by Lyle Daly | Updated July 21, 2021 - First published on Nov. 4, 2019
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It's the cheapest way to pay off credit card debt, and most consumers are missing out.
Credit card debt is one of the most frustrating and difficult types of debt to pay off. Every month, you'll incur interest charges that cut into any progress you've made. And unless you pay much more than the minimum, it could be years before you're debt-free.
Although getting out of credit card debt ultimately depends on your financial habits, there are tools out there that can help you pay it off more quickly and without paying so much interest. One such option is a balance transfer credit card that includes a 0% introductory APR.
Many debtors haven't even tried this method, despite the amount it could save them. But if you have credit card debt, then it should be the first payoff method you consider.
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The National Foundation for Credit Counseling recently released its 2019 Consumer Financial Literacy Survey, and the results weren't promising for those who are carrying credit card debt.
It found that 60% of consumers had credit card debt, but only 8% of consumers had transferred balances to a credit card with a lower interest rate. That means that of all the consumers who had credit card debt, only 13.33% had tried a balance transfer.
Why would so few consumers attempt to get a lower interest rate this way? There are three potential reasons:
They're satisfied with their current interest rate. With the average credit card APR reaching 17.35% as of October 2019, this is unlikely. And even if your cards have lower rates, nothing beats 0%.
They can't qualify for a balance transfer card. Although this may be true for some consumers, the average credit score reached 704 last year, and it's possible to get a balance transfer card with a score of 670 or sometimes less. Even among consumers with credit card debt, many have a high enough credit score for a balance transfer card.
They haven't thought about it. For most consumers, this is the likely reason. Unfortunately, not looking at all your debt payoff options can be costly.
There's nothing complicated about a credit card balance transfer. You just apply for a balance transfer card, and then transfer over the balances from your current credit cards. Some cards limit the total amount you can transfer, so make sure to check the card's terms and conditions before you apply. You also can't transfer over an amount that is greater than your credit limit, but you won't know that limit until you're approved for the card.
The most important part of the process is picking a card. To decide which of the many available balance transfer cards is right for you, look at:
Once you've picked a card, the next step is to apply. Depending on the card, there may be an option to set up your balance transfers during the application process. If not, you can do so after you're approved, either through your online account or by calling the number on the back of the card.
If you're dealing with thousands in credit card debt, then a balance transfer card can be very valuable. Let's say you have $6,000 in balances, which is about the average credit card debt. Here's a comparison of what you would pay with a balance transfer card against what you will pay if you keep your balances on cards with an average APR.
|Payoff Method||Starting Balance||APR||Monthly Payment||Time to Pay Balance||Total Paid|
|Keeping balances on original cards||$6,000||17.35%||$400||18 months||$6,812|
|Balance transfer||$6,180 (includes 3% balance transfer fee)||0% for 18 months||$400||15.45 months||$6,180|
Data source: Author's calculations.
You save more than $600 this way -- $632, to be exact.
You'll also be out of debt about 2 1/2 months sooner. And because you're consolidating your debt onto one credit card, you're less likely to miss a payment than you would with balances spread across multiple cards.
There's one thing to remember with this method. Don't make the mistake of thinking you can relax just because your credit card debt is interest-free for the time being. Balance transfers are only effective if you use that interest-free period to pay off as much of the principal as you can.
A balance transfer card won't magically eliminate your credit card debt, but it can help you pay a lot less in the long run. If you haven't tried one yet, it's a route that's well worth your time.
If you have credit card debt, transferring it to this top balance transfer card secures you a 0% intro APR into 2023! Plus, you’ll pay no annual fee. Those are just a few reasons why our experts rate this card as a top pick to help get control of your debt. Read The Ascent's full review for free and apply in just 2 minutes.
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