The Ultimate Guide to Using a Balance Transfer Credit Card to Pay Off Holiday Debt

If you racked up holiday debt this year, you’re not alone. A new study from Magnify Money noted that Americans with holiday debt added an average of $1,054 to their balances during the 2017 holiday shopping season. This figure is up 5% from last year, and a full-fledged representation of our love affair with plastic. If you can’t afford your holiday gift list, just charge it and worry about it later, right?

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    Of course, it’s all fun and games until that “later” date in the future actually gets here. But, now that the holidays are behind us, the shiny lights and excitement give way to credit card bills and regret. It was a blast while it lasted, but now the piper must be paid.

    Here’s the good news: It’s possible to pay off holiday debt without paying interest if you play your cards right. By signing up for a balance transfer credit card that offers 0% APR for anywhere from nine to 21 months, you can stop paying interest and make sure every cent of your payment goes toward your balance.

    There are some limitations to these offers, as well as some caveats to consider. We’ll get to those in a moment.

    What Is a Balance Transfer Credit Card?

    Before you can learn how to make the most of a balance transfer offer, it’s crucial to understand what these offers are and how they can help you save money. Simply put, a balance transfer credit card is a type of card that comes with an introductory zero-interest promotional period that lasts anywhere from nine to 21 months.

    Once you sign up for a balance transfer credit card, you transfer your old high-interest credit card balances to your new card and begin carrying those balances at 0% APR. Ideally, you’ll want to stop using both your old credit cards and your new balance transfer credit card for purchases at that point so you can focus your efforts entirely on paying off debt.

    Now, here’s the fine print. Some (not all) balance transfer credit cards charge a balance transfer fee of 3% to 5% of your balance as an upfront charge. So, if you transferred a $1,000 bill you racked up over the holidays to a card that charged this fee, you would need to pay $30 to $50 upfront just to score the 0% APR introductory offer.

    Also keep in mind that, once your introductory offer ends, your card’s interest rate will reset to normal and your zero-interest days are over.

    Six Steps to Using a Balance Transfer to Pay Off Holiday Debt

    With these details in mind, it’s smart to have a plan in place before you use a balance transfer credit card to pay off debt. Here are some of the steps you should take as you move through the process and prepare to pay off your holiday debts for good.

    Step 1: Figure out what you owe.

    The first step to using a balance transfer credit card in the right way is figuring out how much debt you have to transfer over. To do this, you’ll want to get out all your credit card and personal loan statements and add them all up. Ideally, you’ll want to transfer as much high-interest debt to your new 0% APR credit card as you can.

    Let’s say you have three credit cards with balances of $2,000, $1,500, and $500, respectively. When you apply for a new zero-interest credit card, you should hope to get approved for a new credit limit of at least $4,000, so you can transfer all your debt over. (However, that’s cutting it pretty close: A bigger cushion between balance and credit limit is better for your credit score.)

    Either way, you need to know how much you owe and to whom before you sign up for a balance transfer credit card. Make sure you have all your account numbers and exact balances. By having the information ready, you’ll be in the best position to move onto steps 2, 3, and 4.

    Step 2: Choose a balance transfer offer and run some numbers.

    Once you know how much you owe and to whom, you need to figure out which balance transfer offer is best for your needs. If you owe a relatively small amount of money, a card with no balance transfer fee and a shorter introductory offer may be ideal. But, if you owe a lot, you may be better off paying a balance transfer fee to get a longer 0% APR timeline.

    Here’s an example that can help you run your own numbers: Let’s say you owe the balances mentioned above on three credit cards: $2,000, $1,500, and $500 for a total debt load of $4,000. Ideally, you’ll want a balance transfer card that makes it possible to pay off all your debts at 0% APR.

    If you signed up for the Chase Slate® (currently unavailable), you would avoid paying a balance transfer fee (as long as you transferred your balances within the first 60 days, then 5% with a minimum of $5) and have 15 months at 0% APR to pay down your debt with no interest. To become debt-free during that timeline, you would need to commit to paying $267 per month for 15 months ($4,000 / 15 months = $267 per month).

    Now let’s say you’re also considering the Citi® Diamond Preferred® Card, a card that isn’t on our list but offers 0% for 12 months APR for 0% for 21 months on balances and purchases then an ongoing 13.74% - 23.74% variable. The kicker is, this card charges a 3% balance transfer fee upfront.

    In this case, you would add 3% of your transferred balance – or $120 – to your bill upfront, bringing your total debt load to $4,120. But you would also have 0% for 21 months to pay this off without accruing any interest, which means you’d only have to pay $228.88 per month during that timeline ($4,120 / 18 months = $228.88 per month). While this lowers your monthly payment significantly, you also need to commit to making payments for six extra months.

    No matter how much you owe, make sure you take the time to run the numbers to see how much you would need to pay each month to pay off your debt entirely. It may be worth it to pay a balance transfer fee to buy yourself more time at 0% APR in some cases. But, if you feel you can make a higher monthly payment, choosing a card with no balance transfer fee and a shorter introductory offer could leave you better off.

    Step 3: Get approved for a balance transfer card and transfer your balances over.

    Once you’ve chosen a balance transfer offer for your situation, the next part is easy. Simply apply for the best balance transfer credit cards online to get an answer within minutes.

    Once your card is approved, find out whether your credit limit is high enough to transfer all your balances over. At this point, you may transfer your balances to your new card over the phone or online depending on the offer you sign up for. Either way, you’ll need your account numbers and balances to make the transfer.

    Step 4: Make sure your old credit card balances are zero.

    Once your balances are transferred over to your new credit card, don’t forget to check your old cards to make sure their balances are at zero.

    Because credit card interest accrues daily, it’s possible your old credit cards could have a small balance after you transfer the bulk of your balance over. If they have a small balance, pay them off right away.

    Step 5: Stop using your credit cards!

    The next step to paying off a balance with a 0% APR credit card is simple in theory, but not so easy to do. Stop using your credit cards!

    If you want to avoid piling on more debt while you pay down your holiday balances, you need to avoid using your old credit cards altogether – even though seeing a $0 balance may tempt you to use them. Put them away in a sock drawer or freeze them in a block of ice if you must, but don’t fall into old habits and rack up more debt.

    In terms of your new balance transfer card, you should also avoid using it for purchases. Not only will using your card for purchases make it harder to pay debt off, but it could cost you a bundle in interest payments, too. Keep in mind that some balance transfer cards offer 0% APR on balance transfers only, while others offer zero interest on transfers and purchases. If your card only offers 0% APR on balance transfers and you use it for purchases, you’ll begin accruing interest on those purchases right away.

    Step 6: Focus on paying off as much debt as you can while you have 0% APR.

    Now that you’ve stopped using your cards and figured out a game plan to get out of debt, it’s time to focus in on your goal. Remember that scoring 0% APR on your credit card balances is extremely valuable: It makes it easier to get out of debt faster, since every penny you pay toward your bill goes directly toward the principal and not toward interest. By paying as much as you can and avoiding new debt, you can use this time to your full advantage.

    Balance Transfer Credit Cards: What to Watch Out For

    While balance transfer credit cards are valuable tools that can help you pay off debt faster, that doesn’t mean they’re risk-free. To get the most of your balance transfer, you’ll want to avoid certain pitfalls. Here are the main “gotchas” to be aware of:

    #1: Avoid complacency.

    Once you open a balance transfer card and transfer your balances over, you may see your average minimum payment drop since your new payment doesn’t include interest. While it may be tempting to pay the lower minimum payment and pocket the difference, this will not help you get out of debt over the long run.

    Avoid complacency and make sure you’re dedicated to becoming debt-free before you sign up for a balance transfer credit card. If you’re only going to make minimum payments toward your debt, it’s unlikely this strategy will leave you much better off once the introductory rate expires.

    #2: Have a backup plan.

    We already mentioned how your new balance transfer credit card may not have a high enough limit to transfer all your debts over. If you’re afraid that may be the case, it makes sense to have a backup plan.

    Let’s say you have $8,000 in high interest debt but your new balance transfer credit card only has a limit of $6,000. In that scenario, it might be wise to pay the minimum payment on your 0% APR balance for a while so you can focus on paying off your leftover debt that’s still at a high interest rate.

    Of course, you could also apply for a second balance transfer card from another issuer to try to transfer those balances over as well. Just remember that applying for too much new credit may have a negative impact on your credit score.

    #3: Stick to cash or debit while you pay down debt.

    Using credit cards while you’re trying to pay off credit card debt is like playing with fire. It might seem convenient to use credit and you may tell yourself you’ll pay it off right away, but life happens and it’s far too easy to let your spending get out of hand. If you’re serious about paying off debt, you’ll want to stick to cash or debit.

    #4: Make sure your balance qualifies for a transfer.

    Some balance transfer credit cards only let you transfer a balance over if it comes from a different bank. The Chase Slate® (currently unavailable), for example, won’t let you transfer balances from other Chase credit cards. If you have debt with Chase and still want a card with no balance transfer fee, you should consider a no-fee card from another bank.

    #5: Watch out for rewards that entice you to spend.

    Some balance transfer credit cards offer 0% APR and a rewards program. However, pursuing rewards while you’re trying to pay off debt is a bad idea. Why? Because pursuing rewards requires using your credit card, and using your card works against your goals when you’re trying to dig out of debt.

    Your best bet is not using credit cards and holding off on earning rewards until you are debt-free. Trust us; the small amounts of cash back you earn won’t be worth it when your introductory offer ends and you’re paying 15% APR or more.

    Holly Johnson is an award-winning personal finance writer and the author of Zero Down Your Debt. Johnson shares her obsession with frugality, budgeting, and travel at

    Did you rack up holiday debt this year? If so, how much? How do you plan to pay it off?

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    Holly Johnson

    Contributing Writer

    Holly Johnson is a frugality expert and award-winning writer who is obsessed with personal finance and getting the most out of life. A lifelong resident of Indiana, she enjoys gardening, reading, and traveling the world with her husband and two children. In addition to The Simple Dollar, Holly writes for well-known publications such as U.S. News & World Report Travel, PolicyGenius, Travel Pulse, and Frugal Travel Guy. Holly also owns Club Thrifty.