Tired of paying high interest rates on your credit card debt? Moving that debt to a credit card that offers an introductory 0 percent interest rate on balance transfers can help, as long as you pay that debt off before the intro period ends.
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.
How does a balance transfer work?
A balance transfer is one way to eliminate or reduce the interest you pay on debt.
Many card issuers offer new cardholders the chance to transfer existing debt to a new card at 0 percent interest for a limited time, usually 12 to 18 months. After this introductory period ends, the card’s regular APR kicks in and you’ll start accruing interest on any remaining balance.
Most cards charge a fee for transferring a balance, typically 3 percent to 5 percent of the transfer amount, although it is possible to find a balance transfer card with no fee. There are also some limits to balance transfers: You generally can’t transfer debt between accounts with the same lender, and the amount you can transfer will be limited by the total credit limit on your new balance transfer card.
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 transfer credit card debt. The average credit card interest rate is currently hovering above 16 percent but this is just the average and your interest rate could be much higher depending on your credit. A reprieve from paying interest for over a year could give you the breathing room you need to pay off your credit card balance 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.
Just make sure 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 can be high because they aren’t backed up by any collateral, which makes them riskier for lenders.
Consider an auto loan: If you don’t pay your loan, your lender can repossess your car, the collateral for that loan. With a personal loan, there’s little lenders can do if you stop paying, which is why these loans come with higher interest rates. Moving this debt to a credit card with an intro APR offer could save you money on interest.
It is possible to transfer student loan debt to credit cards but proceed with caution. Federal student loans come with protections such as repayment plans and forgiveness programs. If you transfer that debt to a credit card, you’ll lose these protections.
Home equity loans
If you’ve taken out home equity loans to cover the costs of a kitchen remodel or other home-improvement project, 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, this might still 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 so you should 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, it’s important to choose the right balance transfer card for your financial situation. 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 and purchases, followed by 14.49 percent to 24.49 percent variable APR.
- The Citi® Double Cash Card comes with a 0 percent APR on balance transfers for 18 months, with 13.99 percent to 23.99 percent variable APR thereafter.
- The Wells Fargo Platinum card comes with an 18-month 0 percent introductory APR offer for both qualifying balance transfers and purchases from account opening, followed by 16.49 percent to 24.49 percent variable APR.
- The Citi® Diamond Preferred® Card offers 0 percent APR on purchases and balance transfers for 18 months, with a variable 13.74 percent to 23.74 percent APR after.
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.