The offers are everywhere: Transfer your credit card balance and pay no interest for 12, 15, even 21 months. But what seems ubiquitous now will become less common if interest rates continue to rise, as many expect. So anyone with a high double-digit annual percentage rate (APR) who carries a balance may want to pounce on one of these offers.
Most general purpose card APRs are tied to the prime rate set by banks, plus a certain percent. When the Federal Reserve raises interest rates, it flows through to the prime rate and to your APR. Wells Fargo Bank, for one, raised its prime rate to 3.5% from 3.25% after the quarter-point rate hike last week.
"As the prime goes up, these offers will either go to a smaller population or companies will raise fees," says Brian Riley, principal at business advisory firm CEB.
Here are points to consider when evaluating the parade of promo offers:
The credit score lowdown
The best deals require an "excellent" credit score, which means 750 or better. If someone's credit score is "good" — 700 to 749 — they may still be able to get some of the best deals. They'll just likely get a card with a higher APR once the promo period ends — maybe 18% instead of 13%.
If you're not sure of your credit score, you can get a credit report at no charge from the major credit reporting companies — TransUnion, Experian and Equifax. Even if you're not planning a balance transfer right away, checking your score means that if you find errors, you'll have time to fix them before offers dwindle.
Those 0% rates
Some 0% offers apply to balance transfers and new purchases for the length of the introductory offer; others apply just to balance transfers. The Citi Diamond Preferred Card, for example, offers 0% for both, and it has the longest promo period around — at 21 months.
Whatever card you apply for, make a plan to pay down your balance, suggests Bethy Hardeman, chief consumer advocate at Credit Karma. Balance transfers give temporary relief, but you don't want to be in the same place or worse after the introductory offer ends.
The fee picture
The usual fee is 3% to 5% of the transfer. That seems like a lot. A family carrying $10,000 in credit debt at 19% and making minimum payments, however, pays close to $200 a month just for interest, says Mr. Riley. Even with a 3% fee — $300 — they can save a lot over time. Be aware that the credit limit on a new card may not be high enough to transfer your entire balance, Ms. Hardeman says.
There are also 0% offers with no-fee balance transfers. "The best of the best" is the Chase Slate card, says Julie Myrhe-Nunes of NextAdvisor, a consumer site that reviews online services. It costs nothing to transfer a balance if you do it within 60 days. Its offer covers transfers and new purchases and runs for 15 months. The card requires a "good" credit score.
The credit score effect
Applying for cards can affect your credit rating. But the standard for assessing credit, the FICO score, anticipates that consumers will accumulate and reduce credit over time. If your score takes a little hit, it should recover as the credit scoring algorithm does its job, says Mr. Riley. What you don't want to do is go out and apply for three or more cards at a time.
If you transfer your entire balance onto a new card, think twice before canceling your existing one. That could hurt your credit score, particularly if you've had the card a long time. Part of your credit score is tied to the length of your credit history.
The calculators
To help figure out how much you could save with various cards, there is a wealth of balance transfer calculators.
NextAdvisor.com has a simple calculator to help compare offers, as does
cardhub.com. A more sophisticated balance transfer calculator can be found at
bankrate.com.
