If you’re tired of paying high interest rates on your credit card debt, a balance transfer credit card could be a powerful solution. Balance transfer cards allow you to move debt that is subject to a high APR to a new card with an introductory 0 percent interest rate.
But credit card debt isn’t the only debt that you can transfer to other credit cards. Many card issuers allow you to transfer auto, personal, home equity and student loan debt, too. Doing so could help you save thousands of dollars in interest. But if you can’t pay off that debt before those introductory offers end, you could be facing even higher interest payments.
This is why anyone considering transferring large chunks of debt to credit cards should take the time to craft a plan for how they’ll pay them off. Here’s what you need to know about the types of debt you can transfer to a credit card and how to set yourself up for success with a payment plan.
Acceptable debts you can transfer to a credit card
Most people consider balance transfer cards when looking to transfer high-interest credit card debt, but it is possible to transfer other kinds of debt. Here’s a quick rundown of the different account balances you may be able to transfer to a balance transfer card, depending on the issuer.
Credit card debt
Consumers most commonly use balance transfer cards to transfer credit card debt. The average credit card interest rate is currently hovering above 17 percent, but this is just the average. Your interest rate could be much higher depending on your credit. A reprieve from paying interest for over a year or more could give you the breathing room you need to pay off your credit card debt in full.
Most card issuers allow you to transfer auto loan debt, too. As an extra benefit, when you transfer auto loan debt to a balance transfer credit card, you’ll officially be paying off the lender servicing that loan. This means you’ll get the title of your car earlier than you otherwise would have.
This is where the distinction of “can” and “should” comes into play with balance transfer cards. Can you transfer auto loan debt? Absolutely. Should you? Well, that depends on whether you can pay off the transferred amount before that 0 percent offer ends.
Auto loans generally come with lower interest rates, often in the 3 percent range. You don’t want to swap a low interest rate with a much higher one when your new credit card’s regular APR kicks in on your remaining balance.
The interest rates on personal loans are generally lower than those you get with a credit card, although they’re generally higher for borrowers with poor or fair credit. If you’re in the latter group, moving this debt to a credit card with an intro APR offer could save you money on interest.
However, if you have good credit you’ll likely have a better interest rate on a personal loan than a credit card. If you’re confident you can pay off the balance during your balance transfer card’s intro APR period, then no interest is better than whatever low interest rate your personal loan charges. But if life throws you a curveball and you can’t pay the card balance off in full, you could pay more in interest on the back end.
While transferring student loan debt to credit cards is possible, it may not be the best financial decision. Federal student loans come with protections such as repayment plans and forgiveness programs. You’ll lose these protections if you transfer that debt to a credit card.
Home equity loans
If you’ve taken out home equity loans to cover the costs of a kitchen remodel or other home improvement projects, you can also transfer this debt to a credit card. However, there is a catch.
Since renovations are so expensive, home equity loans tend to be large. It’d be rare to find a credit card with a large enough credit limit to allow you to transfer your entire home equity loan to a credit card. However, if you’ve paid down enough of your loan or have a relatively low home equity loan to begin with, this might be feasible.
Debts you can transfer to a balance transfer card, by issuer
Many issuers allow you to transfer different types of debt to a balance transfer card as long as it’s not from an account with that issuer, although these policies may vary. Consult your issuer about your options.
|Credit card balance||Personal loan balance||Student loan balance||Auto loan balance||Home equity loan balance|
|Bank of America||✔||✔||✔||✔||✔|
Which balance transfer card should you choose?
If you are interested in doing a balance transfer, choosing the right balance transfer card for your financial situation is important. Here are just a few of the best balance transfer cards on the market today:
- The U.S. Bank Visa® Platinum Card offers a 0 percent introductory offer for 20 billing cycles on both balance transfers (made within the first 60 days) and purchases, followed by 16.74 percent to 26.74 percent variable APR.
- The Citi® Double Cash Card comes with a 0 percent APR on balance transfers for 18 months, with 16.24 percent to 26.24 percent variable APR thereafter.
- The Wells Fargo Reflect® Card offers one of the longest 0 percent introductory offers on the market: 0 percent intro APR for 18 months from account opening on purchases and qualifying balance transfers. Intro APR extension of up to 3 months (for a total of 21 months) with on-time minimum payments during the intro and extension periods. The APR is 15.99 percent to 27.99 percent variable thereafter.
- The Citi® Diamond Preferred® Card offers 0 percent intro APR for 21 months on balance transfers from the date of first transfer. After that, the variable APR will be 15.99 percent to 25.99 percent. Balance transfers must be completed within 4 months of account opening.
The bottom line
If you want to transfer loan debt to a credit card, you can find an issuer and a card that will allow it. Just remember to be smart: You can save plenty in interest by transferring loan debt to a card with a 0 percent interest rate period, but if you don’t pay that debt off in time, you may actually end up paying far more in interest in the long run.