit Cards
The Chase Freedom credit card offers an industry best cash rewards system that also has great capabilities for those with debt problems. This includes a 15 month period of zero interest on purchases or balance transfers - which isn't quite the 18 months of the discover card, but is still more than competitive in the industry. In addition to this great 15 month period, the Chase Freedom Card offers the following :
- $100 cash back when spending $500 in the first 3 months from opening the account
- 5% cash back up to $1,500 in rotating categories
- Unlimited 1% cash back
- Extra benefits when shopping in Chases' online store
In the grand scheme of things, this is a competitive cash back credit card in its own right - with the added 15 month introductory period, this is absolutely one of the strongest entrants in the category. The only caveat would be that it requires average to good credit, which might be difficult for some users.
Best Credit Cards - Extended Low APR Balance Transfer Credit Cards
The Citi Simplicity Credit Card lives up to its name - it is a simple, straightforward balance transfer credit card. We definitely think it's one of the best credit cards in the category because of this - it offers no late fees and no annual fees in order to leverage its extended balance transfer period. It also offers reasonable purchase APR after the introductory period depending on the cardholder's credit score - anywhere from 12.99-21.99% Find more information at the Citi Simplicity Card site.