How to use a balance transfer to pay off credit card debt (2024)

FAQs

Is a balance transfer a good idea to pay off credit card debt? ›

If you transfer the balance from a credit card with a higher APR to a card with a lower rate, or even an introductory 0-percent APR period, you can save money on interest as you work to pay down the debt. Ultimately, your goal should be to pay off the debt you transferred entirely during any introductory period.

With a 0% balance transfer you get a new card to pay off debt on old credit and store cards, so you owe it instead, but at 0% interest. A card will have a 0% period, during which you pay no interest – for example, 28 months – and sometimes you'll pay a small fee.

A balance transfer can improve your credit over time as you work toward paying off your debt. But it can hurt your credit if you open several new cards, transfer your balance multiple times or add to your debt.

After a balance transfer takes place, your old account remains open. The original card issuer will typically only close your account if you make a request for it to do so. Unless you have a good reason to cancel your old credit card, however, you may want to think twice before you close the account.

Transferring your debt has its drawbacks. Balance transfer credit cards often have a host of pitfalls that can potentially offset the benefits, including: Fees: Most credit cards have a 3% or 5% balance transfer fee. Temporary 0% APR: The 0% intro offer will eventually expire, and your regular APR may be 20% or higher.

Balance transfer fees are typically 3 percent or 5 percent of the total balance you transfer to your new card. So, for every $10,000 in debt you move to a balance transfer credit card, you'll owe an additional $300 or $500.

Balance transfers can also be done with an existing card, especially if the issuer is running a special promotion. This can be tricky, however, if the existing card already has a balance that the transfer will only increase.

Make sure your balance transfer is large enough to cover at least the minimum payment - if it does't you will have to make an additional payment to bring the total up to the required amount. A balance transfer that is received in time will always count as a payment towards your credit card account.

The catch with a balance transfer credit card is it may not save you money once the 0% introductory period ends because interest will start accumulating on any remaining balance.

Does it look bad to do a balance transfer? ›

In some cases, a balance transfer can positively impact your credit scores and help you pay less interest on your debts in the long run. However, repeatedly opening new credit cards and transferring balances to them can damage your credit scores in the long run.

A balance transfer takes about five to seven days after your request before you'll see it appear in the account you're transferring the balance to. But a word of warning: Some credit card issuers can take 14 or even 21 days to complete a balance transfer.

While it might be tempting to close it to help avoid racking up more credit card debt in the future, keeping the card open is likely the smarter move for most people.

Applying for a new credit card to transfer your balance will result in a hard inquiry on your credit report. A hard inquiry will shave a few points off your score initially, and it will stay on your credit report for up to two years. Opening a new card also affects the length of credit history.

In theory, there's no limit to the number of separate credit and store cards you can transfer over. But in practice, you're limited by the credit limit on the card. There will usually be a time limit for transferring balances though.

Since paying only the minimum on your credit card debt could end up costing you thousands and take you years to repay, you shouldn't follow this strategy once you can afford to pay more.

Paying a credit card by using another may not be everyone's first choice. It might not be the best option if you: Don't intend to stop using the first card: If you pay a balance using another credit card, you should cease using the card with the now zero balance until you can pay off the higher balance.

It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.

Closing a credit card after transferring the balance can negatively impact your credit scores by increasing your credit utilization rate. It's best to leave the account open, even if you don't use it very often. At Experian, one of our priorities is consumer credit and finance education.