Find out how a balance transfer card works and how you can avoid paying interest for a year or more while paying down debt
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A credit card balance transfer is when you take part or all of what you owe on your current credit card and transfer it to a lower interest card. This can be a great way to simplify multiple debt payments as well as save on high interest charges.
Here is an example:
Let’s suppose that Liz and Dan each have $12,000 in credit card debt. Liz decides to transfer her balance to a credit card that offers a 1 year 0% introductory rate with a 3% transfer fee. Liz pays the one-time transfer fee of $360. Dan, on the other hand, keeps his current credit card with a 20% interest rate. Both Liz and Dan want to quickly pay off their balances so they each make monthly payments of $1,000 and avoid adding any new debt. After 12 months, Liz pays off her new balance transfer credit card. For Dan, however, it would take two more months to pay off his high interest card.
If you can qualify for a balance transfer card and trust yourself to make payments on time, this is a good way to pay down debt without paying interest. However, you should make certain you pay off the card before the 0% interest promotion expires, or you’ll find yourself once again paying high interest fees on whatever you owe.