When you carry a balance on your credit card month after month, interest payments can make it seem like you’re trying to climb out of a hole using a shovel. You need a different kind of tool to get your credit moving in the right direction. Used correctly, a balance transfer credit card can do a great deal to help you reduce credit card debt. For example, a balance transfer card with 0% introductory APR lets you avoid interest and focus on paying down the principal.
A specialized card like the Discover it® 18 Month Balance Transfer Offer can temporarily put the brakes on interest payments with 0% introductory APR. It also offers the opportunity to earn rewards while you’re paying down debt — 5% cash back in rotating categories (plus 1% on all other purchases). If you need to transfer a large balance or multiple balances, check out the Chase Slate®. It doesn’t charge a balance transfer fee for the first 60 days.
We’ve chosen these cards as our Best Overall and Best for Large Balances, respectively. With some financial discipline and the right balance transfer card, you can start turning your credit around right away. Find your ideal balance transfer card and apply online in minutes.
The Best Balance Transfer Credit Cards for 2017
The Simple Dollar’s Top Picks
- Discover it® 18 Month Balance Transfer Offer
- Chase Slate®
Best for Large Balances
- Chase Freedom®
Great Signup Bonus
- Blue Cash Everyday® Card from American Express
Best Rewards for Everyday Purchases
- Barclaycard Ring™ Mastercard®
Discover it® 18 Month Balance Transfer Offer
THIS QUARTER’S BONUS CATEGORY:
Through the end of June 2017, home improvement stores and wholesale clubs are the 5% Cashback Bonus® category for Discover it® cardmembers.
The Discover it® 18 Month Balance Transfer Offer has the longest 0% introductory APR of any card on our list, a full 18 months. If you transfer a balance to this card, you get even more time to pay it off at the introductory zero-interest rate. This distinction makes it our Best Overall pick for balance transfer cards.
The Discover it® 18 Month Balance Transfer Offer also has a generous rewards program highlighted by 5% cash back on purchases in rotating categories, as well as 1% cash back on other purchases. At the end of your first year as a cardmember, an automatic Cashback Match™ will double the rewards you’ve earned. Redeem your rewards for statement credits to pay off your balance even more quickly.
The Discover it® 18 Month Balance Transfer Offer does double duty as a balance transfer card and a cash back rewards card, with no annual fee. You could find yourself keeping this card for the rewards program long after you’ve used it to pay off a balance.
How To Use It
- You could turn $200 into $400 with Cashback Match™. Get a dollar-for-dollar match of all the cash back you’ve earned at the end of your first year, automatically.
- Earn 5% cash back in rotating categories each quarter like gas stations, Amazon.com, restaurants, wholesale clubs and more, up to the quarterly maximum each time you activate. Plus, 1% cash back on all other purchases.
- Redeem your cash back for any amount, any time. Cash rewards never expire.
- 100% U.S. based customer service.
- Get your FICO® Credit Score for free on monthly statements, on mobile and online.
- No annual fee.
- Click "APPLY NOW" to see rates, rewards, FICO® Credit Score terms, Cashback Match™ details & other information.
- Transfer a balance from a high-APR card and pay off as much as you can during the introductory 0% APR period.
- Earn 5% cash back on eligible purchases in Discover’s rotating categories each time you activate. (Note: if you forget to activate your 5% rewards, you’ll earn the standard 1% on purchases in the bonus category. We recommend setting a quarterly activation reminder to maximize your rewards.)
- Monitor your FICO® Credit Score for free on your monthly statement and through your online account portal.
The fee for each transferred balance is 3%. Use The Simple Dollar’s Debt Payoff Calculator to estimate how much interest you’ll pay on your current balance. If the Total Interest is more than 3% of your current balance, the Discover it® 18 Month Balance Transfer Offer is a good fit. If the Total Interest is below 3% of your balance, consider the Chase Slate® for its 60-day $0 intro balance transfer fee.
The Discover it® 18 Month Balance Transfer Offer is a very valuable balance transfer card. The 18-month introductory 0% APR sets it apart from other cards on this list. Also, the cash back rewards on rotating categories and first-year Cashback Match™ make it worth keeping for at least 12 months to help you maximize its value. You can pay off your balance early (and interest-free!) while earning cash back rewards for a variety of purchases.
Best for Large Balances:
If you want to transfer a large credit card balance or multiple balances, the Chase Slate® offers a more economical alternative to cards that charge balance transfer fees.
Many balance transfer credit cards charge a 3% to 5% fee per transfer. For smaller balance transfers, paying a fee in the 3%-5% range could still mean saving money compared to typical APR interest of around 16%. But although the percentages of the fees are small, the cost can add up when you’re dealing with a large transfer or several transfers. In those cases, a $0 balance transfer fee could lead to considerable savings. The Chase Slate®, on the other hand, offers $0 balance transfer fees. The key is making sure to transfer your balance or balances during your first 60 days. After the introductory period ends, transfers are subject to a 5% fee.
While the Chase Slate® does not have a rewards program, it does offer introductory 0% APR for 15 months. If you’ve struggled with a large credit card balance or multiple balances, getting a 15-month reprieve from a high APR could make the Chase Slate® an attractive choice.
How To Use It
- $0 Introductory balance transfer fee for transfers made during the first 60 days of account opening
- Chase Slate named "Best Credit Card for Balance Transfers" four years in a row by Money Magazine
- 0% Introductory APR for 15 months on purchases and balance transfers
- Monthly FICO® Score and Credit Dashboard for free
- No Penalty APR – Paying late won't raise your interest rate (APR). All other account pricing and terms apply
- $0 Annual Fee
- Make your balance transfer or transfers within 60 days of opening your account to qualify for the $0 intro balance transfer fee.
- Pay off as much of the balance as possible during the intro APR period to take full advantage of the 0% offer.
- Focus on using the Chase Slate® to pay off your transferred balance instead of using it for new purchases. Once you’ve taken care of the balance, consider graduating to a card with a rewards program.
Unfortunately, you will not be able to transfer a balance to the Chase Slate® from another Chase account. If you would like to transfer a balance from an existing Chase account, we recommend the Discover it® 18 Month Balance Transfer Offer.
For consumers carrying a large balance or multiple balances on their credit cards, the Chase Slate® offers a temporary break from high APR (0% introductory APR for 15 months) and balance transfer fees ($0 intro balance transfer fee within 60 days of account opening). The card offers a sensible opportunity to pay off one or more balances with no interest and no transfer fee. Together, these features could help reduce the amount of time it takes you to become debt-free.
Great Signup Bonus:
THIS QUARTER’S BONUS CATEGORY:
Through June 30, cardholders earn 5% cash back on up to $1,500 in combined purchases at drugstores and grocery stores (not including Walmart® and Target® purchases).
The Chase Freedom® is a popular choice for cash back rewards, but that’s not all. Used correctly, this card’s signup bonus can also be very useful for paying off a transferred balance.
Even when your primary goal is paying off a transferred balance with the help of a 0% introductory APR, you can use the rewards program in a way that helps you achieve that purpose. With this card, you’ll earn 5% cash back in bonus categories each quarter you activate and unlimited 1% on all other purchases. Instead of redeeming your rewards for gift cards, consider applying your cash back to your balance to pay off your transferred balance even faster. You can do the same with the $150 bonus earned after spending $500 on purchases in the first 3 months, along with the $25 bonus earned after adding your first authorized user and making your first purchase in the same 3-month period.
The Chase Freedom® makes it easy to earn rewards, and applying your cash back to your balance can mean a quicker payoff. The generous rewards program and $0 annual fee make this card a keeper even after you’ve paid your transferred balance down to zero.
How To Use It
- Earn a $150 Bonus after you spend $500 on purchases in your first 3 months from account opening
- Earn 5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate
- Unlimited 1% cash back on all other purchases – it's automatic
- 0% Intro APR for 15 months from account opening on purchases and balance transfers, then a variable APR of 15.74-24.49%. Balance transfer fee is 5% of the amount transferred, $5 minimum
- Enjoy new 5% categories every 3 months
- Cash Back rewards do not expire as long as your account is open
- No annual fee
- Transfer a balance from a high APR card to take advantage of the 0% intro APR. Do your best to pay off the balance during the introductory period.
- Maximize your 5% cash back potential by matching purchases to the quarterly bonus categories (example: Christmas shopping at eligible department stores during the Holiday category). Remember, you’ll need to activate each quarter to earn 5% cash back.
- In the first 3 months after opening your account, spend $500 on purchases to earn the $150 bonus (15,000 bonus points). Add your first authorized user and make your first purchase to earn the $25 bonus (2,500 bonus points).
Balance transfers with this card carry a fee of $5 or 5%, whichever amount is greater. The Simple Dollar’s Debt Payoff Calculator can help you figure out whether a different card with a $0 balance transfer fee would be a better deal. If you calculate your Total Interest at less than 5% of the balance, consider the Chase Slate® and its $0 fee for balance transfers.
With its 0% introductory APR, the Chase Freedom® offers an opportunity to avoid high interest rates while paying off credit card balances. Applying cash back rewards toward your balance provides even more potential to zero out a balance quickly without paying high interest. The 0% intro APR might be the reason you get the Chase Freedom®, but the generous rewards program could be the reason to hang on to it long-term.
Best Rewards for Everyday Purchases:
Blue Cash Everyday® Card from American Express
Like our previous pick, the Blue Cash Everyday® Card from American Express offers a rewards program that can be particularly useful for paying off a balance transfer. With 0% intro APR and rewards redeemable for statement credits, this card can maximize your potential to pay off a transferred balance faster and interest-free. A $0 annual fee also makes it an affordable choice.
The Blue Cash Everyday® Card from American Express features the broadest rewards structure for everyday purchases on our list:
- 3% cash back at U.S. supermarkets (up to $6,000 per year, 1% cash back thereafter)
- 2% cash back at U.S. gas stations and select U.S. department stores
- 1% on other purchases
Earning rewards for purchases at U.S. supermarkets, select U.S. department stores and U.S. gas stations is a particularly good fit for families and frugal cardmembers. Still, any consumer who makes frequent purchases from these types of merchants can benefit from this card’s rewards program. Add in a need for a balance transfer from a high-APR card, and the Blue Cash Everyday® Card from American Express could offer an even better fit.
How To Use It
- $100 statement credit after you spend $1,000 in purchases on your new Card within the first 3 months.
- No annual fee.
- 3% cash back at U.S. supermarkets (on up to $6,000 per year in purchases, then 1%).
- 2% cash back at U.S. gas stations and at select U.S. department stores, 1% back on other purchases.
- Low intro APR: 0% for 12 months on purchases and balance transfers, then a variable rate, currently 13.99% to 24.99%.
- Expanding merchant acceptance: Over 1 million more places in the U.S. started accepting American Express® Cards in the last year.
- Cash back is received in the form of Reward Dollars that can be easily redeemed for statement credits, gift cards, and merchandise.
- Terms Apply.
- See Rates & Fees
- Take advantage of the 0% intro APR period to transfer a balance from a card with high interest rates.
- Earn the $100 signup bonus (a $100 statement credit) by spending $1,000 on purchases in your first 3 months.
- Once you’ve paid off your balance, keep the card to continue earning cash back at U.S. supermarkets, U.S. gas stations, and select U.S. department stores (plus 1% on other purchases).
The card has a balance transfer fee of 3% or $5, whichever is greater, which can be more costly if you transfer a large balance or multiple balances. Use The Simple Dollar’s Debt Payoff Calculator to see if your Total Interest is less than 3% of your balance. If so, a card like Chase Slate® with $0 balance transfer fees might be a better option.
Based on the rewards structure, the Blue Cash Everyday® Card from American Express is one of the most family-friendly, budget-friendly balance transfer cards on our list. At the same time, anyone who spends a lot on gas, groceries and other everyday purchases stands to benefit from the generous rewards program. The key for balance transfers, as always, involves leveraging rewards redeemable for statement credits and the 0% intro APR to pay off your balance faster.
Barclaycard Ring™ Mastercard®
If you want to take a simple, straightforward approach to paying off a credit card balance, the Barclaycard Ring™ Mastercard® is a sound choice.
Transferring a balance to the Barclaycard Ring™ Mastercard® can give you a break from high interest thanks to its 15-month 0% introductory APR. The introductory period is comparable to most of the cards on our list, and there’s no annual fee. The card also offers a $0 balance transfer fee, which can be useful for transferring larger balances or multiple balances.
While the Barclaycard Ring™ Mastercard® may not have a rewards program, it does let cardmembers vote on charity partners through the Giveback™ program and vote on new features. You can choose to graduate to a rewards card after you’ve paid off your transferred balance. In the meantime, the Barclaycard Ring™ Mastercard® can help you reduce or even eliminate credit card debt with a simple, zero-interest (and $0 balance transfer fee) solution.
How To Use It
- 0% Introductory APR for the first 15 months on purchases. Plus, you'll get a 0% introductory APR for 15 months on Balance Transfers made within 45 days of account opening. After that, a variable APR will apply, 13.74%
- No balance transfer fees
- No foreign transaction fees
- Chip technology, so paying for your purchases is more secure at chip-card terminals in the U.S. and abroad
- Free online access to FICO® Credit Score
- To take advantage of the 0% introductory APR, you’ll need transfer your balance or balances within 45 days of opening your account.
- Pay off as much as possible during the 15-month duration of the 0% introductory APR period.
- Go online to the Barclaycard Ring Community to vote on new card features, vote on charity partners and get advice on personal finance topics ranging from energy-saving tips to 401(k) rollovers.
If you don’t have a large balance or multiple balances to transfer, we recommend the Discover it® 18 Month Balance Transfer Offer, a rewards card that doubles as a balance transfer card. The intro APR period is 3 months longer, and you can earn 5% cash back in rotating categories.
The Barclaycard Ring™ Mastercard® may not be flashy, but it has the necessary features to help you pay off a balance from another card without interest. The 0% introductory APR and lack of annual fees or balance transfer fees make it easy to use and affordable. If you want a balance transfer card that offers a straight path toward becoming free of credit card debt, the Barclaycard Ring™ Mastercard® might fit the bill.
Best Transfer Credit Cards of 2017: Summed Up
- Discover it® 18 Month Balance Transfer Offer
- Chase Slate®
Best for Large Balances
- Chase Freedom®
Great Signup Bonus
- Blue Cash Everyday® Card from American Express
Best Rewards for Everyday Purchases
- Barclaycard Ring™ Mastercard®
Two problems, one potential solution
Problem: Compounding interest
Carrying a balance from month to month can lead to compounding interest. By not paying the principal balance down to zero, you wind up paying interest on the interest. This effect is a great thing when the interest is compounding on an investment or savings, but it can be extremely costly when applied to debt.
Problem: High credit utilization
Carrying a balance also affects credit utilization, a measure of how much of your credit limit you’re using and one of the most influential factors in determining credit scores. Ideally, your credit utilization ratio should be low, an indication that you’re not stretching the bounds of your credit limit. High balances on credit cards and loans will increase your credit utilization and can have a negative effect on your credit score.
Solution: Zero-interest balance transfer
Fortunately, transferring your credit card balances to a zero-interest balance transfer card can address both of these pitfalls. A balance transfer to a card with introductory 0% intro APR means that interest stops piling up and compounding during that introductory period. If you gradually pay off your balance in this kind of interest-free environment, your credit utilization should go down as you retreat further from the edge of your credit limit.
The Best Way To Use A Balance Transfer Card
Let’s say you have a high balance to transfer and don’t want to get hung up on the fees charged by most cards. The Chase Slate® is the only card on my list that doesn’t have any fees for transferring a balance for the first 60 days of account opening. If you need as long as possible to pay down your debts, you may want to consider a different balance transfer card with a longer timeline.
Also, balance transfer cards extend the 0% APR offer to balance transfers and purchases. These cards simply offer more flexibility to manage your cash flow and pay down debt without donating your money to high interest payments. So, you can use a balance transfer offer to make a large purchase at 0% APR, then use the promotional period to pay it off over time. The best 0% balance transfer cards will usually offer 0% on new purchases for at least 6 months.
This is obviously to incentivize people to keep spending on the cards, but if you’re not in debt, you can take advantage of it. Maybe you want to buy a couch, pay a medical bill, or tackle a home renovation project.
Other reasons to get a balance transfer card:
- Consolidate your debts or get rid of cards with fees
- Upgrade your credit card to earn more rewards
- Add a card with great service and amenities
Research More Balance Transfer Credit Cards
Our team also created a directory of the most popular balance transfer credit cards available today. This directory was used as a starting point for my research and analysis. It is updated weekly to reflect any new changes to balance transfer offers, to add new cards, and to remove any expired deals.
The balance transfer credit cards directory is customized to highlight the most important features for balance transfer credit cards. It includes every credit card that has a 0% intro APR on balance transfers and rates each offer based on a number of key factors.
Balance Transfer Credit Card Directory
In order to value each of these cards, certain features were balanced accordingly based on overall importance to the prospective cardholder. The most relevant features for balance transfer credit cards are Balance Transfer Fee, Introductory Balance Transfer APR, Ongoing APR, and Annual Fee.
Obviously the biggest feature is having a 0% intro APR. You can also use the directory to filter by signup bonus or ongoing rewards if those are features that are more important to you.
Rewards Tier Level
Great Ongoing Rewards
Balance Transfer Fee 3% or lower
Intro Balance Transfer APR 0% 12+ Months
Only Fair Credit Score Needed
To come up with a list of top balance transfer credit cards, I used the information shown in the directory above in addition to other data gathered on each credit card. For a better explanation of what was analyzed, I’ve included additional details below. Sometimes the terminology in the credit card world can be a bit confusing, so take a look if you’re unsure of anything.
Balance Transfer Fee
Credit card companies usually charge a fee of up to 3% when you transfer a balance to a new card. This means that if you transfer a $10,000 balance, you will pay an extra $300 to the credit card company. Even some of the best balance transfer credit cards on this list charge this fee.
The Balance Transfer Fee carries high importance because it can likely cost you a decent amount of money. However, depending on the card you choose, the fee may be worth it to get a few extra months of zero interest.
The Chase Slate® does not have a balance transfer fee for the first 60 days of account opening, making it the top choice on my list. The Discover it® has an industry-leading intro offer of 18 months for a balance transfer, which is six months longer than any other card, including the Chase Slate®. Deciding which of these cards to commit to may come down to knowing how much you’ll transfer, so you can decide between having no fee or the longer introductory period.
Balance Transfer Intro APR
The Balance Transfer Intro APR refers to the promotional interest rate charged for transferring a balance or making new purchases. The Intro APR is 0% for the best balance transfer credit cards. Nothing higher should be considered unless you can’t get approved.
Intro APR holds a high importance level when ranking all the top balance transfer cards simply because the main reason to transfer a balance is to stop paying interest for a period of time by taking advantage of a 0% APR.
Many times, the Intro APR is also extended to new purchases, not just balance transfers. This way, you can take advantage by purchasing items and paying them off over the introductory period without accruing interest.
Balance Transfer Intro Period
he Balance Transfer Intro Period is the time frame for which the Intro APR or other promotion is valid. As I mentioned earlier, the best balance transfer credit cards will run a 0% Intro APR on a combination of balance transfers or new purchases for at least 12 months, with some offering up to 18 months.
The Intro Period is of high importance because it controls the amount of time you can start paying down a high balance without accruing interest.
Ongoing APR is the interest rate charged on your balance after the Intro Period. The key determinant of your ongoing APR is your credit score and history. Note that there is no limit on the interest rate that can be charged by credit card companies.
Balance transfer cards have ongoing APRs that range as low as 10.99% and go beyond 20%. If you have good credit, the APR rate for you will be on the lower end. APR differs from Intro APR because it is the permanent rate. Once you get beyond the designated time period for any introductory APR offers, the credit card will default to the ongoing APR rate.
As I mentioned many times, you shouldn’t get a credit card if you plan on carrying a balance. But, if you must carry a balance after the Intro Period, look for the lowest APR possible.
Rewards Rate refers to the actual rate at which you can earn rewards on a credit card. Several of the best balance transfer cards do offer rewards on new purchases and some do not. Rewards Rate carries a low importance rating because the main purpose of a balance transfer card is to pay down debt and not earn rewards. Rewards rate is not included as a main feature in the balance transfer credit cards directory, but it does have a slight impact on some of the card ratings and you can filter by Great Ongoing Rewards.
A really good strategy is to completely pay down your balance with Chase Slate® because of its 60-day no balance-transfer fee and solid Intro Rate and Intro Period and then shift to one of the best rewards credit cards when you feel your balance is manageable. I wouldn’t recommend being overly concerned with rewards when your main focus should be on getting rid of your debt.
Top balance transfer cards, like the Discover it® 18 Month Balance Transfer Offer and Chase Freedom®, will offer rotating categories that enable you to earn 5% cash back on a variety of common purchases each quarter. The Blue Cash Preferred® Card from American Express is also a solid card for balance transfers, as it offers 6% at U.S. supermarkets on up to $6,000 per year in purchases (then 1%). Again, you should only be concerned with these rewards after you pay off your balance and start to consider using one of these cards long-term.
The Truth About Balance Transfer Credit Cards
- Look at the most important details to find the right card for your situation.
- Transfer a balance if you are facing late payment fees on a high balance.
- Consider the long-term features of the card after the balance transfer.
- Know your credit score to apply for the right card so your transfer is not delayed.
What To Do Before Getting a Balance Transfer Credit Card
Review the Most Important Details of Each Card
Most cards offer a low introductory APR on balance transfers. However, it’s critical to look at the whole deal first to get an idea if the card fits your unique situation. Again, some of the most important factors to consider are:
- Introductory Balance Transfer Rate
- Introductory Balance Transfer Length
- Balance Transfer Fee
Often, it’s the balance transfer fee that goes undetected until you’re already signed up and about to transfer your balance. You then see there are a few hundred dollars missing. This fee is charged as a percentage of the balance you are transferring over. Rates can vary by company, but they’re generally around 3%. Chase Slate® is the only card on this list that does not charge a balance transfer fee for the first 60 days of account opening.
The introductory balance transfer rate should always be 0% on any balance transfer card you consider. Never transfer a balance to any card that does not have a 0% intro rate on balance transfers.
Depending on the card you get, the 0% intro balance transfer rate will vary. Remember, you want to get a card that has a 0% balance transfer intro period for at least 12 months or longer. This gives you ample time to pay off your balance.
Check Your Credit Score
Getting a 0% balance transfer used to be a piece of cake. Since the financial crisis, the availability of this great offer has tightened up. The best terms are available to those who have good or excellent credit. It can pay to check your credit score ahead of time and make sure it aligns with the new card to qualify. If you don’t check and are denied, this could negatively impact your credit score.
You should also be mindful of credit score changes. Keep an eye on your old accounts and know how many credit cards you have open. I’ve heard stories of people going to buy a house and realizing an old credit card has dinged their credit report. You can check out our review of credit report sites for more info on how to get your score (for free).
There are various schools of thought but, generally speaking, making changes to your credit card accounts will impact your credit score. You do have some control over whether those changes are positive or negative. For some more insight into this topic, check out these tips for cancelling a credit card.
Consolidate Multiple Cards and Other Debt
In many circumstances, you can stay current on payments by taking several of your cards with high balances and consolidating them into one balance. You can avoid keeping up with multiple payments each month by tracking just one card.
Additionally, you may be able to move loans for cars, appliances, furniture, and other monthly installment payments to a low- or zero-interest balance transfer credit card. You can do this because credit card companies often issue paper checks drawn on your new credit card account. You can use these checks to pay off your installment loans (if they’re small enough) when you open a new credit card account.
Come Up with a Plan to Pay Off Your Debt
There’s no use in getting a balance transfer credit card under conditions of complete panic. Gather yourself and come up with a plan to use a balance transfer credit card as a tool to help your financial situation.
The worst thing you can do is repeat the same issue and end up not paying off your balance again on the new card you transferred your balance to. By having a plan in place on how to attack your debt, you’ll be ready to use a balance transfer credit card the right way.
The Plan: How to Gain Control of Your High-Interest Credit Card Debt
Without question, the number-one reason people seek out the best balance transfer credit cards is to help get a handle on their high-interest credit card debt. There are many reasons for accumulating credit card debt, and many of these situations involve some sort of emergency spending. Regardless of the reasons for accumulating credit card debt, getting control over your debt takes the right tools and a plan.
I’d recommend the following to get started:
- This guide (to find the best balance transfer card for your situation)
- A way to analyze your expenses
- Credit score & credit monitoring
Rule #1: Stop Digging
The first rule for getting out of a hole is to stop digging. I first heard that saying as a high-school basketball player and it’s stuck with me ever since. Odds are, if you’re reading this guide you’ve somehow found yourself in the hole of credit card debt.
It doesn’t matter how you got here. All that matters are the next steps you take, and your first step is to stop adding to your credit card debt. Get it under control.
You don’t need to cut up your existing cards or put them in the freezer as some people say. Drastic measures may be needed in extreme cases, but most people who are serious about trimming their debt can continue using a credit card without getting behind. Treat it like cash!
Rule #2: Stop Paying Interest
To stop paying interest on your credit card debt, you need to do two things:
- Find a solid balance transfer card.
- Consolidate as much as you can onto that card.
Understand Your Credit Score
You want to apply for a card that you can get approved for. While there is no way to know for sure without applying, knowing your credit score will give you a general idea of how likely it is you’ll be approved. If you’re in credit card trouble, is a good idea to sign up for a credit monitoring service so you can keep track of your score and other important changes to your credit report.
For the most part, balance transfer cards are good credit cards for people with decent credit who are trying to avoid damaging their credit and making high interest payments. If you have lower credit, there won’t be many great offers for you because most balance transfer cards won’t want to take on high risk consumers who already have a history of not paying off credit card debt.
Select the Best Balance Transfer Card for You
My recommendation for those who seriously need to pay down debt is to go with the Chase Slate® card. You won’t earn any rewards if you continue to use the card for new purchases, but this card offers the best combination of features to help you have more of your money go toward eliminating your debt.
The Chase Slate® offers a 0% intro rate on balance transfers and new purchases for 15 months. While some other cards have introductory-period offers for up to 18 months, Chase Slate® is the only card that does not charge a balance transfer fee, if you transfer your balance within the first 60 days of account opening. This fee is usually 3%, so this feature alone can save you hundreds of dollars.
A good option for balance transfers while earning cash back on new purchases is Discover it® because it has a 0% intro period of 18 months and earns up to 5% cash back in rotating categories. Keep in mind, however, this card does have a balance transfer fee and isn’t as widely accepted as Visa or MasterCard.
A very comparable card to Discover it® is Chase Freedom®. The Chase Freedom® is available as a Visa or MasterCard so it’s widely accepted everywhere.
Consolidate and Transfer Your Credit Card Debt
Once you’ve selected the proper card, gather all of your credit card debt and transfer as much as possible to the new card, starting with the highest-rate balances first. This will help you take advantage of that 0% introductory period.
Then, divide your entire balance by the number of months on your introductory period. This gives you the monthly payment you need to pay off all of your debt by the end of the intro period.
Example: Balance transfer in action
You have three credit cards with a total combined balance of $7,000. You sign up for the Chase Slate® card and transfer all of the $7,000 to the new card. Your new balance is still $7,000 because Chase Slate® does not have a balance transfer fee for the first 60 days of account opening. The 0% intro APR period on Chase Slate® is for 15 months.
In order to have the entire $7,000 paid off in 15 months, you’ll have to come up with an extra $466.67 per month. An insurmountable debt that was going to continue to grow sitting on your other cards is now somewhat manageable. The key is to find a feasible number that makes a huge dent in that debt while taking advantage of the 0% intro APR period.
Rule #3: Create the Payoff Plan
Now that you’ve selected the right tool to knock down your interest rate, it’s time to lock in a solid plan to pay off the balance.
Step 1: Understand your Spending
Your first objective is to free up cash flow you can put toward paying down your debt. To do this you need to understand your spending. Most credit card companies have online monthly statements where you can go back and see every transaction you’ve made. You can begin to see patterns and hone in on areas where you spend more than you should.
Many credit cards also provide a year-end breakdown with your spending by categories. The best cards have great online analytics that help you visualize your spending in near real time.
If your card doesn’t have any of these options, another great option is to use a free web service like Mint.com. Mint helps you expand your spending analysis outside of credit cards by linking in your bank account debit transactions, checks, and other expenditures.
Step 2: Free Up Cash
Once you know how you spend, you can figure out where to pull back. This is, of course, easier said than done. If you’re looking for some creative ways to cut spending, spend some time in the archives of The Simple Dollar. Trent, the founder of this site, shares tons and tons of useful “frugality” tips he used to get himself out of debt and still applies today.
A particularly useful starting point is Rule 9: Do It Yourself. I also recommend Trent’s advice for things to do on a money-free weekend, which will keep you entertained while you save money at the same time.
The key is to be brutally honest about the money you spend and the true value of the services you use. Take cable TV for instance. With cheap streaming services, websites, and devices, cable TV is becoming less relevant. I would save at least $150 per month if I cut it out of my budget.
Younger generations are also getting rid of their cars and moving closer into central city districts. They prefer walking to work and not having to deal with high car payments, gas, and maintenance. Car sharing services like Zipcar make going carless a reality.
Consider a few of these changes to free up cash and pay down your debt more quickly. Some of them may fit your situation while others may not, but there are options out there.
Step 3: Create a Systematic Payment Plan
Once you’ve made some changes to free up cash each month, you need to match the freed-up cash on a monthly basis to the intro period. As I did in the example above, you will take your new balance and divide it over the number of months in your introductory period, which is 15 months for Chase Slate®. This will give you a nice, smooth “payment” that you can make each month to lower your debt.
You will want to systematically siphon off that money for debt payments before it can go anywhere else. Set up automatic payments to your credit card if you can, or set up auto transfers to a different bank account you’ll use to pay your credit card bills each month. You can easily set up a free checking account or online savings account for these purposes.
Exceptions to the Rules
Exception to Rule #1: Stop Digging
This rule is not meant for extreme circumstances. Sometimes, high credit-card spending is simply unavoidable. Job losses, medical bills, and other emergencies are examples of situations where reliance on credit cards may be warranted if all other options have been exhausted.
Exception to Rule #2: Stop Paying Interest
This rule assumes you can take advantage of a 0% balance transfer credit card’s features. There are a few instances where you can’t completely stop paying interest:
- Some people may not be able to qualify for a balance transfer card.
- You may not qualify for high enough of a limit to consolidate all of your credit card debt.
- You cannot pay off all of your debt by the end of the intro period.
If you don’t qualify for a balance transfer card, creating a systematic payoff plan is even more crucial because you won’t have the safety net of 0% interest for a period of time. You will want to tweak the plan to be more aggressive in paying down your balances on the higher-interest rate cards first, then move on to lower-interest cards down the line.
If you can’t consolidate all your debt on a 0% card, you will end up paying some interest. I would transfer the highest-rate balances to the new card, then target your free cash at whatever balance could not be transferred over while maintaining your minimum payment on the new balance transfer card. Once this is paid down, you can shift the free cash to the new balance to get that under control.
If you can’t pay everything down by the end of the intro period, you will also pay some interest on the remaining balance. I recommend reviewing your spending plan at the end of the intro period to see if you can free up more cash to apply to the remaining balance. Continue your systematic payment plan as long as it takes.
Exception to Rule #3: Create the Payoff Plan
There really are NO exceptions to this rule. You will never pay off your debt without a solid plan. The only caveat is in a situation where a person might have have large lump payments instead of creating smooth monthly payments. Salespeople often encounter this situation because their pay is highly variable. Inheritances also create a situation where someone would have a lump payment.
Regardless of how you pay, you must still have a plan and understand the costs and benefits of your approach.
For instance, the key is to make the payments as quickly as possible on interest-bearing debt. If you have interest-bearing credit card debt, you never want to “save” money in a bank account to make later payments unless you have to. This is because your interest rate is higher than anything you will earn in a bank account, so making frequent payments is more effective.
By following these rules, and understanding if any exceptions apply to your situation, you will be well on your way to tackling your credit card debt and liberating your financial future in 2017 and beyond.