How a Balance Transfer Can Help You Pay Off Holiday Debt
December 1, 2017
Editorial Disclaimer: Information in these articles is brought to you by CreditSoup. Banks, issuers, and credit card companies mentioned in the articles do not endorse or guarantee, and are not responsible for, the contents of the articles.
It’s no secret that the holidays can be expensive. Between travel, gift exchanges, and decorations, many end up spending hundreds or even thousands each year. In fact, a Magnify Money survey found that Americans added more than $1,000 in holiday debt in 2016.
And most can’t pay it off quickly; many need four months or more to eliminate their holiday debt balance. It’s not uncommon to be still paying off Christmas presents in June.
If you belong to the majority who use credit cards to finance the holidays, high interest rates and low minimum payments can make it hard to get rid of your debt. Interest rates can cause your balance to balloon quickly and, if you only pay the minimum, it can take years to pay off your credit card debt in full.
To make it easier, consider using a balance transfer credit card with a 0 percent APR promotion. With this approach, more of your payment goes towards principal, rather than interest, so you can pay off the debt faster. Simply move your balance over and pay it off interest-free before the promotion ends.
Here are the top cards that are offering balance transfer offers to consider:
No balance transfer fee: Chase Slate®
Most balance transfer credit cards charge a fee to move your balance. On average, you’ll pay three percent of the transfer amount. The Chase Slate®, on the other hand, won’t charge you anything at all as long as you transfer your balance within the first 60 days.
You’ll have 15 months to pay off the balance interest-free, and the introductory promotion also applies to new purchases. Plus, the card has no annual fee and you’ll get free access to your FICO credit score.
The main drawback to the Chase Slate® is that it doesn’t offer rewards. So, once the 0 percent APR promotion is over, the card doesn’t offer much value.
High rewards rate: Barclaycard CashForward™ World Mastercard®
The Barclaycard CashForward™ World Mastercard® won’t waive your balance transfer fee, but it makes up for it by offering some of the best cash-back rewards available.
You’ll get a 0 percent APR on balance transfers and new purchases for 15 months. You’ll also earn 1.5 percent cash-back on every purchase. There’s no annual fee, but the card’s balance transfer fee is three percent of the transfer amount or $5, whichever is greater.
Longest promotion: Santander Sphere®
You’ll get a whopping 24 months with no interest on balance transfers with the Santander Sphere®. You’ll also get a 0 percent APR promotion on new purchases for the first 12 months.
The card has no annual fee and also offers rewards, giving you one point per dollar on all purchases. The card’s balance transfer fee is four percent of the transfer amount or $10, whichever is greater.
Big sign-up bonus: Chase Freedom®
If you plan to use your new card for new purchases, the Chase Freedom® has an offer that’s tough to refuse. You’ll get a $150 sign-up bonus after you spend $500 in the first three months.
What’s even more impressive, you’ll earn 5 percent cash back on certain everyday spending categories that rotate every quarter, plus 1 percent on everything else.
The card’s 0 percent APR promotion is nothing to sniff at either. You’ll get 15 months with no interest for both balance transfers and new purchases, then a variable APR of 16.99-25.74%. Balance transfer fee is 3% of the amount transferred, $5 minimum. The card has no annual fee, but it does charge a 5-percent balance transfer fee.
Longest promotion on purchases and transfers: Citi Simplicity®
If you need some time to pay off high-interest debt and also have a big purchase coming up, the Citi Simplicity® has the best deal. You’ll get a 0 percent APR promotion on balance transfers and new purchases for 21 months.
There’s no annual fee and even no late payment fee. But the card does charge a balance transfer fee of 3 percent or $5, whichever is greater. There’s also no rewards program.
Which balance transfer card should you choose?
There’s no one best balance transfer credit card out there for everyone. The right one for you depends on your needs and preferences. For example, if you want long-term value beyond the introductory promotion, you’ll want to consider a card that offers rewards.
And if you have a large balance you’re moving over, you might want to consider a card with no balance transfer fee, or at least a card with a super-long promotional period.
Whichever card you choose, make sure you have a plan to pay off the balance as soon as possible. All of these cards charge fairly high interest rates once the promotion is over, so you’ll want to get rid of the debt within the promotional period.
As you use a balance transfer card to tackle your debt, you’ll be able to pay it off more quickly and with less cost.