Paying off credit card debt can be challenging when your card has a high annual percentage rate (APR). The higher your rate, the more difficult it is to gain traction with your payoff plans.

Using a credit card transfer to consolidate your credit card debt at a lower promotional interest rate could allow you to reduce your outstanding balances faster and save money on interest in the process.

How a Credit Card Transfer Works

A credit card transfer sounds complicated, but it’s really not. It simply involves transferring a balance you have on one credit card to a new card with a low promotional APR. If you transfer the entire balance from the old card, that card is now effectively paid off. You’ll make payments to the new card going forward.

Credit card transfers typically involve a fee, which is usually 3-5% of the transfer amount. This fee is added onto your balance when you make the transfer. So if you’re transferring $5,000 from Card A to Card B, with a 3% transfer fee, your balance on the new card would be $5,150.

The basic idea behind a credit card transfer is that by moving your balance to a card with a lower promotional interest rate, more of your monthly payment will go toward principal assuming you don’t make purchases with the new card. If you’re making your payments regularly, that would make it easier to chip away at the balance.

Tackling Debt With a Credit Card Transfer

Taking control of your debt with a credit card transfer starts with choosing the right balance transfer card. For example, some offers may offer 0% promotional APR with a fee, while others may have a low promotional APR without a fee. Comparing balance transfer offers and terms can help you find the card that best fits your debt repayment plans.

If you select a card with a promotional APR, it’s very important to know exactly when the promotional period expires. Once the promotional rate ends, the standard purchase APR will apply to any remaining balance. If you still owe a decent chunk of debt on the new card after the promotional period ends, that could reduce any savings you may have gained by transferring the balance.

Consider how much you can afford to pay to the card each month. Then, look at how that matches up with the promotional period the card is offering. If you wouldn’t be able to pay the balance off before the introductory rate ends, you’d either need to step up your payments or choose a card with a longer promotional offer.

Credit Card Transfer Mistakes to Avoid

When you’re contemplating a credit card transfer, there are some potential pitfalls to watch out for. The first is overlooking the balance transfer fee. If you’re transferring a large balance and you’re not able to qualify for a card with a 0% intro APR offer, you’re basically adding to your debt in the short term. You need to calculate the cost of the fee before pulling the trigger on a transfer.

Next, don’t rush to shut down your old credit card account. Closing down old accounts can ding your credit score. For example, it could impact your utilization rate. Losing points off your score could make it more difficult to qualify for new credit in the future.

Balance Transfer


Pay Off Debt Faster with a Balance Transfer.

At the same time, you don’t want to make the mistake of racking up new debt on the old card. Doing so can erase any headway you may have made by transferring the balance in the first place.

Finally, it’s important to be disciplined about making payments to the new card on time every month. Late payments can wreak major havoc on your credit score and trigger a late fee. Even worse, some credit card companies will increase your APR if you pay late by 60 days or more. The new APR could be much higher than the promotional rate you started out with.

The takeaway? Before you take advantage of a balance transfer offer, it’s important to read the fine print. The better you understand the offer’s terms and conditions, the easier it becomes to manage your debt with a credit card transfer.

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