How to manage debt with a balance transfer card

PeopleImages/Getty Images
Bankrate Logo

Why you can trust Bankrate

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here's an explanation for . The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired. Terms apply to the offers listed on this page.

If you’re dealing with large balances on several credit cards, you may benefit from consolidating your debt with a balance transfer credit card. Balance transfer cards usually offer a 0 percent APR or a low APR on balance transfers for a set period, often well over a year. Consolidating your balances with this type of card gives you a chance to pay down the principal faster and bring your debt under control.

Here’s how to use a balance transfer card to manage your credit card debt.

Take stock of your existing balances

First, add up the balances on your credit cards to find the total amount you want to consolidate. You’ll need this number to develop your budget for paying off your debt. Also, note the APRs of your current credit cards, which will be helpful when you compare balance transfer offers.

Figure out your repayment budget

Next, decide how much money you can dedicate to paying off your credit card debt each month. To maximize your interest savings, you’ll want to make substantial progress toward paying down your consolidated balance during the introductory APR period. So you should plan to make well above the minimum payment while your introductory offer is in effect.

Some great budgeting apps are available to help you figure out a financial plan, but you can also do it the good old-fashioned way. Look at your monthly income and subtract how much you spend on necessities like rent, utilities and food, as well as other debt payments, like student loans or car payments. The portion of your income left over is the amount you have available to repay your credit card debt.

If that number isn’t as high as you were hoping for, you might consider temporarily taking on some extra work to increase your income during the introductory APR period. For example, you could do some gig work in the evenings or start a side hustle on weekends and use the additional earnings to pay down your balance. Another option is to decrease your expenses. This may be easier said than done, but if you can find a way to cut your spending and sustain it over the introductory period, you can direct those savings toward debt repayment.

Select a balance transfer card

Use a balance transfer card calculator to see how much you’ll pay in fees and interest for each card you’re looking at, and find out how long it will take you to pay off your balance.

You can also use a credit card payoff calculator to check how much interest you will owe if you leave your balances on your existing cards. Compare this to the results for the balance transfer cards to estimate how much you would save with different options.

The right balance transfer card for you will depend on your budget and goals.

If you need as much time as possible

If you can’t make large monthly payments, you’ll likely want a card with a long introductory APR period. For example, the U.S. Bank Visa® Platinum Card could be an attractive choice because it offers a 0 percent introductory APR on balance transfers for the first 20 billing cycles, with an APR of 14.49 percent to 24.49 percent after the promotional period.

The Wells Fargo Reflect℠ Card is another good choice, offering up to 21 months with 0 percent APR (18 months plus an additional three months if you make on-time payments each month) followed by 12.99 percent to 24.99 percent variable APR.

If you want to earn rewards

The trade-off for a rewards program is usually a shorter 0 percent intro APR period. But if you’re confident you can pay off your balance sooner and you want more long-term value from the card, consider a rewards card like the Citi Custom Cash℠ Card.

This card offers a 0 percent balance transfer introductory APR for the first 15 months, followed by a variable APR of 13.99 percent to 23.99 percent. But it also gives 5 percent cash back on your top spending category for up to $500 per billing cycle, then unlimited 1 percent cash back.

Make the most of the introductory APR period

Opening a balance transfer card with a promotional APR gives you a reprieve from paying the standard interest rate, but only for a limited time. It’s essential to manage the card well to take full advantage of this opportunity to get a handle on your debt.

Initiating the transfer

First, make sure that the balances you want to consolidate are accurate. Once you transfer a balance, you may no longer have the right to dispute overcharges and other errors.

Next, transfer your balances promptly. The clock on an introductory APR period usually starts ticking as soon as you open the account. You should initiate the transfers right away to get as much time as possible to pay a lower rate (or no interest if you have a 0 percent APR offer). Also, be aware that some cards come with a deadline to transfer balances, which might be 60 or 90 days from account opening. Issuers generally charge the standard APR on balances you transfer after that deadline has passed.

If the balance transfer limit on your new card isn’t high enough to transfer all your existing balances, put your cards in order from highest APR to lowest APR. Transfer the balance from the card with the highest APR first, then the second-highest, and so on, until you have consolidated the maximum allowed.

Pay on time and aggressively

It’s essential to pay your bill on time. If you pay late, you’ll incur fees, which would offset some of the savings from consolidating your credit card debt. And falling behind on your payments will likely cause you to lose your introductory APR.

While you need to pay at least the minimum each month, you’ll make progress faster if you pay more. It may be helpful to divide the amount you want to pay off during the introductory period by the number of months to get an idea of how large your payments should be. For example, if you have an intro APR for 12 months and you owe $6,000, then paying at least $500 per month will keep you on track to eliminate your debt by the time the introductory period is up.

Keep in mind many cards have different terms for balance transfers and purchases, so check the purchase APR before shopping with your balance transfer card. You likely won’t enjoy a grace period on your balance transfer card, as you’ll be carrying a balance each month. This means until you’ve paid off your entire balance and paid your bill in full for a few months to earn back your grace period, any new purchases will attract interest right away.

When the introductory APR period is almost over

Your credit card company will start charging a higher rate on your remaining balance when the intro APR period ends, so it’s essential to know when that will happen. Mark the final day of your introductory APR period on your calendar. You may want to set up an alert on your phone to remind you a week or two before the introductory period is up.

If you’re able to pay off the remainder of your balance while you’re still in the introductory period, that’s ideal. You’ll avoid a jump in interest when the promotional period ends, and the credit card debt you consolidated will be taken care of.

If paying off the entire balance is not possible, you could transfer the balance to another card with an introductory APR offer. In this case, you’ll need to once again come up with a plan to repay the consolidated debt.

Alternatively, you could try to negotiate the APR with the credit card company. However, even if the company agrees to lower the rate, you probably aren’t going to get an APR that’s as good as the promotional offer.

The bottom line

If you manage it well, a balance transfer card can help you pay off credit card debt. Plan ahead, select a card that’s right for your budget and steadily pay down your balance during the introductory APR period to get the most value from the card.