Balance Transfer Cards: Pay Off Debt Faster
If you're carrying high-interest credit card debt, a balance transfer can be a powerful tool to accelerate your payoff and save on interest. The concept is straightforward: move your existing balance to a new card with a lower — often 0% — introductory interest rate. But the details matter, and using this strategy incorrectly can make things worse.
How Balance Transfers Work
When you open a balance transfer card, you request the new card issuer to pay off your existing card balance. That balance is then transferred to the new card, usually at a 0% introductory APR for a set promotional period — typically 12 to 21 months.
During the promotional period, your entire monthly payment goes toward principal rather than interest. This can dramatically speed up debt payoff.
Balance Transfer Fees
Most balance transfer cards charge a fee of 3–5% of the transferred amount. On a $5,000 balance, that's $150–$250. While this seems significant, compare it to the interest you'd pay at a typical credit card APR over the same period. In most cases, the transfer fee is far less than the interest savings.
A few cards offer no balance transfer fee, though they may have a shorter promotional period or less competitive terms otherwise.
How to Use a Balance Transfer Effectively
Step 1: Calculate Your Monthly Payment
Divide your total transferred balance (including the transfer fee) by the number of promotional months. This is the monthly payment needed to pay off the entire balance before the promotional rate expires. Make this your target.
Step 2: Stop Using Credit for New Purchases
Many balance transfer cards charge regular APR on new purchases. If possible, use cash or a debit card for everyday spending during the payoff period. Adding new charges while trying to pay off old debt is counterproductive.
Step 3: Set Up Autopay
Missing a payment during the promotional period can void your 0% rate entirely on some cards. Set up at least the minimum payment on autopay, then make additional manual payments to hit your payoff target.
Step 4: Have a Plan for After the Promotional Period
Once the 0% period ends, any remaining balance will accrue interest at the card's regular APR, which is often high. Your goal should be to pay off the entire balance before this happens.
When a Balance Transfer Makes Sense
- You have a manageable amount of debt that you can realistically pay off within the promotional period.
- Your credit score qualifies you for a card with good promotional terms (typically 670 or higher).
- You're committed to not adding new debt during the payoff period.
When It Doesn't Make Sense
- Your debt is so large that you can't pay it off within the promotional period.
- You're likely to continue spending on credit cards while paying off the transfer.
- Your credit score doesn't qualify you for favorable terms.
Balance Transfer vs. Debt Consolidation Loan
A personal debt consolidation loan is another option. Loans offer fixed monthly payments and a set payoff date, which some people find easier to manage. However, loan interest rates are typically higher than a 0% promotional balance transfer rate. For student loan debt specifically, see our guide on paying off student loans faster.
Avoid the Trap
The biggest risk of a balance transfer is treating it as a license to keep spending. If you transfer a balance but then run up new charges on your old card, you'll end up with more debt than you started with. Pair your balance transfer with a solid budget and a commitment to changing the spending habits that created the debt in the first place.
A balance transfer is a tactic, not a solution. The solution is a plan — and the discipline to follow it. Learn more about building sustainable money habits with our credit card rewards guide for when you're ready to use credit cards strategically rather than reactively.
