With consumer credit scores and debt levels both rising, it’s primetime for balance transfers, especially when you consider that they have the potential to significantly reduce the cost of most types of consumer debt. Unfortunately, while consumers have the opportunity to save more than $1,000 on fees and finance charges, a general lack of understanding regarding balance transfers conspires to prevent most people from achieving the best possible results.

In order to help consumers save money and free themselves from debt, Card Hub today released its 2013 Balance Transfer Study, which compares the balance transfer policies of each major credit card issuer and identifies the best balance credit cards on the market. The study’s main findings can be found below, along with insights and tips from Card Hub CEO Odysseas Papadimitriou, a personal finance expert who previously served as a senior director at Capital One.

Main Findings
 

• Six of the 11 issuers surveyed (54.5%) – Barclaycard US, Capital One, Pentagon Federal Credit Union, USAA, U.S. Bank, and Wells Fargo – allow you to transfer most common types of consumer debt, including mortgages, auto loans, small business loans, and student loans.
  • Discover also accepts balance transfers from auto loans and medical expenses, but not mortgages, small business loans, personal loans, student loans, HELOCs, or payday loans.


• Chase is the only major issuer that does not allow transfers from store cards (i.e. cards that don’t have the VISA, MasterCard, American Express, or Discover logo).
• Out of the offers from the 11 major issuers included in this study, the three best balance transfer credit cards on the market are:

1. Chase's Slate Card
2. Pentagon Federal Credit Union’s Platinum Rewards Card
3. Discover’s it Card

• American Express is the only major issuer that does not currently offer a card with a low introductory balance transfer APR.
• Each major issuer prohibits the transfer of debt between two of their own credit cards, and most – if not all – prohibit the transfer of debt between their own loans and lines of credit (e.g. transferring a Wells Fargo auto loan balance to a Wells Fargo credit card).
• Three major issuers – Barclaycard US, Chase, and U.S. Bank – offer their cardholders rewards on transferred balances at least some of the time.
• As a result of The Dodd-Frank Wall Street Reform and Consumer Protection Act, Regulation Z now requires issuers to wait at least 10 days after approving a new customer’s application before
  processing a balance transfer request. This rule is designed to give customers time to review final account terms and disclosures and to cancel their balance transfer, if necessary.
• When a consumer submits a balance transfer request via mail that is in excess of their available credit, certain issuers will outright decline the transfer while others will process part of the requested transfer amount.
  • American Express, Capital One, Pentagon Federal Credit Union, U.S. Bank, and USAA will decline requested balance transfers (principal + transfer fee) that exceed your account’s credit line.
  • Bank of America, Barclaycard US, Chase, Citi, Discover, and Wells Fargo may process the balance transfer (requested amount + transfer fee) up to the amount of your available credit.

Odysseas Papadimitriou: “While there are a number of interesting conclusions you can glean from an examination of the balance transfer credit card landscape, perhaps the most significant remains the existence of free balance transfer credit cards. The Slate Card from Chase boasts the best balance transfer terms by far, offering qualified consumers 0% on transferred debt for the first 15 months without charging either a balance transfer fee or an annual fee. In other words, it enables you to effectively eliminate your current interest rate for free. For the average consumer with a $6,700 credit card balance, that’s worth up to $1,000 in fees and finance charges that you no longer have to pay.

In addition, it’s important that consumers think broader than just card debt when considering the value of 0% credit card offers. Not only can you leverage such a card to lower the cost of other types of debt, but you can also use it to turn secured debt into unsecured debt. For example, seven major issuers allow you to transfer an auto loan balance – which is backed by the value of your car – to a credit card. That means the credit card company will pay off your obligation to the auto lender, thereby scoring you the title to the vehicle sooner than expected and ensuring that payment difficulties won’t result in your car being repossessed. Though you must be cautious in adopting this approach, strategically leveraging a balance transfer credit card can really pay off.”

Balance Transfer Tips
 

1. Identify your most costly debt: The purpose of a balance transfer is to save yourself money on interest, so in order to make the most of one you need to first figure out which of your balances – if you have more than one – charges the highest interest rate. If that happens to be your auto loan, for example, then determine which issuers accept the transfer of that respective type of debt and find the best offer among them.
   
   While some people might blindly discourage you from transferring balances that originate from auto loans, student loans, etc., doing so can actually be quite powerful if used strategically. Not only does this type of transfer offer a pathway to a lower interest rate, but it also enables you to effectively transform secured debt into unsecured debt. For example, while an auto loan is guaranteed by the value of the vehicle it’s used to purchase – meaning the lender could repossess your car if you don’t pay as agreed – credit cards aren’t backed by any such physical property. Transferring the last little bit of an auto loan to a credit card will also get you the title sooner. With that said, you need to proceed with caution when contemplating transferring a non-credit card balance and make especially sure that you will be able to pay off your balance within the low-interest introductory period.
2. Make a realistic payoff plan: Evaluating the potential cost of a balance transfer necessitates determining how much you can comfortably afford to allocate to debt payments each month. It’s very important that you’re honest with yourself in making this assessment because if you make assumptions based on the best-case scenario, you could wind up costing yourself money rather than saving it.
3. Don’t assume 0% rates will always be available: When drawing up your payoff plan, it’s important that you operate under the impression that you will not be able to hop from 0% card to 0% card until debt free. A lot of people got into trouble doing just that during the Great Recession because 0% rates disappeared. Everyone needs to understand that 0% rates aren’t a constant. Otherwise, you might find yourself saddled with a significant balance when the music stops.
4. Consider all relevant costs when comparing offers: Once you’ve determined your timetable for debt freedom, you’ll be able to figure out which of the available balance transfer credit cards will offer the most savings given your particular debt situation. You can certainly do the requisite calculations by hand, but it’s far more efficient to simply reference Card Hub’s balance transfer calculator, which is tied to our database of more than 1,000 credit card offers. All you have to do is input the balance you wish to transfer along with applicable rates, fees, and your monthly payment, and the calculator will tell you which card offers the most savings. Keep in mind that when hunting for the best balance transfer offer, your primary goal should be to find the most lucrative collection of terms possible. The issuing bank is largely immaterial, unless you’re attempting to transfer non-credit card debt.

Now, if you do decide to compare offers the old fashioned way, don’t fall into the common trap of only focusing on the introductory interest rate and term. That’s a big mistake. Not only might the balance transfer fee increase your overall costs significantly, but regular rates could also quickly rob you of any savings if you aren’t able to pay off your full balance by the time regular rates take effect. The bottom line is you have to consider all of the potential cost drivers involved with a balance transfer: the introductory APR, the length of the intro term, the balance transfer fee, the regular APR, and the monthly payments you’re able to make.


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