Credit Card and loan interest rates have been climbing as the Federal Reserve hikes rates to battle inflation. According to Investopedia, the median credit card interest rate stands at 21.62% for October 2022, based on average advertised rates across several hundred of the most popular cards offered in the market.
Balance Transfer Credit Cards
If you are battling high-interest rates on credit card balances, a special balance transfer credit card might help you pay down your balance at a lower rate. There are many different types of balance transfer cards. Ideally, securing a 0% APR for a limited time can help you put a dent in your debt. A great example is Choice One Community Credit Union’s VISA balance transfer credit card. Choice One’s VISA balance transfer card offers 0% APR* on balance transfers for 6 months.
When selecting a balance transfer credit card, remember that the special low introductory balance transfer rate is only for a limited time. Whatever balance you have remaining on the card when the intro period ends will start accruing interest at the regular APR. That’s why it’s important to focus on paying down the balance during the intro period. It’s also important to know that the rate will convert to. For example, Choice One’s VISA balance transfer card features fixed rates as low as 8.90% APR* after intro period. That’s a rate still much lower than the average mentioned above. Plus, it’s fixed.
Comparing balance transfer credit card details
As mentioned above, the interest rate that a low-rate balance transfer card will convert to once the introductory period ends is an important consideration when selecting a card. The best balance transfer credit card rates are typically available only to consumers with very good or excellent credit. A very good credit score is considered to be between 740 and 799 and an excellent credit score is between 800 to 850. You may want to check your credit score before applying for a balance transfer credit card.
Other important consideration includes any balance transfer fees and also annual card fees. Most balance transfer cards charge a balance transfer fee that may be a percentage of the balance transferred. It’s essential to calculate your savings by accounting for any fees. The Choice One VISA balance transfer card we mentioned above has no balance transfer or annual card fees. That’s a great option when you are looking to save.
6 ways to compare balance transfer cards
To sum it up, when it comes to transferring the balance of a high-rate credit card to a lower-rate balance transfer card, consider the following six factors:
- The intro APR on balance transfers during the intro period.
- The length of time the intro APR will last. Will you have time to pay off your balances or pay them down significantly during that time? A balance transfer calculator can help you weigh your options for paying off debt by helping you estimate how much you can save.
- The regular APR that your card will convert to once the intro period is over.
- Any fees involved with the card. A high balance transfer fee and an annual fee may outweigh your rate savings. Balance transfer fees are commonly 3% to 5% of the balance transfer.
- Any rewards or perks that come with the balance transfer card.
- Your credit limit with the balance transfer card. Will it be enough to transfer over all of your higher credit card balances?
The bottom line on balance transfer credit cards
When you are struggling with high-rate credit card balances, a low-rate balance transfer card can be a great tool in helping you manage your debt. It can help you save considerably on interest. Your success will depend on the amount of debt you have and your ability to pay it off during the low intro rate.
Balance transfer credit cards also carry risks. If you don’t focus on paying down your balance, and instead make additional purchases, you could end up with more debt than when you started. Automating your payments can help you ensure you pay off your balance. As with any debt, be sure to make all of your payments on time.
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Learn more ways to save by reading our “6 Money Hacks to Combat Inflation.”
*0% VISA Balance Transfer Rate is valid for 6 billing cycles from date of transfer. Rate returns to current rate at that time. Choice One’s current Platinum Visa Credit Card Rate is 8.90% APR and Classic Visa Card is 13.50% APR with No Balance Transfer or Annual Fee. Balance Transfer offer is good on any new or existing Choice One Platinum or Classic Credit Card. 0% balance transfer rate is for balances transferred from another institution only. Transfers may not exceed the credit line a member is approved for.