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The Discover it Balance Transfer card has no interest for 18 months—here's how it can help you become debt-free
The Discover it Balance Transfer card can help you become debt-free while also earning cash-back rewards. CNBC Select reviews all the benefits of the card so you can decide if it's right for you.

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If you are struggling with credit card debt, you aren't alone. On average, Americans with revolving credit card debt owe $6,194.

One way to get that debt under control is to move it to a balance transfer credit card with no interest accruing for a set period of time — anywhere from six to 21 months.

During the introductory 0% APR period offered by the Discover it® Balance Transfer card, you can pay off debt without accruing costly interest charges for up to 18 months (after 13.49% to 24.49% variable APR).

But the Discover it® Balance Transfer card offers cardholders more than just the chance to become debt-free — you can also earn rewards, finance new purchases and use the card overseas without incurring fees. Plus, there's no annual fee, which earns it a top spot on CNBC Select's list of the best balance transfer credit cards of 2020.

To determine the rankings, CNBC Select analyzed 101 popular balance transfer cards using an average American's annual spending budget and credit card debt and digging into each card's perks and drawbacks to find the best of the best based on your consumer habits. (See our methodology for more information on how we choose the best cards.)

Before signing up for a balance transfer card, consider how you plan on tackling your debt repayment plan. When we crunched the numbers to see which cards could help you pay down debt at the lowest cost, we assumed you'd transfer an average debt of $6,194 and pay $200 per month, which means you could pay off the debt in roughly 34 months. We factored in each card's transfer fee, the length of the 0% interest period and any interest you'd pay once the intro period ends. But the more you pay each month, the faster you'll pay off the balance you've transferred, and ideally, you could pay off the debt in full before the higher interest rates kick in.

Below, we break down Discover it® Balance Transfer's rewards, benefits and fees to help you decide if it's the right card for you.

Discover it Balance Transfer review

  • Rewards
  • Intro 0% APR
  • Fees
  • Bottom line

Discover it® Balance Transfer

  • Rewards

    5% cash back at different places each quarter after you activate bonus categories (on up to $1,500 in purchases, then 1%). Plus, unlimited 1% cash back on all other purchases.

  • Welcome bonus

    At the end of your first year, Discover automatically matches all the cash back you earned

  • Annual fee

    $0

  • Intro APR

    0% APR for the first 6 months on purchases; 0% APR for the first 18 months on balance transfers

  • Regular APR

    13.49% to 24.49% variable

  • Balance transfer fee

    3% intro balance transfer fee, up to 5% fee on future balance transfers (see terms)*

  • Foreign transaction fee

    None

  • Credit needed

    Excellent/Good

  • *See rates and fees and our methodology, terms apply.

Pros

  • 18 months of no interest on balance transfers
  • Cash-back program
  • No annual fee
  • No fee charged on purchases made outside the U.S.

Cons

  • Bonus categories must be activated each quarter
  • Cash-back program limits 5% cash-back earnings to $1,500 a quarter
  • Fee charged on balance transfers
  • Transfer timeline: Balances must be transferred by a specific date, refer to your cardmember agreement for the exact date
  • Estimated total fees and interest on debt repayment: $478
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On Discover's secure website.

Discover it Balance Transfer rewards

Like the Discover it® Cash Back, the Discover it® Balance Transfer offers 5% cash back in rotating categories on up to $1,500 in combined purchases after you activate the bonus every quarter. After you reach the limit, it's 1% on all purchases. If you maximize your spending in these categories, you could earn $75 cash back each quarter on top of the 1% cash back you earn in all the other categories.

Now until March 2020, you can earn 5% cash back at grocery stores (excluding Target and Walmart), Walgreens and CVS. Remaining bonus categories for this year include gas stations, grocery stores and Amazon. These eligible merchants rotate quarterly, and cardholders must enroll each quarter to receive the bonus rewards. Activation for the next quarter's bonus categories starts Feb. 1, 2020.

This card also has a unique welcome bonus where Discover automatically matches all the cash back you earned at the end of your first year. There is no limit to how much Discover will match.

CNBC Select calculated how many rewards the average American can earn if they optimize the way they use their Discover it® Balance Transfer. We worked with the location intelligence firm Esri, who provided us with a sample annual spending budget of $22,126.

The budget includes six main categories: groceries ($5,174), gas ($2,218), dining out ($3,675), travel ($2,244), utilities ($4,862) and general purchases ($3,953).

Here's a breakdown of how much cash back you can roughly earn in each category, annually:

  • Groceries: $103
  • Gas: $44
  • Dining out: $73
  • Travel: $22
  • Utilities: $49
  • General purchases: $62
  • Total: $353

Cardholders can earn an estimated $707 in cash back the first year (including the cash back from the welcome bonus) and a total of $2,120 over five years. The estimated fees and interest on debt repayment totals $478.

The cash back doesn't expire and you can redeem your rewards at any time for statement credits, gift cards, merchandise and more.

Intro 0% APR

The Discover it® Balance Transfer has one of the longest interest-free intro periods: 0% APR for 18 months on balance transfers (then 13.49% to 24.49% variable APR). There is a 3% intro balance transfer fee, then up to 5% on future balance transfers (see terms), but this is typical and is arguably negligible when you consider the amount of interest you save by completing a transfer.

Many cards require balance transfers to be completed within 60 days from account opening, but this card sets a specific date so refer to your cardholder agreement for the exact transfer time frame. The intro period starts as soon as you open the card, not from the date you transfer the balance, so it's in your best interest to make the balance transfer as soon as possible.

Cardholders can also benefit from no interest on new purchases for six months (then 13.49% to 24.49% variable APR).

Fees

The Discover it® Balance Transfer card has no annual fee and there are no foreign transaction fees, though Discover is not as widely accepted overseas as Visa or Mastercard. Discover also provides a late fee waiver on your first late payment — which is helpful if you forget to pay on time. The waiver acts as a good reminder to set up autopay so you never miss a payment going forward. We always recommend paying your balance on time and in full.

Bottom line

With the Discover it® Balance Transfer, you can transfer debt from high interest credit card(s) with no interest for 18 months (after 13.49% to 24.49% variable APR). This can help you save money in the long run, if you commit to paying off your balance during the introductory 0% APR period.

After you complete a balance transfer, it's essential to follow some guidelines so you can ensure you pay off debt within this introductory period. Transferring a balance is only the first step toward becoming debt-free. You'll need to make consistent, sizeable payments and avoid overspending to rid yourself of debt once and for all.

If you want a longer stretch of time to pay off your debt, consider the Citi Simplicity® Card with a 0% APR for the first 21 months on balance transfers (then 16.24% to 26.24% variable APR). If you want to minimize fees, consider a no-fee balance transfer credit card, like the Amex EveryDay® Credit Card with a 0% APR for the first 15 months on balance transfers (then 14.49% to 25.49% variable APR). (See rates and fees.)

Make sure you read the fine print before requesting a transfer. Balance transfer cards often have set maximum limits on the amount of debt you can transfer, and you can't complete a transfer between cards issued from the same bank. Also be aware that good credit (scores 670 to 739) or excellent credit (scores 740 and greater) is often required for a balance transfer credit card.

Our methodology

To determine which credit cards offer the best balance transfer deals, CNBC Select analyzed 101 of the most popular credit cards that offer no interest on balance transfers issued by the biggest banks, financial companies and credit unions that allow anyone to join.

We compared each card on a range of features, including: annual fee, balance transfer fee, rewards program, introductory and standard APR, welcome bonuses and foreign transaction fees, as well as factors such as required credit and customer reviews when available.

For balance transfer cards, we used a Bankrate calculator to tally the interest rates and fees you could incur if you transferred $6,194, the average balance Americans carry on their credit cards in 2019, according to Experian.

If the average consumer with a $6,194 balance on their credit card pays $200 each month, they will spend $2,012 in additional interest, assuming the average 16.97% APR, according to the Fed. And it will take them 42 months — more than three years — to pay off that debt.

With four of the five cards featured on this list, if you take full advantage of the intro APR period and pay $200 per month, you'll pay less than $500 in interest. That's a significant savings.

For the cards that offered a rewards program, we also estimated how much cash back you might earn over a five-year period. CNBC Select teamed up with location intelligence firm Esri. The company's data development team provided the most up-to-date and comprehensive consumer spending data based on the 2019 Consumer Expenditure Surveys from the Bureau of Labor Statistics. You can read more about their methodology here.

Esri's data team created a sample annual budget of approximately $22,126 in retail spending. The budget includes six main categories: groceries ($5,174), gas ($2,218), dining out ($3,675), travel ($2,244), utilities ($4,862) and general purchases ($3,953). General purchases include items such as housekeeping supplies, clothing, personal care products, prescription drugs and vitamins, and other vehicle expenses.

CNBC Select used this budget to estimate how much the average consumer would save over the course of a year, two years and five years, assuming they would attempt to maximize their rewards potential by earning all welcome bonuses offered and using the card for all applicable purchases. All rewards total estimations are net the annual fee.

It's important to note the value of a point or mile varies from card to card and based on how you redeem them. When we calculated the estimated returns, we assumed that cardholders are redeeming points/miles for a typical maximum value of 1 cent per point or mile. (Extreme optimizers might be able to achieve more value.)

When choosing the best balance transfer card, we focused on the card that provides consumers with the cheapest way to pay off their debt rather than the number of rewards they could potentially earn. When you're in credit card debt, your primary focus should be repayment. Earning rewards should be seen as a bonus, and you don't want to spend beyond your means in order to earn points.

The five-year rewards total and the interest rate and fees estimates are derived from a budget similar to the average American's spending and debt. You may earn a higher or lower return depending on your spending habits.

For rates and fees of the Amex EveryDay® Credit Card, click here.

Information about the Amex EveryDay® Credit Card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.