Welcome to the fourth installment of The Best Credit Cards in America. To start the year off on a good note, this is a special “get out of credit card debt” edition.
I decided to focus on balance transfers because credit card debt is such a huge problem in the U.S., especially right after the holidays. A very recent Bills.com survey showed that the average credit card debt is $5,500. That’s a lot of money to have on a credit card while the interest clock is ticking away.
Look, I know what this feels like. I’ve actually been in your shoes. There’s a heavy feeling to debt. It colors everything you do and affects all of your decisions. When you get rid of it, it feels fabulous!
A good option for people looking to pay off credit card debt is to make a balance transfer to a card with a zero percent intro rate. But a balance transfer won’t work for everyone. If your debt is huge or you simply can’t make any payments, contact the National Federation for Credit Counseling and ask for some help. Really, you don’t have to go through this alone.
Before we get to the winners, let’s take a look at what you need to do to make your transfer a success:
- Know what your FICO score is. The best offers require excellent credit. (You can check your credit score for free or you can compare paid credit score monitoring products on Credit.com)
- Read the fine print. Yuck, I know. But you need to know what the balance transfer fee is and what the deadline is for making the transfer.
- Decide how long you need to pay it off. Factor in the transfer fee (unless it’s been waived). Example: A $5,000 transfer with a 3 percent transfer fee means you need to pay off $5,150 ($5,000 × .03). If you get a 21-month intro period on a $5,000 transfer, you’ll have to pay $238.10 per month (5,150 ÷ 21).
- Make a vow that you won’t use the card to buy new stuff. Your goal with your new card is to pay off the debt. Period.
Okay, let’s get to it. The category winner is the card that scores the highest number of points based on a unique, 41-factor formula that I designed. The formula gives each card a “benefits/rewards score” and then subtracts the “costs score.”
The Winner Citi Simplicity Card
This card is perfectly named. I spend hours (and hours!) every week reading the fine print on credit cards. After reading it for this card, I wanted to send a thank you note to Citi.
Why it won Best Credit Card in America:
The benefits: You get an 18-month zero percent intro APR on balance transfers. You must complete your balance transfer within four months of opening your account. It’s a good card for anyone who has struggled to pay bills on time. There are no late fees and no penalty rate so this card is a little forgiving if you make a mistake.
The costs: The balance transfer fee is 3 percent. You get an 18-month zero percent intro APR on purchases. After that, you get a 12.99, 17.99 or 21.99 percent variable APR. There’s no annual fee. Foreign transaction fees are 3 percent.
(This article was updated Feb. 14, 2012 to reflect a change in the Citi Simplicty Card’s balance transfer offer. The zero percent intro APR now lasts 18 months, not 21 months as it was when this article was originally published.)
This zero percent intro period is shorter, but if you can swing it, you’ll get out of debt faster. It’s also a good card to have going forward. It has rewards and the starting variable APR is a low 10.99 percent.
Why it won 1st runner-up:
The benefits: You get an 18-month zero percent intro APR on balance transfers. You have until July 10, 2012 to complete the transfer. After you pay off your balance, you’ll have a rewards card. You’ll get up to 5 percent cash back on rotating categories, plus up to 1 percent on other purchases. The grace period is 25 days, which is pretty good. This gives you a little extra time to get those payments in if you’re having cash flow issues. There are also no foreign transaction fees.
The costs: The balance transfer fee is 3 percent. You get a six-month zero percent intro APR on purchases. After that, you get a variable APR between 10.99 and 20.99 percent. There’s no annual fee.
Tie for 2nd runner-up: Discover More Card – $0 Balance Transfer Fee!
UPDATE 3/1/12: Sorry, this card is longer available for consumers.
It’s great to see a card waive the fee. You save money on the transfer fee and this is savings you can toss at your debt. Now, the “cost” of the waived fee is that you only have 12 months to pay off the balance.
Why it tied for 2nd runner-up:
The benefits: You have until July 10, 2012 to complete the transfer. If you can pay your balance off in 12 months, this is a great deal. This approach is like ripping off a Band-Aid in one stroke. It still hurts but you get the pain over with in a hurry.
When your balance is paid off, you’ll have a rewards card to use. Like the first runner-up, you’ll get up to 5 percent cash back on rotating categories, plus up to 1 percent on other purchases.
The costs: The balance transfer fee is waived. You get a 12-month zero percent intro APR on purchases. After that, you get a variable APR between 10.99 and 19.99 percent. There’s no annual fee and no foreign transaction fees.
Tie for 2nd runner-up: Discover Motiva Card
There’s an official category for credit cards called “cards with good intentions.” Okay, I totally made that up. But if there were such a thing, this card would qualify. This card rewards you for paying your bills on time.
Why it tied for 2nd runner-up:
The benefits: You get a 15-month zero percent intro APR on balance transfers. You do have to pay the 3 percent fee, but you get an extra three months to pay it off. You have until July 10, 2012 to complete the transfer. Once you’ve paid off the balance and begin using the card for purchases, you get up to 1 percent cash back.
You also get 5 percent cash back on the interest charges shown on your next billing statement if you pay your bill on time for six months in a row. I don’t encourage anyone to carry a balance, but if some financial disaster happens to you, it’s nice to know you can recoup a little of the interest paid.
The costs: The balance transfer fee is 3 percent. You get a 15-month zero percent intro APR on balance transfers and on purchases. After that, you get a variable APR between 10.99 and 20.99 percent. There’s no annual fee and no foreign transaction fees.
At publishing time, Citi Simplicity Card, Discover More Card – 18 Month Promotional Balance Transfer, Discover More Card – $0 Balance Transfer Fee!, and Discover Motiva Card are offered on Credit.com product pages and Credit.com may be compensated if our users apply for and ultimately sign up for any of these cards. However, this relationship does not result in any preferential editorial treatment.