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Getting Out of Debt With a Balance Transfer

Getting Out of Debt With a Balance Transfer

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This article was last updated Apr 16, 2018. Terms and conditions may have changed. For the most accurate information, please consult the issuer website.

Balance transfers can be a great way to recover from debt when used responsibly. By transferring debt from a card with a high APR to a new card with a low or 0% introductory APR period, you can avoid a lot of unnecessary interest charges as you work to pay down your debt.

If you make consistent on-time payments throughout the intro period and pay your balance in full prior to the intro period ending, you can be on your way to living credit debt-free! Once your debt is at $0, continue to practice good credit behavior and monitor your spending so you don’t fall back into debt.

In this guide, we’ll discuss how a balance transfer can help you get out of debt, and best practices to live a debt-free life long term.

Consider your current financial situation

Before you transfer a balance, consider your current financial situation and decide which type of card you need to open in order to pay off all your debt within the intro period. A great starting point is to add up all the debt you plan to consolidate to a new card. That means if you have two credit cards with a $1,000 balance and a $500 balance, you will be transferring $1,500.

Then, see how much time you need to pay off your debt. Look at how much money you can afford to put toward your debt each month — whether that’s $100 or $200, decide what’s reasonably possible.

Once you have the total amount of money you want to transfer and your estimated monthly payments, check out MagnifyMoney’s personalized balance transfer tool to see how long it will take you to pay off your balance, as well as card recommendations and estimated savings. (Disclosure: MagnifyMoney is owned by LendingTree, which also owns CompareCards.)

For example, if you have excellent credit, $1,500 in debt on a 25% APR card and can pay $100 a month, you’ll need 15 months to pay off your debt with a 0% intro APR card.

You’ll want to look for a balance transfer offer that comes with an intro APR period of at least nine months to give yourself enough time to pay the card off in full. Fortunately, many intro APR periods are 12 months or longer.

If you do the math and it looks like you’ll need years to pay down your debt, you may want to seek an alternative debt consolidation option, such as a personal loan.

Compare balance transfer offers

There are hundreds of balance transfer cards available, allowing you to shop around for the best offer. There are cards with long 0% intro APR periods upward of 21 months and cards that offer $0 intro balance transfer fees. Some cards even come with rewards programs and 0% intro APR periods for new purchases. With such a large selection of cards to choose from, it can become overwhelming, but we’ve compiled a list of things to consider when comparing cards.

  • Length of the 0% intro APR period: Consider how much time you need to pay off your balance, as there are cards that offer 12-month intro periods, which are ideal for small balances, and cards that offer 15-month or longer intro periods that benefit larger balances.
  • Balance transfer fee: Some cards have intro $0 balance transfer fees which allow you to transfer your balance within a certain time frame and avoid the typical 3% balance transfer fee most cards charge. Often, cards with intro $0 balance transfer fees have shorter intro periods but this may be enough time to pay off debt.
  • Deferred interest: Read the fine print. Your card terms may say something along these lines: “No interest if balance paid prior to the end of intro period, otherwise you’re responsible for all interest accumulated.” That means the card charges deferred interest. You will be responsible for all the interest accrued during the intro period if you still carry a balance when the intro period ends. As a preventive measure, look for cards that don’t charge deferred interest and make it a goal to pay off your balance before the intro period ends.
  • Credit score: The majority of balance transfer cards require good or excellent credit, so if you have bad or fair credit you most likely won’t qualify and may be better off with a personal loan.
  • Rewards: Do you plan on using the card for more than a balance transfer? If yes, you can benefit from select balance transfer cards that offer rewards for new purchases. Keep in mind you want to avoid overspending just to earn rewards — at the end of the day, the goal is to get out of debt, not earn rewards. However, balance transfer cards with rewards can be more beneficial in the long run.

Follow through with the balance transfer

Now that you’ve decided to do a balance transfer, you need to follow a few simple steps to ensure you get the most out of the 0% intro period:

  • Transfer your debt within the issuer’s timeline. Most issuers require balance transfers to be completed within the first 60 days of account opening. Transfers made after may not qualify for the 0% intro APR period. Refer to your cardmember agreement for the time frame you have to complete transfers.
  • Make on-time payments. Many issuers require you to make on-time payments in order to keep your balance transfer offer. Paying late may result in the issuer revoking the intro offer.
  • Limit spending, if possible. It’s important to limit new purchases when you can so you avoid racking up more debt. Also, new purchases may not have a 0% intro APR period, so any lingering balances will incur the applicable regular purchase APR.

Best practices for maintaining a debt-free life

Everyone would like to be debt-free, and you can too by following several credit practices:

  • Don’t spend more than you can afford to pay by your statement due date, or go one step further and don’t spend more than you can afford to pay off at the time of purchase. By following either rule, you can prevent overspending and make sure you have the needed money to pay your bills.
  • Pay your bill on time to avoid late payment fees and potential penalty APRs.
  • Pay your bill in full so you don’t fall into debt and incur interest charges.

Suggested balance transfer cards

The Amex EveryDay® Credit Card from American Express: If you’re looking for more than a balance transfer card, The Amex EveryDay® Credit Card from American Express offers a rewards program where you earn 2x points at US supermarkets, on up to $6,000 per year in purchases (then 1x), 1x points on other purchases. That’s in addition to the intro 0% for 15 Months on balance transfers and intro 0% for 15 Months on purchases (after, 14.49% - 25.49% (Variable) APR) There is a money-saving feature with the $0 balance transfer fee. Just note, transfers must be made within 60 days of account opening.

Chase Slate®: The Chase Slate® is a basic credit card that is primarily designed for balance transfers with its intro balance transfer fee of $0 for the first 60 days that your Account is open, after that, either $5 or 5% of the amount of each transfer, whichever is greater. You can utilize the 0% Intro APR on Balance Transfers for 15 months and 0% Intro APR on Purchases for 15 months to save money on interest payments. Keep in mind, 16.49% - 25.24% Variable APR applies after the intro periods. This card is a good choice for people who need an average length of time to pay off debt and don’t want to be tempted to overspend with a rewards card.

  • 0% Intro APR on Purchases and Balance Transfers for 15 months*

  • $0 for the first 60 days that your Account is open, after that, either $5 or 5% of the amount of each transfer, whichever is greater.

  • 16.49% - 25.24% Variable

  • 0% Intro APR for 15 months on purchases and balance transfers. After that, 16.49% - 25.24% variable APR.
  • $0 Intro balance transfer fee for the first 60 days your account is open. After that, the fee for future transactions is 5% of the amount transferred with a minimum of $5.
  • Free credit score, updated weekly with Credit Journey ℠
  • No Penalty APR – Paying late won’t raise your interest rate (APR). All other account pricing and terms apply
  • No annual fee

See additional details for Chase Slate®

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Citi® Diamond Preferred® Card: With the longest intro period of any card in our database, the Citi® Diamond Preferred® Card is one of the best options if you need a long time period to pay off debt. You can benefit from an intro 0% for 21 months on Balance Transfers as well as an intro 0% for 12 months on Purchases. There is a 15.24% - 25.24% (Variable) APR in effect after the intro periods. While that’s a long time to pay off balances, there is a balance transfer fee to consider — Balance transfer fee applies with this offer 5% of each balance transfer; $5 minimum.

  • 0% for 12 months on Purchases

  • 0% for 21 months on Balance Transfers

  • 15.24% - 25.24% (Variable)

  • 0% Intro APR on balance transfers for 21 months from date of first transfer. After that, the variable APR will be 15.24% - 25.24%, based on your creditworthiness. All transfers must be completed in first 4 months.
  • 0% Intro APR on purchases for 12 months from date of account opening. After that, the variable APR will be 15.24% - 25.24%, based on your creditworthiness.
  • If you transfer a balance with this offer, after your 0% Intro purchase APR expires, both new purchases and unpaid purchase balances will automatically accrue interest until all balances, including your transferred balance, are paid in full.
  • There is a balance transfer fee of either $5 or 5% of the amount of each transfer, whichever is greater
  • Get free access to your FICO® score online.
  • With Citi Entertainment℠, get special access to purchase tickets to thousands of events, including concerts, sporting events, dining experiences and more.
  • Shop with confidence knowing that you have dependable protection benefits, including $0 Liability on Unauthorized Purchases and Citi® Identity Theft Solutions.
  • The standard variable APR for Citi Flex Plan is 15.24% - 25.24%, based on your creditworthiness. Citi Flex Plan offers are made available at Citi's discretion.

See additional details for Citi® Diamond Preferred® Card

More Info

Check out our roundup of the best balance transfer credit cards.

The information related to The Amex EveryDay® Credit Card from American Express has been independently collected by CompareCards and has not been reviewed or provided by the issuer of this card prior to publication. Terms apply to American Express credit card offers. See americanexpress.com for more information.

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