Recession prep: Should you apply for a balance transfer card now?

While rising interest rates have benefited savers, who can now earn up to 5% on high-yield savings accounts and certificates of deposit (CDs), rising rates on loan products have historically slowed the economy. However, with the Fed’s recent rate hikes, most of us are beginning to wonder where interest rates will go from here — and whether a recession is on the horizon in the coming months.

Unfortunately, an economic slowdown may have an impact on people who are already struggling with credit card debt at historically high rates. According to recent data, the average interest rate charged on credit card accounts as of September 20, 2023 was 20.71%.

Credit expert John Ulzheimer, formerly of FICO and Equifax, believes banks and credit card issuers are better than economists at predicting recessions and difficult economic times. Furthermore, prior to economic downturns, banks frequently “clean up” their portfolios by lowering the limits on underperforming cardholder accounts and closing inactive accounts.

Is it a good time to apply for a balance transfer credit card?

With that in mind, it may make sense to try to consolidate high-interest credit card debt now, before a recession slows the economy and creditors tighten their requirements. After all, there are a variety of top balance transfer credit cards available today, each with a lengthy 0% intro APR period and few or no fees.

By applying now and consolidating high-interest credit card debt while you can, you could save money on interest, pay off debt faster, or both. Just keep in mind that you’ll need a plan to pay down debt with a balance transfer, or you may end up with even more debt.

Ulzheimer, for example, believes that if you use a balance transfer credit card for its intended purpose, which is to buy yourself some time at a 0% intro APR so you can pay off the card in full, you will get the most out of it.

What to look for in a balance transfer card

When comparing balance transfer credit cards, look for options that allow you to consolidate and pay off debt at the lowest possible cost. Meanwhile, keep an eye out for features and benefits that you might actually use.

Here’s what you should look for in your next balance transfer card:

—Long introductory offer. To begin, Ulzheimer advises looking for the longest introductory APR offer you can find. Balance transfer cards, for example, may offer a 0% intro APR on balance transfers for up to 21 months.

—There is no annual fee. The best balance transfer credit cards also have no annual fee, so make sure the cards you’re considering don’t have any hidden annual fees.

—Minimum balance transfer fee. While most balance transfer credit cards charge a balance transfer fee based on the amount of debt transferred, this fee is typically 3% or 5% of the transferred balance. To maximize your savings, you’ll want to look for balance transfer cards with the lowest balance transfer fees you can find.

While all of the characteristics listed above are desirable in a balance transfer card, you’ll also notice that some cards with 0% intro APR offers come with rewards. While earning cash back or rewards points may be appealing, keep in mind that if you continue to use credit cards for purchases, you will have a much more difficult time getting out of debt.

If you truly want to maximize a balance transfer credit card, avoid options that offer rewards, avoid using credit cards for purchases for the time being, and instead focus on working toward debt freedom. If you are completely debt-free in the future, you can always reconsider getting a rewards credit card.

Balance transfer credit cards to think about

Consider the following options for the best balance transfer credit cards, which have some of the market’s longest intro APR offers:

Citi Simplicity Card

The absence of an annual feeThe Citi Simplicity® Card offers a 0% intro APR on balance transfers for 21 months and a 12 month intro APR on purchases, with both offers followed by a variable APR ranging from 19.24% to 29.99%. Only balance transfers made within the first four months of account opening qualify for the introductory offer, and there is a 3% (minimum $5) intro balance transfer fee if you transfer debt to the card within the first four months of account opening.

Wells Fargo Retrospective Card

The Wells Fargo Reflect® Card has a 0% intro APR on purchases and qualifying balance transfers for the first 21 months after account opening, followed by a variable APR of 18.24%, 24.74%, or 29.99%. The introductory offer is only valid for balance transfers made within 120 days of account opening, and it comes with a 5% (minimum $5) balance transfer fee. There is also no annual fee.

BankAmericard credit card

The BankAmericard® credit card is another excellent debt consolidation option because it offers a 0% intro APR on qualifying balance transfers (made within the first 60 days of account opening) and purchases for 18 billing cycles. The variable APR ranges from 16.24% to 26.24%. There is no annual fee, but there is a 3% balance transfer fee.

The BankAmericard® credit card information was last updated on September 20, 2023.

The bottom line

Whether or not a recession is imminent, debt consolidation with a balance transfer card can make sense. You can get a 0% intro APR offer for 18 or even 21 months with a top balance transfer card, allowing you to pay down debt faster because interest charges will not accrue the entire time. In most cases, a balance transfer fee is required and is added to your total balance, but the interest savings can be well worth it.

Consider using our balance transfer calculator to get a better idea of how much you can save, and then make your decision from there.

  • independently gathered information about the Citi Simplicity® Card and BankAmericard® credit card. The card issuer has not reviewed or approved the card details.

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