When your debt keeps growing but your income stays the same, it can be difficult to imagine how things might change. It’s hard enough to keep up with minimum payments on your credit cards when the average credit card interest rate is 16.93%, after all. How will you ever pay down debt when so much of your payment goes toward interest every month?
Balance transfer cards are commonly suggested as a solution to this problem. These cards tend to offer 0% APR for anywhere from 9 to 21 months, although the terms and conditions of their offers vary.
Still, there are some caveats to be aware of and fees to understand. Most balance transfer cards charge a balance transfer fee of 3% to 5% upfront, for example. Some also limit the amount of time you have to take advantage of their offer after you sign up. Finally, these cards come with the same late fees and over-the-limit fees as many other credit cards.

The anatomy of a balance transfer

Still, the proof of balance transfer card’s transformative potential is “in the pudding,” as they say. Despite fees and caveats, these offers can be life-changing in the way they help consumers save. Plus, a balance transfer credit card can easily help consumers get out of debt faster. Here’s how this might work:
Imagine you’re the average consumer with credit card debt, meaning you and your spouse owe approximately $9,100 across several credit card accounts. Factor in interest rates, and your balances and minimum monthly payments might look like this:

  • Card 1: $5,000 at 14.9% APR ($200 minimum payment per month)
  • Card 2: $2,500 at 16.93% APR ($100 minimum payment per month)
  • Card 3: $1,600 at 19.0% APR ($64 minimum payment per month)

Total Debt: $9,100

Your monthly payment across all three cards would likely be around $364 depending on your card issuers. The problem is, so much of your payments would go toward interest since your rates are so high.

Enter a stellar balance transfer card such as the Citi Simplicity® Card. This card offers a balance transfer 0% APR introductory period of 21 months (after that, the variable APR will be 16.74% – 26.74%, based on your creditworthiness) — one of the longest on the market. On the flip side, it does charge a 5% mandatory balance transfer fee upfront (minimum $5). If you signed up for this card and received an approval, you would have four months to take advantage of the balance transfer offer to score 0% APR for the next 21 months.

Now imagine you went ahead with it, transferring $9,100 in credit card balances to your new card. You would also need to tack on the 5 percent balance transfer fee of $455 right away. This means you would owe $9,555. Now divide that balance over the 21 months you’ll have at 0% APR. If you were able to pay $455 per month toward your debt during that time, you could pay off every penny you owe and become debt-free by the end of your card’s introductory offer.

But, how much would you save? It really depends on how much you were previously paying monthly on your credit cards. If you were paying the average minimum payments of around 4 percent, however, you would have paid this much:

  • Card 1: $200 per month for 122 months, total of $7,158.78
  • Card 2: $100 per month at 103 months, total of $3,748.65
  • Card 3: $64 per month for 94 months, total of $2,508.79

When you add this all up, you would have paid $13,416.22 in total to pay down your debt over several years. That’s $4,316.22 in interest savings alone, and that doesn’t account for all the time and stress you’ll save.
Understanding the breakdown of a balance transfer offer can help you decide whether getting a balance transfer card to consolidate debt is a worthwhile strategy to help you save on interest rates and get out of debt faster.

Still have questions about consolidating your debt with a balance transfer card? Browse Bankrate’s complete balance transfer catalog for everything you need to know before applying for one of the year’s top balance transfer offers.