The average American household with credit card debt owes just over $16,000. At an average APR of about 16%, this implies that the average household with credit card debt ends up paying more than $2,500 on interest every year, or $213 monthly. Transferring that balance to the right credit card can dramatically cut, or eliminate, that expense.
There are two main reasons to consider a balance transfer with your existing credit card debt -- consolidation and saving money. It can simplify your financial life to have all of your debt in one place, as opposed to smaller balances spread across several credit cards. And if you're trying to pay down credit card debt, a balance transfer offer can save you some serious money and help you pay down debt faster.
How long can you avoid paying interest?
The first consideration when evaluating a balance transfer offer is how long the 0% intro APR period lasts. During the 0% intro APR period, you won't be charged a dime in interest, and all of the money you pay toward the debt will be used to pay down the principal. If you still have a balance outstanding when the 0% intro APR period expires, you'll be charged interest at your card's regular interest APR from that point forward.
Fortunately for consumers, competition among credit card issuers has never been stiffer, and this has produced some of the most generous balance transfer offers ever. As of this writing, there are credit card offers with 0% intro APR periods for as long as 21 months. This means that you could transfer a $5,000 credit card balance, pay $238 per month for 21 months, and pay your entire balance off without any interest whatsoever (not inclusive of fees, which I'll discuss in the next section).
Credit card balance transfer offers are evolving constantly, so be sure to check out our frequently updated list of the best balance transfer offers currently on the market.
Be aware of the fees
The other piece of the balance transfer puzzle are fees. Most credit cards charge a fee for completing a balance transfer. The industry standard is a 3% fee with a set minimum, but this can vary. This means that on a $5,000 balance transfer, you should expect a $150 fee added on to the new balance.
To be clear, paying a balance transfer fee can be well worth it in many circumstances. For example, if you're paying 18% interest on a credit card balance, a 3% fee to transfer the balance and avoid interest for over a year is still a favorable deal.
Better yet, there are some balance transfer offers that don't charge a balance transfer fee. These are quite rare, and there's only one mainstream credit card product that doesn't charge a fee at the time of this writing.