There’s an easy, legal way you can get out of paying interest on your credit card debt: Move it. Specifically, move that debt to a credit card that offers an introductory 0% interest period on balance transfers.
When you shift your balance to a 0% APR balance transfer credit card, your debt will stop accruing interest charges for a period of time, often a year or longer. That could save you hundreds of dollars, making more money available to pay down your debt more quickly.
Here’s what you should know before applying for a balance transfer credit card.
Balance transfer basics
For many, balance transfer credit cards — that is, cards with 0% balance transfer APR — are the most affordable and accessible way to pay down high-interest credit card debt. The 0% introductory rate is much lower than the typical APRs on other debt consolidation instruments, such as personal loans and home equity lines of credit. And because they’re unsecured, they don’t require collateral, such as a house or security deposit.
But these cards aren’t an option for everyone. Some caveats to consider:
- Credit requirement. You typically need good or excellent credit to qualify for balance transfer credit cards.
- Balance transfer fees. Most issuers charge a balance transfer fee — usually 3% of the transferred balance. Transfer a $2,000 debt, for example, and a 3% fee would come out to $60. Make sure your interest savings would at least be more than the amount of the fee before moving your debt.
- Limits: Your transfer limit is generally the same as your credit limit, with some exceptions. The problem is, you generally don’t know what your credit limit will be until you apply. If you have an especially large balance, but end up with a low limit, you may not be able to transfer your entire debt.
- No same-issuer transfers: If your debt is from Citi, for example, you can’t transfer it to another Citi card. The same goes for other issuers.
That said, a balance transfer credit card that fits your credit profile and debt situation could offer enormous value.
Suppose you have a $5,000 balance on a credit card with an 18% APR, and you want to pay it off over the course of 15 months. You’d save more than $470 if you were to transfer that balance to a card with 15 months of 0% balance transfer APR, assuming a 3% balance transfer fee and equal payments. Here’s what those savings might look like after five, 10 and 15 months:
| Months elapsed in repayment plan | Balance remaining (on 18% APR card) | Total interest accrued (on 18% APR card) | Balance remaining (on balance transfer card) | Total interest accrued (on balance transfer card) |
|---|---|---|---|---|
| 5 | $3,455.75 | $329.36 | $3,333.35 | $0 |
| 10 | $1,792.16 | $539.38 | $1,666.70 | $0 |
| 15 | $0 | $620.83 | $0 | $0 |
| Total interest accrued: | $620.83 | $0 | ||
| Net savings, assuming 3% balance transfer fee ($150): | $470.83 | |||
Best balance transfer cards
We compared balance transfer cards on several criteria, including length of 0% APR period, balance transfer fees and rewards, and these three cards rose to the top of the list.
$0 introductory balance transfer fee:
Chase Slate®
The Chase Slate® is the only card on NerdWallet that offers the combination of a $0 introductory balance transfer fee on transactions made in the first 60 days, an annual fee of $0 and a generous 0% APR offer: 0% Intro APR for 15 months on purchases and balance transfers, and then the ongoing APR of 13.24%-23.24% Variable. You can also apply for this card with average credit, which is relatively rare for balance transfer credit cards. Keep in mind that you can only transfer up to $15,000, regardless of your limit, and you won’t earn any rewards on this card. But if you’re trying to get out of paying a balance transfer fee and a balance transfer APR for a while, this card is an excellent choice.
Longest 0% APR period:
Citi Simplicity® Card
The Citi Simplicity® Card offers one of the longest 0% balance transfer APR periods on the market: 0% for 21 months on purchases and balance transfers, and then the ongoing APR of 13.24% - 23.24% Variable . It also boasts no late fees or penalty APRs and an annual fee of $0*, though it comes with a 3% balance transfer fee. You won’t earn rewards with this card, which might be a deal-breaker for some. But if you want more time to pay down your credit card debt interest-free, this might be your best option.
Best sign-up bonus:
Discover it®- 18 Month Balance Transfer Offer
The Discover it®- 18 Month Balance Transfer Offer, which has an annual fee of $0, does double-duty as a rewards credit card and a balance transfer credit card. You’ll get a big sign-up bonus: Discover will automatically double your cash back in your first year. You’ll also get 5% cash back in categories that change each quarter, and 1% cash back on everything else. There are no late fees, penalty APRs or foreign transaction fees, and it comes with a generous 0% APR offer: 0% on purchases for 6 months and 0% on balance transfers for 18 months, and then the ongoing APR of 11.24% – 23.24% Variable. The card charges a 3% balance transfer fee, and Discover isn’t widely accepted abroad. But it could be a great choice if you’re trying to earn big rewards on new purchases while paying off an old debt.
Next steps
Applying for a balance transfer card is easy, but paying down your transferred debt can be harder. Start by making a debt payoff plan and putting a set amount toward your debt every month, so that you won’t be left with a large balance after your 0% APR period runs out. In the meantime, borrow sparingly and track your expenses. With disciplined payments and careful spending, you’ll soon be on your way to a debt-free future.
Claire Tsosie is a staff writer at NerdWallet, a personal finance website. Email: claire@nerdwallet.com. Twitter: @ideclaire7.
Image via iStock.
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