For debt consolidation, transferring a balance from a higher-interest credit card to a lower-interest card is a great way to get out of debt faster. Such a bold financial move can be a way to save money and chip away at your debt. However, transferring a credit card balance could lead to even more debt.
Do balance transfers impact your credit score?
A balance transfer won't alter anything that's already on your credit report. A balance transfer sets you up to improve your credit down the road after you reduce your debt. Balance transfers might help you pay down the principal faster and avoid added interest payments, but balance transfers don't change the past. Any payments you missed on the old card will still be on your credit score.
What is promotional balance transfer?
When you're researching balance transfer credit cards, you will run into promotional balance transfer offers. These offers are usually attached as introductory benefits when opening up new credit cards. As much as the promotional balance transfer helps alleviate some of the debt at the beginning, they can make a bad financial situation worse in the long run.
What are the best balance transfer credit cards in 2020?
When you transfer a balance from high-interest to low-interest credit cards, you are essentially paying off the debt on your existing card with the new one. On paper, the concept sounds like it should work perfectly, but there are many factors to consider when choosing a new card.
Comerica Bank Visa Platinum card
The best balance transfer credit card in 2020 is the Comerica Bank Visa Platinum card. The credit card has an introductory APR of 0 percent for 20 months on the initial transfer and a $0 annual fee. The APR goes up after that but there is only a 3 percent fee on requested balance transfers within 60 days of opening the account. Applicants with excellent credit who plan to pay off their balance within the 20 months should look into this card.
Citi Double Cash card
The Citi Double Cash card is next on our list. The card one offers an 18-month balance transfer promotion of 0 percent. The Citi Double Cash card also comes with the same 3 percent (min $5) transfer fee and $0 annual fee but comes with the added bonus of 2 percent cashback on all purchases. The card is a good bet if you want to get out of debt.
U.S. Bank Visa Platinum Card
Like the Comerica Bank Visa Platinum card, the U.S. Bank Visa Platinum card offers 0 percent for 20 months on balances transferred within 60 days of opening an account. The balance transfer fee is only 3 percent and has no annual fee. Unfortunately, you will likely need excellent credit to apply for this card, which makes it less than ideal for individuals already experiencing debt difficulties.
Citi Diamond Preferred Card
Like some of the credit cards mentioned above, the Citi Diamond Preferred card offers an introductory APR of 0 percent for 18 months on any balance transfers. The APR goes up after the initial period. So, you need to understand that rates and even approval for many of these cards depend on how much you owe and how quickly you plan to pay the debt off.
Transferring a credit card balance should be seen as a tool to help you get out of debt faster, not a catch-all for all of the debt you have accrued over the years. Individuals need to understand the math and read between the fine print of any promotional deals before completing a balance transfer. As with any debt consolidation, laying out your repayment plan is the key to repairing your credit and saving money for the future.