What to know about low interest balance transfer
Quick insights
- A balance transfer is when you move debt from one credit card to another.
- Some credit cards offer a lower annual percentage rate (APR) on balance transfers for a set period of time.
- If you don’t pay off your balance by the end of the promotional period, you will be charged interest for the remaining balance at the credit card's standard APR.
Navigating credit card debt can be challenging, but low interest balance transfer credit card offers may provide a strategic approach to repayment. By enabling consumers to transfer existing high-interest balances to a new card with a low introductory APR, these cards provide an opportunity to delay accruing interest while paying down debt.
In this article, we'll explore the ins and outs of low interest balance transfers, including how they work, the benefits they offer and factors to keep in mind.
What is a low interest balance transfer?
A low interest balance transfer is a financial tool that allows consumers to move existing credit card debt to a new credit card, typically with a low introductory APR for a specified amount of time.
Low interest balance transfer credit cards are designed to enable consumers to consolidate debt from high-interest credit cards to a single card with a lower interest for a limited time. Any balance left on the card after the introductory period ends will typically accrue interest at the card’s standard APR.
How low interest balance transfers apply to new purchases
Credit cards that offer low interest promotional balance transfers may or may not include a low introductory APR on new purchases too. The card terms and conditions will often distinguish between the rate on a balance transfer and the APR on new purchases.
If the card does offer a low APR on new purchases, it will usually be specified separately in the offer details. Like the balance transfer interest rate, this promotional rate will typically only last for a specific period of time.
Balance transfers fees
Balance transfer fees may be charged by the new card issuer when you move the balance you owe from one credit card to another. Specific details will be listed in the cardmember agreement.
Balance transfer fees are added to the balance of the new card, which increases the total amount you owe. You may want to calculate the cost of the transfer, including fees, to determine if it’s financially beneficial to transfer your balance to another card and to ensure you have sufficient available credit for the transfer.
How long do introductory rates last?
How long an introductory APR lasts will depend on the card issuer and the credit card’s offer. Knowing the length of the introductory period can help you determine how much you could potentially save on interest. Longer introductory periods provide more time to pay down the balance without accruing interest at the standard rate.
You may want to consider how much you can realistically pay off during the introductory period to help maximize savings on interest.
What happens when the introductory APR period ends?
Once the introductory APR period ends, the remaining balance will accrue interest at the card’s standard purchase APR. Your card’s standard APR may be significantly higher than the promotional rate. To avoid higher interest charges, you may want to have a plan to pay off your credit card before the introductory period ends.
Qualifying for a low interest balance transfer credit card/h2>
Qualifications for credit card approval vary based on the card issuer and specific credit card. Here are a few common qualifications for low interest balance transfer credit cards:
- Credit score: A good to excellent credit score may be required to qualify for some balance transfer credit cards, especially those that offer a lower APR.
- Creditworthiness: Credit card issuers typically assess your creditworthiness, including your credit history and income, to determine eligibility.
- Credit utilization: Your existing debt and credit utilization ratio may also be considered during the application process. Card issuers are typically looking for a low credit ratio.
- New cardmember status: Some issuers require you to be a new customer to be eligible for balance transfer offers. You may not be able to transfer balances between cards from the same issuer.
Before applying for a card that offers low interest balance transfers, you may want to compare different offers and understand the qualification criteria first. Keep in mind that applying for a credit card can result in a hard inquiry, which can impact your credit score.
In summary
Low interest balance transfer credit cards provide card members with an opportunity to delay accruing interest on their balance by offering an introductory interest rate. This may enable cardmembers to pay off their transferred balance without accruing additional interest during the promotional period. Once this introductory period ends, cardmembers will be subject to the standard APR for any remaining balance.
Many card issuers will charge a balance transfer fee. Card issuers may also offer a low introductory rate on new purchases. Of note, low interest balance transfer offers are typically only available to new cardmembers, so you may want to review the terms carefully before applying.
