2-Minute Guide: How to Use Balance Transfers to Pay Off Credit Card Debt

Balance transfer credit cards can help you get out of debt, once you know a few things. Take a couple of minutes to learn the basics about what they are and how to use them.

What is a balance transfer credit card?

A balance transfer card has a low interest rate or none at all for an introductory period — typically six to 21 months. You move your debt from high-interest cards to the balance transfer card and get a low- or no-interest period in which to clear your debt.

Who qualifies for a balance transfer card?

To get the best terms, you’ll need excellent credit. There are balance transfer cards for people with fair credit, but they may have shorter introductory periods and higher interest rates.

How do balance transfers work?

Once you’re approved for a balance transfer card, you’ll use it to pay off the balances from your old cards, usually over the phone or via the web. Then you can pay down the debt on the balance transfer card during the promotional period without any interest added to your payments. Every penny you pay toward your debt comes directly off your credit card balance. (See also: Step-by-Step Guide to Balance Transfers)

What are the costs?

Most of these cards charge a balance transfer fee of 3%–5% of your balance upfront (though a handful do not). You’ll need to do the math to make sure you still come out ahead by transferring the balance.

What are the dangers?

  • If you fail to pay off your balance before the introductory period ends, whatever debt is left will be subject to interest rates, which can be higher than the rate you were paying previously.

  • If you pay late or fail to make your minimum payment, you could lose your introductory offer and be hit with a higher interest rate right away.

  • Once you transfer a balance, it may be tempting to start running a balance on the old card again. That could put you in a worse situation than when you started. (See also: 6 Hidden Dangers of Balance Transfers)

5 tips for balance transfer success

  • Look for a card that doesn’t charge a balance transfer fee.

  • Create a plan to pay off your debt during your card’s introductory offer.

  • Don’t use your balance transfer card for purchases. It will keep you in debt longer, and you’ll forgo your grace period on new purchases as long as you carry a balance.

  • Don’t quit making payments on your old cards until you know your balances have been transferred. Missing a payment or paying late can damage your credit score.

  • Keep old cards open. Closing credit cards can also lower your credit score. (See also: Comprehensive Checklist for Successful Balance Transfers)