How to do a balance transfer with bad credit

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Credit card debt can pile up easily, but paying it off is another story. Normally, the payoff process can be eased by using a balance transfer credit card with a zero percent APR offer, but for those with bad credit, obtaining one may be a challenge.

Thankfully, there are balance transfer card options you can qualify for with a less-than-stellar credit score. You won’t receive an interest-free window, but you might get access to a significantly lower APR compared to your current card.

Discover it® Secured

For those with no credit history or a poor credit score, the Discover it® Secured offers an introductory balance transfer APR of 10.99 percent for six months from the date of the first transfer (24.49 percent variable thereafter). If you fail to pay off your debt within the six-month window, you’re subject to pay the variable interest rate.

The card doesn’t charge an annual fee and actually offers a pretty good rewards structure considering it’s a secured card. Get 2 percent cash back at gas stations and restaurants and 1 percent on everything else (with a cap on the 2 percent rewards of $1,000 in combined purchases each quarter).

After eight months of making on-time payments, you receive the opportunity to graduate to an unsecured credit card. That means once you complete the debt payoff process, you can upgrade to an unsecured Discover card with a potentially higher rewards structure and more robust benefits.

A security deposit is required to receive the card (with the amount of your deposit equal to the credit line you’re approved for), but it’s refundable.

UNITY Visa® Secured Card

OneUnited Bank’s UNITY Visa® Secured Credit Card offers a slightly lower introductory APR compared to the Discover it Secured, but with lesser overall perks.

For six months, you can receive a 9.95 percent APR on balance transfers (with a fixed APR of 17.99 percent thereafter). The fixed variable APR means your interest rate can’t be increased. For each balance transfer, there’s a $10 or 3 percent balance transfer fee (whichever is greater), with a maximum charge of $150.

A minimum security deposit of $250 is required to receive the card, and you can deposit up to $10,000. Unlike the Discover it Secured, your credit limit is calculated as your security deposit minus the card’s $39 annual fee.

Unfortunately, there’s no rewards structure for UNITY Visa Secured Card, but you do receive perks like zero liability protection, 24/7 roadside assistance, extended warranty and a rental car collision damage waiver.

Alternative options: Consider a co-signer or personal loan

If you have a parent, family member or significant other who’s willing to cosign a credit card with you, you could potentially be approved for a better credit card with their help.

Most major issuers don’t allow co-signers, however, there are two exceptions: Bank of America and U.S. Bank. With a co-signer, you could potentially sign up for the BankAmericard® credit card, which offers an 18-billing cycle introductory zero percent APR for balance transfers made in the first 60 days (14.49 percent — 24.49 percent variable).

Your cosigner is as responsible for the bill as you are, so if you already know you won’t be able to make on-time payments, it’s best you don’t pull a friend or family member into your situation.

Another alternative to a balance transfer credit card is a personal loan. Personal loans don’t normally offer zero percent APRs, but they can offer significantly lower interest rates compared to the variable APRs of balance transfer cards.

For December 2019, the average personal loan interest rate is 11.24 percent (but this depends on your credit score). Those with poor credit scores (300 to 629) can expect an interest rate between 28.5 percent to 32.0 percent.

Want a good low-interest offer? Boost your credit score

If you’re willing to sit with your debt for a bit longer, it may be in your best interest to try and improve your credit score as quickly as possible.

A higher score means access to better credit cards and lower interest rates. With a poor credit score, the best thing you can do for yourself is to continue paying off as much as you can each month.

In need of supplemental funds? Try picking up a side hustle or practice mindful spending (i.e., thinking before you swipe) to cut back on unnecessary purchases.

“Think of your long-term goals and ask yourself if that purchase is bringing you closer towards completing those goals,” says Kayse Kress, financial planner at Physician Wealth Services. “Mindful spending is a habit that can be fulfilling and encouraging when used regularly.”