How a Balance Transfer Credit Card Can Help You Pay Down Debt
If you're paying hefty credit card interest rates, consider a balance transfer card, which can help improve your financial position.
In a sign that the pandemic is starting to ease, credit card issuers are once again offering balance transfer cards, which let you save money by shifting an existing balance to a new card that charges little or no interest for a year or more.
The new offers are arriving just as consumers are once again racking up credit card balances, which recently hit $966 billion, according to the Federal Reserve. That’s a turnaround from earlier in the pandemic, when nervous consumers focused on paying down their balances and reducing their card usage.
Now is a good time for anyone carrying hefty credit card debt to consider getting a balance transfer card. Credit card interest rates recently averaged 16.2 percent, up from their pandemic low of 15.9 percent.
By opting for one of these cards, you may be able to pay as little as zero interest on the amount you transfer, which will give you time to put more money toward paying off your actual debt.
“My no. 1 tip for someone who wants to reduce their credit card debt is to get a balance transfer credit card,” says Ted Rossman, senior industry analyst at CreditCards.com, "and then to focus on getting out of debt as quickly as possible."
Think about it this way: Retiring debt that costs you 16 percent or more in interest is the equivalent of earning a 16 percent guaranteed return on investment—a great deal.
Strike a Great Balance Transfer Deal
Making a balance transfer is fairly simple. You can apply online, and the new card will actually handle the transfer. All you have to do is provide some basic information, such as the account number of the old card and the amount you want to transfer.
Based on your credit limit or other factors, the balance transfer card may approve you for all or part of the requested transfer amount.
But, as you would expect, there are a few catches. You generally need to have a good or excellent credit score—about 700 or higher—to qualify for an attractive balance transfer deal, says Rossman.