How to manage debt with a balance transfer credit card
Editor's Note
If you have substantial balances on multiple credit cards, it might make sense to opt for a balance transfer credit card.
These cards typically provide an introductory 0% annual percentage rate, or APR, on balance transfers for a specified duration, often ranging from 12 to 21 months. Consolidating your balances offers an opportunity to expedite the repayment of the principal amount without incurring interest charges.
To effectively manage your credit card debt using a balance transfer card, consider the following steps.
Related: Balance transfer or personal loan: What’s the difference?
Understand your existing balances
First, calculate the total amount you wish to consolidate by comparing the combined balances on your credit cards.
This figure is essential for creating a budget and setting goals to repay your debt effectively. Additionally, take note of the APRs on your current credit cards. This information will be valuable when comparing different balance transfer offers and selecting the most suitable option.
Related: What happens when zero APR ends on a credit card?
Create a repayment plan
After determining the total amount you want to consolidate, it's important to decide how much money you can allocate toward paying off your credit card debt each month.
To make the most of the interest savings, it is recommended to make significant progress in reducing your consolidated balance during the introductory APR period. During this time, aim to pay more than the minimum payment requirement.
To establish a financial plan, you can utilize budgeting apps or opt for the traditional method: Analyze your monthly income and subtract essential expenses such as rent, utilities and food, as well as other debt obligations like student loans or car payments.
The remaining portion of your income represents the available amount that can be dedicated to repaying your credit card debt.
By understanding your financial situation and setting a realistic budget, you can effectively manage your debt repayment strategy.
Related: Should you carry a balance on zero APR cards?
Choose a balance transfer card
Consider your budget and goals to find a suitable balance transfer card. It is important to evaluate a few factors before hastily choosing the first balance transfer card that comes your way.
Firstly, consider the credit requirements. Most balance transfer credit cards typically require good to excellent credit. Prior to submitting an application, check your credit score to understand where you stand.
Secondly, understand the terms associated with the card. Familiarize yourself with any limitations on the amount you can transfer, the duration of the promotional 0% APR period and the time frame within which you must transfer a balance after opening the account.
Lastly, consider the presence of any fees. Balance transfer fees typically range from 3% to 5% of the total balance being transferred, often with a minimum of $5. Take note of these fees and factor them into your decision-making process.
By carefully considering these elements, you can make an informed decision and select a balance transfer card that aligns well with your financial goals and circumstances.
Related: What kind of debt can you transfer to a credit card?
Use the introductory APR period
Acquiring a balance transfer card with a promotional APR provides temporary relief from paying the standard interest rate, but it is crucial to effectively manage the card to fully benefit from this opportunity to tackle your debt.
Ensure the accuracy of the balances you wish to consolidate and promptly initiate the transfer process. The countdown for the introductory APR period generally begins as soon as you open the account. Initiate the transfers promptly to maximize the duration of the lower rate (or interest-free period if you have a 0% introductory APR offer).
Be aware that certain cards have a balance transfer deadline, typically within 60, 90 or 120 days from account opening. After this deadline, issuers typically apply the standard APR to any transferred balances.
If the balance transfer limit on your new card is insufficient to accommodate all your existing balances, prioritize your cards based on the highest to lowest APR. Start by transferring the balance from the card with the highest APR, followed by the next highest, until you have consolidated the maximum allowed.
Paying your bill on time is also essential. Late payments result in fees that can offset the savings from consolidating your credit card debt. Moreover, falling behind on payments may lead to the loss of the introductory APR and the imposition of a penalty APR.
Bottom line
Balance transfers can be one of the most useful weapons in the world of credit cards, but only if you use them smartly and work to manage debt going forward. However, try to avoid using balance transfers as a long-term crutch.
By adhering to these guidelines and managing your balance transfer card effectively, you can take advantage of this opportunity to regain control over your debt.
Related: How to use a 0% APR credit card as an interest-free loan
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- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
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Rewards Rate
| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 3X | Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com. |
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You may be eligible for as high as 100,000 Membership Rewards® Points after spending $6,000 in eligible purchases on your new Card in your first 6 months of Membership. Welcome offers vary and you may not be eligible for an offer.As High As 100,000 points. Find Out Your Offer.Annual Fee
$325Recommended Credit
Credit ranges are a variation of FICO® Score 8, one of many types of credit scores lenders may use when considering your credit card application.Excellent to Good
Why We Chose It
There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)Pros
- 4 points per dollar spent on dining at restaurants worldwide and U.S. supermarkets (on the first $50,000 in purchases per calendar year; then 1 point per dollar spent thereafter and $25,000 in purchases per calendar year; then 1 point per dollar spent thereafter, respectively)
- 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
- Packed with credits foodies will enjoy
- Solid welcome bonus
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
- $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
- Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.