Pros and cons of paying off debt with a balance transfer credit card


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Eliminating debt is often a long and tedious process, drawn out by mounting interest payments accruing on top of the original balance.

A balance transfer credit card can help speed up the debt payoff process by taking interest out of the equation for a short period of time, allowing you to chip away more quickly at your principal balance. But for some, a balance transfer card’s period of delayed interest can result in a slippery slope into even more debt.

Everyone’s experience with credit cards is different, and it can be difficult to determine the right course of action for your debt payoff journey. If you’re considering a balance transfer, here are some pros and cons to help you make your decision:

Benefits of a balance transfer card

A balance transfer card is helpful for paying off your debt quickly. Look for details that will improve your chances of paying debt in full like a long introductory period, debt consolidation options and rewards that you can continue to use long-term.

Pro: Zero percent interest

The biggest perk of using a balance transfer credit card to pay off debt is the introductory period after opening your account during which the amount you transfer will be charged zero percent interest.

The introductory period varies for each card on the market, but often ranges between 12, 15 or 18 months. The longest introductory period currently available is through the Citi Simplicity® Card. It allots 21 months (nearly two years) of zero percent interest to pay off your transferred balance (then 14.74 – 24.74 percent variable APR thereafter).

Use your balance and the amount you’re able to dedicate towards your debt each month to determine the period that works best for you. If your balance is relatively low, you may not need as long to pay it off and can focus on finding a card with a low balance transfer fee. But with an especially high balance, you may want a longer introductory period to give you more time to pay it off in full before accruing more interest.

Imagine you have a $5,000 balance on a card earning 18 percent interest. If you transfer that to a card with zero percent interest for 18 months (after a 3 percent balance transfer fee), you could pay off the balance in full by the end of your introductory period by making payments of just over $286 per month. If you were to make minimum $124 monthly payments on your original card, it would take 46 months to pay your balance in full.

You can calculate your own transfer using Bankrate’s balance transfer calculator.

Pro: Debt consolidation

In addition to minimizing your interest commitment, a balance transfer can simplify your debt payoff by consolidating all of your consumer debt in one place.

If you’re carrying balances on multiple credit cards, all with varying APRs, and find yourself getting overwhelmed when your statements are due, transferring them all onto a single card will allow you to make a single payment each month and eliminate risking late fees or penalties for an overdue statement that slips through the cracks.

Pro: Balance transfer card with rewards

Choosing to eliminate your debt with a balance transfer credit card also means that you can set yourself up for practicing healthier credit habits in the future.

You don’t have to cancel or put away your balance transfer card once your balance is paid off; choose a card with a rewards structure that works with your spending and that you can continue to benefit from it well beyond the introductory period. For example, the Capital One SavorOne Cash Rewards Credit Card offers zero percent interest on balance transfers for 15 months after account opening (then 15.74 – 25.74 percent variable APR thereafter), but it also rewards 3 percent cash back on dining and entertainment, 2 percent at grocery stores and 1 percent on all other purchases.

Drawbacks of using a balance transfer card

If you’re continually taking on more debt, opening another credit card may not be the best option for you. Think about factors like the fees you’ll pay, the interest rate you’ll have after your introductory period and your likelihood of taking on more debt with a new card.

Con: Balance transfer fees

Many balance transfer credit cards charge a balance transfer fee, especially those with longer introductory periods or additional rewards. The fee is based on the balance that you have to transfer onto your new card and usually ranges from 3 to 5 percent of the transfer total.

For someone carrying a $10,000 balance, that could add an additional $500 total.

There are some cards that offer no balance transfer fee. The Chase Slate credit card, for example, allows you to transfer your balance at no cost as long as you do so within 60 days of account opening. Then, you can take advantage of zero percent interest on that balance for your first 15 months (then 16.49 – 25.24 percent variable APR thereafter).

A balance transfer fee likely won’t cancel out all that you can gain with a zero percent interest introductory period, but you should keep it in mind when choosing your balance transfer card and do the math to ensure it’s the best choice for you what you’re able to pay.

Con: The APR after your introductory period

If you won’t be able to pay off your balance by the time the introductory period ends, make sure you’re aware of the interest rate you’ll take on after.

It’s important to put as much money toward your balance as you can during the introductory period; otherwise, you’ll likely find yourself in the same situation once again, accruing interest on your balance. Simply making the minimum payment each month won’t do much to bring down your debt.

Search for a card with a lower range of interest rates if it’s likely that you’ll still carry a balance after the introductory period ends. Fourteen percent interest is high, but it can make a difference if you’re currently carrying a balance on a card earning 24 percent interest. If you’re transferring another type of loan, though, like an auto loan earning just 5 percent interest, failure to pay off your balance in full by the end of the introductory period could leave you with a balance earning much higher interest later on.

Con: Risk of accumulating more debt

Balance transfer cards are useful tools, but they’re not for everyone.

If you’re in debt because you have trouble using credit responsibly and habitually overspend on things you don’t need using the cards you already have, it’s probably not in your best interest to take on a new credit card.

A balance transfer may not be the right solution for you, but a personal loan with a more competitive interest rate than you’re currently paying could be a better choice and simplify your repayment. A loan like this can help you speed up your debt payoff without taking on any of the other temptations of a new credit card.

To compare options and determine if a balance transfer card can help you pay off your debt, see Bankrate’s list of the best balance transfer offers here.

The information about the Chase Slate has been collected independently by The card details have not been reviewed or approved by the card issuer.