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If you’re struggling with credit debt and looking to escape high interest charges, you may have heard about balance transfer cards. But what exactly is a balance transfer, how does it work and can you qualify for one if you have bad or fair credit?
A balance transfer is when you take existing debt from one or more high-interest credit cards and transfer it to another, low- or no-interest credit card. Balance transfer cards typically charge a fee of 3 to 5 percent of the amount transferred, but you can find some card offers with no balance transfer fee. The best balance transfer deals are accompanied by a 0% intro period during which you will not pay interest for a certain amount of time.
But here’s the catch: Balance transfer offers are available for people with good or excellent credit. If your credit score is fair (we consider scores below 670 fair), you will have a slim chance of being approved for a balance transfer card — although you do have some options that we explain below.
Why balance transfers make sense
No one likes to carry a balance or be charged high interest rates, but there are times when you may need to carry a balance on one credit card or possibly more.
But because credit cards carry such high interest rates, you may find yourself fighting a balance you just can’t seem to pay down. You’re making your payments on time, but you’re not actually making a dent in your debt because the interest charges are piling up at the same time.
Balance transfers give you the chance to possibly save thousands of dollars on interest payments. The key is to nab a balance transfer card that comes with a generous 0% intro APR offer. By completing a transfer and removing the cloud of interest charges from overhead, you’re able to apply 100% of your payment to your balance instead of your balance plus interest charges.
See how quickly you could pay off your credit card balance with our Balance Transfer Calculator.
Can I get a balance transfer offer with fair credit?
If you have a credit score between 580 and 669, you’re classified as having fair credit. With fair credit, there are really no great balance transfer offers for which you’d qualify. Most balance transfer cards are reserved for people with good or excellent credit (670-850 range). As a result, you will have a hard time qualifying for a balance transfer credit card.
You can get a good idea of your credit health by checking your score with free tools like the Discover Credit Scorecard.
If your credit score puts you somewhere on the border of fair (580-669) and good (670-739) credit, it may be worth it to see if you prequalify for a balance transfer anyway. These scores are subjective, after all, and you won’t know for sure if you qualify for a balance transfer until you really try.
To see if you prequalify for balance transfer cards, check out the tools offered by some of the major card issuers:
A prequalification check means they’ll perform a soft pull on your credit, which won’t ding your score. It’s a good idea to check if you prequalify rather than applying for a credit card you may not qualify for, since an application will generate a hard pull on your credit and lower your credit score.
If you’ve been prequalified for a good balance transfer card, the odds are you’ll be approved. Be careful not to apply for more than one card, though, as a true application will count as a hard inquiry on your credit report and can knock off points from your credit score for a year.
Can I get a balance transfer offer with bad credit?
A credit score below 580 is considered bad. With this level of credit, it isn’t possible to get a balance transfer card. If you have bad credit, the best thing you can do is work to improve your score. Practice good credit behavior by paying down your balances and making payments on time and be patient as your score rises. An alternative is to get a personal loan* and use that as a means of debt consolidation. This may be a good option if your balance is on a credit card with a high APR and the interest rate on the loan is much lower.
Alternatives to a balance transfer
If your credit is far from sterling, odds are you won’t qualify for a balance transfer credit card. But you still have options. Below we explain the benefits of improving your credit score, checking your credit report, and how a personal loan can help alleviate your debt.
Improve your credit and apply later
An important first step is simply to improve your credit until your score is high enough to qualify for a balance transfer card. Make it a goal to pay at least your minimum due (hopefully more) every month to avoid late payment fees. Also set up auto-pay if available (otherwise set a calendar alert). These steps and more will help you raise your credit score.
A great way to build credit is to take out a secured card. Yes, it may sound counterintuitive to get more credit, but if managed properly, it’s another tool to raise your score. Coupled with proper credit behavior, you can build your credit score and raise it from bad or fair to good.
Secured card issuers are more likely to accept those with less than perfect credit, and using a secured card effectively can establish good credit history. Soon, you’ll be on your way to good credit and can qualify for a balance transfer card. Just don’t max out the card, which is a risk since the credit limit of a secured card is often equal to the amount of money you have to surrender to the bank, which will serve as your line of credit. Once the card is closed out, you’ll get your security deposit back.
You should also keep track of your credit report. You are entitled to a free credit report every year from each of the three credit bureaus (Equifax, Experian and TransUnion). Annualcreditreport.com is the most reliable source to obtain your credit reports. By checking your credit report, you can see if there are any errors that may be contributing to your low credit score. Dispute any errors on your credit report with the credit bureau.
Take out a personal loan
You can take out a personal loan if necessary to avoid high APRs on your credit card. Unlike credit cards with variable rates and numerous fees, personal loans are fairly simple — a bank lends you money, most often at a fixed interest rate, with a fixed payment over a fixed period of time.
Before you decide to take out a personal loan, be aware of the risks. The major downside is the high interest rates you will likely face if you get a personal loan with poor credit. Again, see if you prequalify for a personal loan before you apply and see what rates you are offered. LendingTree has a personal loan tool*, which allows you to fill out one short online form where you can potentially receive up to five offers from lenders all at once, based on your creditworthiness. Because LendingTree’s personal loan tool only performs a soft pull, you won’t hurt your credit score in the process. Simply select “Credit Card Consolidation” and fill out the form to get your personalized rates.
Whether you decide to move forward with a personal loan will depend on how the math shakes out — once you account for all the personal loan fees and interest charges, are you saving money by swapping credit card debt for a personal loan?
Once your credit is considered good — a score between 670 and 739, check out our picks for the best balance transfer offers.
*Disclosure: LendingTree is the parent company CompareCards.com