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
TPG featured card
at American Express's secure site
Terms & restrictions apply. See rates & fees.
| 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. |
| 5X | New! Earn 5X Membership Rewards® points on prepaid hotel stays booked through AmexTravel.com or the Amex Travel App. |
| 3X | Earn 3X Membership Rewards® points on flights booked through AmexTravel.com, the Amex Travel App, or purchased directly from airlines. |
| 2X | Earn 2X Membership Rewards® points on prepaid car rentals booked through AmexTravel.com or the Amex Travel App and cruises booked and paid through AmexTravel.com. |
| 1X | Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases. |
Pros
- Valuable dining and food-related credits
- Flexible rewards with airline and hotel transfer partners
- Multiple travel and purchase protections
- No foreign transaction fees
- Access to Amex Offers for additional savings (enrollment required)
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 $8,000 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.
- New! Earn 5X Membership Rewards® points on prepaid hotel stays booked through AmexTravel.com or the Amex Travel App.
- Earn 3X Membership Rewards® points on flights booked through AmexTravel.com, the Amex Travel App, or purchased directly from airlines.
- Earn 2X Membership Rewards® points on prepaid car rentals booked through AmexTravel.com or the Amex Travel App and cruises booked and paid through AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- Pay It® lets you tap in the American Express® App to quickly pay for small purchase amounts throughout the month and still earn rewards the way you usually do. Plan It® gives you the option to split up big purchases into equal monthly payments with a fixed fee. You’ll know upfront exactly how much you’ll pay.
- Updated! $120 Dining Credit: Earn up to a total of $10 in statement credits monthly when you pay with the Gold Card at Grubhub (including Seamless), Buffalo Wild Wings, Five Guys, The Cheesecake Factory, and Wonder. This can be an annual savings of up to $120. Enrollment required.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year at over 10,000 qualifying U.S. Resy restaurants after you pay for eligible purchases with the American Express® Gold Card. That’s up to $50 in statement credits semi-annually. Enrollment required.
- $84 Dunkin' Credit: Earn up to $7 in monthly statement credits after you pay with the American Express® Gold Card at U.S. Dunkin’ locations. Enrollment required.
- $120 Uber Cash on Gold: Enjoy up to $120 in Uber Cash annually with your Gold Card. Just add your Card to your Uber account and you'll get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an Amex Card for your transaction.
- New! As an American Express® Gold Card Member, you can enjoy complimentary Hertz Five Star® Status. Enjoy benefits like skipping the counter at select locations, adding an additional driver at no additional cost*, and vehicle upgrades**. Benefit enrollment and Hertz Gold+ registration are required. *Additional drivers must meet standard rental qualifications and must be a spouse or domestic partner to qualify as complimentary. Other additional drivers subject to fees. **Benefits are subject to availability and vary by location. Additional Hertz program Terms and Conditions including age restrictions apply.
- Take advantage of a $100 credit towards eligible charges* at over 1,300 upscale hotels worldwide when you book The Hotel Collection through AmexTravel.com or the Amex Travel App **. *Eligible charges vary by property. **The Hotel Collection requires a two-night minimum stay.
- Book your travel through the Amex Travel App with added peace of mind – backed by American Express® service and support. Only for American Express® Card Members.
- Whenever you need us, we're here. Our Member Services team will ensure you are taken care of. From lost Card replacement to statement questions, we are available to help 24/7.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.