If you’ve been thinking about executing a balance transfer, you may be wondering if they’re safe.

Well, as with anything that involves your money and personal finances, you need to do your due diligence.

First and foremost, ensure you’re working with a reputable company.

If you’ve never heard of the company, do some research online first to see if they’re trustworthy.

Providing Intimate Details

After all, you’ll need to provide sensitive information to the balance transfer issuer in order to actually carry out the balance transfer.

Things like your credit card or account number, and your social security number.

This is all standard procedure, similar to what you’d need to offer up if you were applying for a new credit card.

The only additional information you’d provide on a balance transfer application would be the existing credit card information.

(How balance transfers work.)

But because you’re likely dealing with two major credit card issuers (or banks), there shouldn’t be too much to worry about.

In fact, you’ll probably be dealing with two multi-billion dollar companies, so safety concerns will be minimal.

Sure, there are some smaller banks that offer balance transfers, but most are still relatively large, FDIC insured, and all-in-all dependable.

Regardless, the majority of consumers will likely transfer credit card balances between the likes of American Express, Bank of America, Capital One, Chase, Citi, or Discover.

If you don’t recognize these names, I’d be pretty surprised.

Assuming you do, there isn’t too much to worry about from that standpoint.

What About Your Credit Score?

Now, you may be worried about carrying out a balance transfer for other reasons, such as the impact it may have on your credit score.

Well, like any application for new credit, you may see a temporary credit score ding related to the balance transfer.

This relates to your heightened risk when you “need new credit.” It’s not a big deal, just a standard signal creditors take in anytime you apply for something.

The good news is that over time, the balance transfer should actually improve your credit score as the debt is paid down and your credit utilization improves.

The idea being that you’re executing the balance transfer to pay down your debt, not simply to shift it.

And it’ll be a lot easier to pay it off without pesky credit card finance charges accruing each month!

In summary, don’t fret. If you have any questions along the way, both banks or credit card issuers will be more than happy to help if you call them directly.

Tip: What credit score do you need for a balance transfer?

A lot of consumers seemed to get tripped up when inquiring about credit card balance transfers.

As I’ve said before, credit card issuers don’t do a great job explaining how they work. Instead, they simply bombard you with offers in your mailbox, inbox, and anywhere else.

So let’s set the record straight. You cannot execute a balance transfer within the same bank.

Let’s look at an example shall we:

Citi credit card balance: $2,000
Citi credit card APR: 19.99%
Citi balance transfer offer: 0% APR for 21 months
Balance transfer fee: 3%

So you’ve racked up some credit card debt with Citi to the tune of $2,000. Knowing that you’re paying some serious credit card finance charges, you look into available balance transfer offers.

It’s not long before you discover that Citi has the longest 0% balance transfer offer, at a staggering 21 months.

Unfortunately, if you look at the fine print, you should notice that you cannot transfer your existing Citi credit card balance using a Citi balance transfer offer.

Sure, they may give you a balance transfer check, which after being deposited into your checking account, could be used for just about anything, including paying off your Citi balance.

But that’s not very kosher, nor should you rely on that being a possibility as not all banks offer balance transfer checks.

Instead, you’ll need to consider balance transfer offers from other leading credit card issuers, such as Capital One, Chase, and Discover, to name a few.

Why Not?

You may be wondering why you can’t execute a balance transfer within the same bank.

It’s simple really; why would a bank allow you to shuffle debt within their own bank to a lower interest rate?

Banks only extend 0% balance transfer offers to take on your debt in the hopes of making interest off you and gaining you as a customer.

If they already have you as a customer and are making money off you, why would they want to change that in any way?

The short answer is they wouldn’t, which is why you don’t see banks offering to move debt within their own institution.

Fortunately, there are plenty of banks out there that offer balance transfers, so you should be able to find a suitable alternative, even if you had your eye on an offer from your current bank.

Just know that this is one of the many balance transfer pitfalls, especially if you’ve burned through a number of banks already while playing the balance transfer arbitrage game.

Tip: Does a balance transfer hurt your credit score?

Perhaps one of the best ways to efficiently and effectively consolidate credit card debt is via a balance transfer.

You’ve probably received balance transfer offers from your credit card issuers, but if you don’t know what a balance transfer is, check the link below for an in-depth explanation.

(What is a balance transfer?)

Credit card balance transfers were essentially created with consolidation in mind, so what better way to corral and tackle your debt than a balance transfer?

Let’s look at an example to illustrate the benefits and the savings:

Credit card A: $3,000 @21.99% APR
Credit card B: $2,000 @24.99% APR
Balance transfer offer: 0% APR for 18 months from Discover.

Assuming you’ve got $5,000 in total credit card debt at outrageous (but all too often common) interest rates, you’d be bleeding money every month just in credit card finance charges.

In our scenario, you’d be paying roughly $97 a month just to cover the interest. That’s nearly $100 down the tubes for no good reason. Why would you subject yourself to that?

Especially if there’s an easy solution…enter the balance transfer offer.

If you moved that $5,000 in credit card debt to a new Discover credit card that offered 0% APR for a full 18 months, you’d consolidate your debt and shield it from interest for a year and a half.

This particular offer would have a 3% balance transfer fee, which would amount to $150, but that beats paying over $1,000 annually in finance charges by keeping it with your current credit card issuers.

Not only that, but you’d also have all your debt in one place, making it convenient to pay off and easy to track.

If your debt is scattered among a slew of different credit cards, it can be difficult to get out of the debt spiral. And you definitely don’t want to miss a payment…that would be disastrous for your credit score!

Balance Transfers Are Simple and Straightforward

So there it is – balance transfers are the best way to consolidate credit card debt. Sure, you can go with a pure “debt consolidation” company, but those are typically riddled with fees and may have a negative impact on your credit if they make odd deals with your creditors.

That type of stuff is reserved for people in serious financial distress anyways.

A balance transfer is a more straightforward and dare I say “legit” method of consolidation, without the stigma of being considered “debt consolidation,” if that makes sense.

They’re also simple to execute, and will only require you to fill out a simple credit card application, while providing basic information about the accounts you want to pay off.

Read more: Does a balance transfer count as a payment?

It’s that time again, where I compare balance transfers to other financial instruments to see which is best in particular situations.

Today’s matchup: “balance transfer vs. personal loan.”

Balance Transfers

In short, a balance transfer allows you to shift high-APR debt from one credit card to another (what is a balance transfer?).

Sometimes, you’re also able to deposit cash into your bank with the use of a balance transfer check.

If this is the case, you can pay down pretty much anything else as well, be it an auto loan or some other outstanding loan you’ve got.

Either way, balance transfers typically offer some kind of promotional APR for a fixed period of time.

For example, it’s common to see 0% APR for 12 months on balance transfers.

This means you pay zero interest for the first year – after that, the balance transfer APR shifts to the standard purchase APR, which will likely be in the high teens to low 20% range.

Personal Loans

A personal loan, on the other hand, provides you with a lump sum of money that can be deposited into your checking/savings account.

That money can then be used to pay off high-APR debt of any kind, such as credit card debt, an auto loan, a cash advance, etc.

Typically, the interest rate is fixed and the loan has a certain duration, such as five years.

For example, you may qualify for a $10,000 personal loan at an interest rate of 13% APR, with a term of five years.

You’d pay roughly $3,700 over that time to borrow the money, which obviously beats a 20%+ interest rate you may have on other credit card debt.

But is it the best move?

Perhaps you could balance transfer $10,000 worth of high-APR debt to a credit card offering 0% APR for 24 months.

And then make sizable monthly payments until it’s paid off in full by month 24. In this case, you’d only pay the balance transfer fee, which if the standard 3%, would be $300.

That sure beats paying $3,700 in interest, right?

Well, it’s not quite that simple. With the balance transfer, you’d be paying roughly double each month to pay down the balance to zero before the rate resets higher.

Additionally, you may not be able to qualify for a $10,000 balance transfer, so there’s a chance you wouldn’t be able to convert all the debt to a 0% balance transfer credit card.

Pros of Balance Transfers

- 0% APR
- Less interest paid
- Lower monthly payment

Cons of Balance Transfers

- Less time to pay of the balance
- Variable rates once promotional period ends
- Good credit score needed
- Balance transfer fees

Pros of Personal Loans

- Fixed interest rate
- Larger loan amounts possible
- More time to pay off the balance
- Options for those with poor credit

Cons of Personal Loans

- Higher APR
- More interest paid
- Down payment may be required
- Possible prepayment penalty

So there it is…for me, the balance transfer is always going to be the better choice, assuming it’s an option.

But it requires a good credit score, and may be limited as far as what debt can be paid off. You also run the risk of getting hit with a variable rate if you don’t pay it off during the promotional period.

However, the savings associated with a balance transfer can be monumental if you’re responsible and dedicated to tackling your debt.

Also see: Balance transfer vs. cash advance.

While this may sound like an obvious mistake, I wanted to clear something up for others new to the balance transfer game.

A reader noted that they received a “zero percent balance transfer fee credit card” from a credit card issuer.

They added that it offered 0% APR for 12 months. This is a bit ambiguous, but what I believe they did was confuse two aspects of a balance transfer.

You see, there is the balance transfer APR, and then there is the balance transfer fee, assuming one applies (it most likely does).

So when you see a 0% balance transfer credit card, you may assume it’s a no fee balance transfer without looking into the fine print.

But the reality of the situation is that this particular balance transfer offer probably came with 0% APR for a year, AND a 3% balance transfer fee.

Credit card issuers just don’t offer 0% APR balance transfers with no fee anymore. Aside from Navy Federal, which isn’t open to the unarmed public.

Sure, there are some indirect ways to getting your hands on a no fee balance transfer, like getting cash back to offset the associated fees.

But beyond that, no card issuer is offering a pure no fee balance transfer.

That’s why I think the reader confused 0% APR with no fee, because 0% sounds a lot like free.

Put simply, a truly “free balance transfer credit card” should offer 0% APR, no balance transfer fee, no annual fee, and no other charges.

Otherwise, you are paying some level of interest, regardless of how small it may be.

Related offer: The best balance transfer deal out there at the moment is the $150 balance transfer cash back bonus from Chase.

You get $100 cash back for transferring a minimum of $500, and another $50 cash back for the balance transfer itself.

So if you transfer say $1,000, you’d pay a 3% balance transfer fee of $30, but earn $150 in bonuses.

That’s $120 to the good simply for executing a balance transfer. Much better than any no fee balance transfer that may or may not exist.

You’ll also save by avoiding credit card finance charges, making it a huge win-win.

Read more: How does a balance transfer work?