Zero interest is the holy grail of credit card offers: a reprieve from interest rates that can easily top 20%, a chance to stop time so you can make good on your efforts to crush your credit card balance once and for all.
But balance transfer offers aren’t a cure-all for your debt. Before you sign up to transfer from a high-interest card to one dangling no interest for several months, ask yourself a few questions to make sure the offer is worth taking.
What expenses do you have coming u
Are you preparing to apply for a mortgage or other sizable loan?
Opening a new line of credit can reduce your credit score, although having more open credit available could cause it to increase within a couple of billing cycles. Before you open a new card for the balance transfer offer, take a good look at your financial needs for the promotional period and beyond.
How long is the promotional period?
Look for an introductory period of 12 to 18 months for a new card application offering a zero-percent balance transfer. If you’re lucky, you might spot an offer for 21 months interest-free.
It’s worth doing some scratch math to see how much of your balance you can realistically pay off before that window closes.
What’s the interest rate after the promotional period?
Some cards will show a range for the variable interest rate (it’ll fluctuate when the Federal Reserve raises or lowers the Federal Funds Rate). Others will spell out benchmarks depending on your credit. For example, HSBC Gold Mastercard lists its regular balance transfer variable APR as 13.24%, 17.24%, or 21.24%.
The national average right now is about 17%.
If you’re confident you can pay off your balance before the promotional period ends, you may not care much about the interest rate. But if this is a card you want to plan to keep in your financial rotation past the promo, a lower interest rate is always nice.
Something to double-check: You may also find that a card offering a balance transfer has different interest rates for balance transfers after the promotional period and for regular purchases—but most charge the same interest for “regular purchases” and “regular balance transfer,” the latter being anything that’s leftover after your promotional period.
What’s the balance transfer fee?
A fee of 3-5% of the amount you’re transferring is common, with some cards requiring a minimum transfer fee of $5 or $10. Some cards charge a transfer fee of a certain percentage for the first few months of the transfer before charging a different percentage for the remainder. For example, The Wells Fargo Cash Wise Visa Card has a 3% balance transfer fee for the first 120 days with a 5% balance transfer fee after that.
Is there an annual fee?
Annual fees can range from $25 per year to $550. Unless you’re using the benefits your card offers in exchange for that fee, you would be wise to steer clear of a card that has an annual fee. Don’t pay more to pay down your debt.
This isn’t the last offer you’ll get
Beyond what winds up in your mailbox, you can check for balance transfer card offers through credit score websites like Credit Karma and Credit Sesame, and through review portals like Bankrate.
If you’ve received an offer for one, you’re surely eligible for another, so don’t feel like that offer you got in the mail is the only option.