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Of the debt held by the major credit card issuers, 82% of that amount is revolving — that is, carried over from month to month — according to the 2023 Consumer Credit Card Report from the Consumer Financial Protection Bureau. The same report found that 1 in 10 personal credit card accounts are charged more in interest and fees than is paid toward the principal each year.
When you're paying so much just in interest, credit card debt can feel like an impossible weight to shed. But there's a way to pause those crushing interest charges, at least temporarily, with a balance transfer credit card. By moving the debt to a balance transfer credit card with a 0% APR promotion, you won’t pay any interest for the 0% term, which can be as long as 21 months.
Transferring a balance to a new credit card is just part of the process, though. After the debt has been relocated, you’ll need discipline to focus on paying it off before that promotional window closes and interest charges resume on the remaining balance.
Here are three tips to help maximize a balance transfer credit card’s interest-free period.
1. Calculate your monthly payment
Most debt payoff strategies require a plan of some kind; using a balance transfer credit card to become debt-free is no exception. First, identify the length of the 0% period, usually listed as a number of months. Then, divide the total balance transfer amount by that number. The result is the amount you’ll need to pay each month to get rid of the balance before interest kicks in.
For example, if you owe $15,000 on the credit card after the balance transfer and the 0% APR period is 15 months, you’d have to pay $1,000 per month to zero out the debt before the term expires.
Note, however, that the calculation above doesn't take into account the one-time upfront balance transfer fee that you'll likely owe. This fee, typically between 3% to 5% of the transferred balance, can be costly. For a $15,000 balance, a 3% fee would add $450 to the debt amount. But if you would save more than that amount in interest charges over 15 months by transferring the debt — which is likely in this scenario — such a fee is worth paying.
Even when a debt is sheltered by a 0% promotion, you'll probably be required to make at least a minimum payment every month on the transferred balance; otherwise, you'll risk losing the promotion entirely. When it comes to paying off debt, it’s not all or nothing. Better to make a payment, even a small one, every month.
2. Prioritize debts
Take stock of all your debts, including the one on the balance transfer credit card, and figure out which ones to pay off first. One option is to pay off the loans with the highest interest rates first, also known as the "debt avalanche" method. This can save more money in interest over time compared with using the "debt snowball" method, in which you pay off the smallest debt first regardless of the interest rate, to help you score quick wins in your debt battle and build momentum.
Either method can be helpful, but there are times when you may want to make an exception to your chosen approach. For instance, it may be wise to prioritize loans with variable interest rates, or loans whose current interest rates will increase in the future. Debt moved to a balance transfer credit card with a 0% APR period is a perfect example. After the 0% promotion ends, the interest rate will likely shoot up to double digits.
As of February 2024, the average APR on interest-accruing credit cards was 22.63%, according to the Federal Reserve. Credit card interest rates will generally be much higher than the APRs on other debts such as a mortgage or car loan, so it may be best to eliminate the debt on the balance transfer card first, even if it isn’t your highest-interest debt.
Other possible exceptions can be mortgages and student loans. The interest you're paying on these loans is sometimes tax-deductible, which means you’re being reimbursed for part of that interest in the form of a smaller tax bill. So you may want to move those debts lower on your priority list to tackle others that lack such tax advantages.
Overall, the order in which you pay off debts matters less than having a clear plan that accounts for the loan type and interest rate, as well as a payoff strategy that best suits your personality.
3. Have a Plan B
A year or more free of interest is indeed a long time, but a lot can happen — say, a job loss or unexpected expenses — to derail your plan to pay off debt before the 0% period on the balance transfer card ends.
Know that there still are ways you can pay off your loan without accruing too much interest. Here's how.
Transfer the remaining balance again. Before the promotional APR window closes, consider transferring your outstanding debt to another balance transfer card. Most major credit card issuers offer several cards with 0% periods. You might also apply for a card from a credit union, which tends to have lower interest rates than cards from bigger banks. To go this route, think strategically about eliminating the debt especially since you'll incur a balance transfer fee each time you move the debt.
Ask for a lower interest rate. Maybe you don’t want to go through the hassle of moving debt to another credit card. You could contact your current card issuer and ask for a lower interest rate. The issuer may be more willing to work with you if you’ve been a loyal cardholder with a history of on-time payments. Your request may not be granted, but you won’t lose anything by asking.
Enlist help from a nonprofit credit counseling service. This option may be best for people who have multiple debts. A credit counselor can determine whether you're eligible for a debt management plan that consolidates debts. As part of that plan, a counselor can negotiate interest rates on your behalf and help you develop healthy financial habits. Make sure the agency you work with is a nonprofit and accredited, such as the National Foundation for Credit Counseling or Money Management International.
The process of paying off debt is often described as a journey, and journeys tend to contain valuable lessons. If you find yourself in need of a balance transfer card as a tool to pay off debt, try to use the experience as an opportunity to scrutinize your spending habits and develop a plan for avoiding credit card debt in the future.
