Before Getting a Balance Transfer Credit Card To Pay Down Debt Faster

A balance transfer credit card is an often-recommended debt repayment strategy. Before deciding whether this is your best option, here are some things to know and consider.

by Andrea Norris-McKnight

Before Getting a Balance Transfer Credit Card photo

Are you considering getting a balance transfer credit card? It can be a savvy financial move if you’re juggling high-interest credit card debt. But for some people, it can make a debt problem worse. Before applying for a balance transfer credit card, consider the following:

The Basics

A balance transfer credit card lets you transfer debt from one or more credit cards to a new card, usually with a lower interest rate. The goal? To save on interest and pay off that debt faster.

The Introductory APR

Many balance transfer cards offer an introductory APR (Annual Percentage Rate) of 0% or a very low rate for a set period, often 12-18 months. But once the introductory period ends, the APR will jump to the card’s regular rate, so you must pay off the balance before then, or at least as much as you can.

The Balance Transfer Fee

Balance transfer cards typically charge a fee per transfer, usually 3% to 5% of the amount transferred that is deducted from your available credit at the time of the transfer. Before applying for a card, do the math to see if the transfer (and the new card) make sense. The balance transfer fee should not be more than the interest you’d pay if the balance remained on your existing card.

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Credit Considerations

Applying for a new credit card means a hard inquiry on your credit report, which can dip your credit score a bit. Plus, the new card’s credit limit will affect your credit utilization ratio. Keeping this ratio low is key to a healthy credit score.

Eligibility and Limitations

You can’t transfer all debts, and not everyone will qualify for the best offers. Your credit score plays a big role in what deals you’re eligible for. Also, transferring balances between cards from the same issuer is usually a no-go.

Late Payments

If you make a late payment, you could lose your balance transfer rate and be assessed the ongoing APR on the transferred balance. Make sure you pay your credit card bill on time every month.

The Fine Print

Reading terms and conditions is tedious, but it’s crucial to understand the balance transfer card’s terms, fees and penalties. For example, unless the introductory offer specifically includes new purchases, any purchase made with the new card will be at the ongoing interest rate, so you should know how your monthly payments will be applied if your card balance includes transfers and purchases.

Transfer Time

It can take a few days up to several weeks for a balance transfer to process, depending on the card issuer. Continue to make all required payments until you confirm your balance transfers are complete. Also, transferring a balance does not automatically close your old account. Contact the issuer directly if you choose to close your old card.

The Temptation To Spend

Getting a new card with a zero or low balance can be tempting. You might feel like you’ve got extra spending power. But remember, the goal is to reduce debt, not add to it. Be mindful of new purchases and try to keep the card for balance transfer purposes only.

Have a Payoff Plan

Creating a payoff plan is perhaps the most important consideration when getting a balance transfer card. Have a clear plan for paying off the transferred balance within the introductory period. Set up a budget, make regular payments and stick to your plan. It’s the key to making the most of a balance transfer card.

A Balance Transfer Card Is Not the Right Debt Payoff Solution for Everyone

A balance transfer credit card can help you get out of debt faster if you stick to a plan for paying off as much of the balance as you can before the balance transfer rate ends. However, it can also land you deeper in debt if you continue to add to your debt balance with additional spending or don’t prioritize debt repayment. Before getting a balance transfer card, make sure you’re committed to getting out of debt.

Reviewed April 2024

About the Author

Andrea Norris-McKnight took over as the editor of The Dollar Stretcher and After 50 Finances after working under the site founder and previous editor for almost 15 years. She has also written for Money.com, GOBankingRates.com, HavenLife.com and The Sacramento Bee.