If you’re tired of struggling to pay off high-interest credit card debt, performing a balance transfer can be an extremely smart idea. With a balance transfer credit card, you can score 0% interest for anywhere from 12 to 18 months. If you use that time properly and really attack your debts, you could emerge from the experience entirely debt-free – or at least, much better off than when you started.
Still, signing up for a balance transfer credit card and transferring your high-interest debts may not be enough. If your effort stops there – and you don’t take any additional steps to improve your situation – you could easily find yourself worse off by the time your new card’s 0% APR introductory offer ends.
Five Crucial Steps After You Complete a Balance Transfer
If you want to use a balance transfer credit card to get out of debt and stay out of debt, you’ll need to perform several key steps even after your balance transfer is complete. Whether you’re considering a balance transfer or just completed one, here’s what you should do next:
Step 1: Make sure balances on your old credit cards and loans are down to zero.
When you transfer balances from one loan or credit card to a balance transfer card, it’s crucial to make sure your old balances are zeroed out. Occasionally some rogue interest or a small part of the balance will fail to transfer to your new card and linger in your old account — where it quietly can rack up late fees or penalties while you’re more focused on paying down your new card. Make sure to pay off any remaining small balances on your old cards or loans right away.
While it might be tempting to close down your old cards, it’s a smarter idea to keep them open (with a zero balance) provided they don’t charge an annual fee. Because the FICO scoring method uses the length of your credit history to determine part of your score, keeping old accounts open can improve your score. Likewise, closing old accounts in good standing can shorten your average credit history and actually damage your score in the short term.
Step 2: Stop using your credit cards altogether.
Getting out of debt becomes easier when you’re not paying interest on your purchases, but the task can quickly become impossible if you keep using your credit cards for regular spending. When you’re using a balance transfer credit card to make headway on your debt, the best thing you can do is quit using your credit cards altogether.
Some cards – like the Discover it® Balance Transfer – offer a 0% introductory APR on purchases for a certain length of time, and those offers can be tempting. But it’s important to remember that interest will begin to accrue the second your introductory offer is up. In the case of the Discover it® Balance Transfer, you get 0% APR on purchases for only six months and then the ongoing APR of 14.24% – 25.24% Variable APR.
The best thing you can do is transfer your balance to one of the better balance transfer credit cards, then stick all your cards in a sock drawer for safekeeping. If the temptation is too great, you can even cut them up; you can always request a replacement card once you’re finally debt-free. Remember, you’re not going to get out of debt if you keep digging a deeper hole.
Step 3: Create a written monthly budget.
A desire to get out of debt is crucial if you want a balance transfer to work in your favor. Yet, it’s also important to figure out what got you into debt in the first place. What happened with your spending that led you to the point where you needed a balance transfer? And how might you change those behaviors?
For most people, tracking their spending and creating a written budget – at least temporarily – is the smartest way to get a handle on their spending problems. If you want to make a change, the first step to take is to figure out where you’re going off track – and how to change it.
Tracking your spending – as in, getting out your last few months’ bank statements to see where your money is going – is a crucial component of this journey. Once you see where your spending has caused trouble in the past, you can begin each month anew with a written budget that sets realistic spending limits but reins in the areas where you tend to go off track the most.
Step 4: Figure out how much debt you can pay off.
Once you have a handle on your spending and income, it becomes a lot easier to figure out how much debt you can feasibly pay off during your card’s 0% introductory period.
Let’s say you owe $8,000 in credit card debt and just transferred it to the Chase Slate® (currently unavailable). Because the Chase Slate® doesn’t charge a balance transfer fee for the first 60 days (after that, 5% with a minimum of $5), your new credit card balance is the same $8,000 you owed before. And per this card’s introductory 0% APR offer, you now have 15 months to pay off your debt for good..
By dividing your $8,000 balance by 15 months, you’ll see you need to pay around $533 each month to become debt-free during your new card’s introductory offer. If you can’t pay that much, you’ll want to pay as much as you can to get your balance as low as possible before the introductory period ends. Remember, regular interest will begin to accrue once your card’s 0% introductory APR runs out.
- Related: Debt Payoff Calculator
Step 5: Create a contingency plan to follow toward the end of your card’s 0% APR introductory offer.
If you won’t be able to become completely debt-free during your card’s introductory APR period, it’s crucial to create a backup plan toward the end. If your card offers 18 months with a 0% introductory APR, and you won’t have the whole balance paid off before it ends, you’ll want to start shopping around for another offer around 16 months into it.
That’s right; there are no rules that prevent you from transferring a balance at 0% APR to another balance transfer credit card. Plus, there is nothing wrong with this strategy provided you’re not spending on credit any longer and you have launched an actionable and realistic plan to get out of debt – and stay out.
By shopping around for a new offer as your old offer ends, you can start the process over and buy yourself even more time to become debt-free without paying a dime of interest.
The Bottom Line
If you’ve just completed a balance transfer and want to make the most of it, these steps can help. Remember, transferring a balance to a card that offers 0% interest for a limited time isn’t enough to get you out of debt on its own. To create the debt-free lifestyle you really want, you need to identify your spending weaknesses, attack your debts with fervor, and, most importantly, stop digging.
Credit Card Directory
The following directory highlights some of the best balance transfer credit cards and offers currently available. Sort by card type, benefits, and offer details.
Rewards Tier Level
Great Signup Bonus
Great Ongoing Rewards
Balance Transfer Fee 3% or lower
Intro Balance Transfer APR 0% 12+ Months
Only Fair Credit Score Needed
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