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

While rising interest rates have been a boon for savers who are now earning upwards of 5 percent with high-yield savings accounts and certificates of deposit (CDs), rising rates on loan products have historically played a role in slowing the economy down. But while the Fed decided to maintain its target range for the fifth consecutive time on March 20, 2024, numerous rate increases from the Fed previously have left many of us to wonder where interest rates will go — and if a recession could be on the horizon.

Unfortunately, an economic slowdown could impact people who are already struggling with credit card debt at today’s exceptionally high rates. According to recent data, the average interest rate charged on credit card accounts is 20.74 percent.

Credit expert John Ulzheimer, formerly at FICO and Equifax, says he believes banks and credit card issuers are better at predicting recessions and tough economic times than economists. Further, it’s not uncommon for banks to “clean up” their portfolios prior to economic downturns by lowering the limits on underperforming cardholder accounts and closing inactive accounts.

Does applying for a balance transfer card now make sense?

With that in mind, it could make sense to go ahead and try to consolidate high-interest credit card debt now — before a recession slows the economy down and creditors have the chance to tighten their requirements. After all, there are a range of top balance transfer credit cards available today that offer lengthy 0 percent introductory annual percentage rate (APR) timelines and very few fees or no fees.

By applying now and consolidating high-interest credit card debt while you can, you have the potential to save money on interest, pay down debt more quickly or both. Just remember that you’ll need to have a plan to pay down debt with a balance transfer, or else you could end up with even more debt in the end.

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

What to look for in a balance transfer card

As you compare balance transfer credit cards, you’ll want to look for options that let you consolidate and pay down debt with the lowest costs possible. In the meantime, you can look out for features and benefits you might actually use.

Here’s everything you should try to find in your next balance transfer card:

• Lengthy intro offer. First off, Ulzheimer says you should always look for the longest introductory APR offer you can find. For example, you may be able to find balance transfer cards that offer a 0 percent intro APR on balance transfers for up to 21 months.

• No annual fee. The best balance transfer credit cards also come with no annual fee, so make sure the cards you’re considering don’t come with any fixed annual charges you can’t avoid.

• Low balance transfer fee. While most balance transfer credit cards charge a balance transfer fee on the amount of debt you transfer, this fee is usually 3 percent or 5 percent of each balance transferred. Obviously, you’ll want to look for balance transfer cards with the lowest balance transfer fees you can find to maximize your savings.

While all the attributes above are good to look for in a balance transfer card, you’ll also notice that some cards with 0 percent intro APR offers come with rewards. While earning cash back or rewards points can be attractive, keep in mind that you’ll have a much harder time getting out of debt if you’re still using credit cards for purchases.

If you really want to maximize a balance transfer credit card, skip over options that offer rewards, stop using credit cards for purchases for the time being and focus on working toward freedom from debt instead. If you’re entirely debt-free in the future, you can always reconsider getting a rewards credit card at that point.

Balance transfer cards to consider

As you look over the best balance transfer credit cards, consider these options with some of the longest intro APR offers on the market today:

Citi Simplicity Card

The no-annual-fee Citi Simplicity® Card comes with a 0 percent intro APR on balance transfers for 21 months from account opening and on purchases for 12 months from account opening, with both offers followed by a variable APR of 19.24 percent to 29.99 percent. Note that only balance transfers made in the first four months of account opening qualify for the introductory offer, and a 3 percent (minimum $5) intro balance transfer fee applies if you transfer debt to the card within four months of account opening.

Wells Fargo Reflect Card

The Wells Fargo Reflect® Card comes with a 0 percent intro APR on purchases and qualifying balance transfers for 21 months from account opening, followed by a variable APR of 18.24 percent, 24.74 percent or 29.99 percent. Only balance transfers made within 120 days of account opening qualify for the introductory offer, and this offer comes with a 5 percent (minimum $5) balance transfer fee. Further, there’s no annual fee.

BankAmericard credit card

The BankAmericard® credit card* is another great card for debt consolidation since it comes with a 0 percent intro APR for 18 billing cycles on both qualifying balance transfers (made in the first 60 days of account opening) and purchases. Then, a variable APR of 16.24 percent to 26.24 percent applies. There’s no annual fee, and a 3 percent balance transfer fee applies.

The bottom line

Whether a recession is coming or not, consolidating debt with a balance transfer card can make sense. With a top balance transfer card, you can get a 0 percent intro APR offer for 18 or even 21 months, letting you pay down debt faster since interest charges won’t accrue the entire time. A balance transfer fee is required in most cases and is added to your total balance, but the interest savings you get can be well worth it.

For more insight into how much you can save, consider trying out our balance transfer calculator, then make your decision from there.

Issuer-required disclosure statement
Information about the BankAmericard® credit card has been collected independently by Bankrate. Card details have not been reviewed or approved by the card issuer. Information about the BankAmericard® credit card was last updated on February 6, 2024.