Advice & Expertise Blog

Can a Credit Card Actually Help Me Pay Off Debt?

Can a Credit Card Actually Help Me Pay Off Debt?

June 12, 2018

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.

If you’re drowning in debt and struggling to find a way out, you may believe a new credit card is the last thing you need. While you are likely right when it comes to traditional cards, there is one type of card that could actually make paying down debt easier. The type of card you’ll want to consider in this situation is called a balance transfer credit card.

With a balance transfer card, you can secure 0% APR on balance transfers from 9 to 21 months. Avoiding interest for a limited time can help you pay down debt in two ways. First, the fact that you’re not paying interest means that every cent you pay toward your debt will go toward principal. Second, without any interest accruing and your entire payment going toward principal, you can pay down debt considerably faster.

How to Choose a Balance Transfer Card

While a balance transfer card can be an excellent tool for paying down debt, certain cards work better for different consumers. Here are some steps you can take to make sure you wind up with the ideal card for your needs.

Consider the balance transfer fee.

While securing 0% APR for 9 to 21 months can help you pay off debt at a furious pace, it’s important to note that many of these cards charge an upfront balance transfer fee between 3% and 5%. This means you’ll need to pay $300 to $500 for every $10,000 in balances you transfer, which can be well worth it when you consider the interest savings you get in return.

Keep in mind, however, that not all balance transfer cards charge this fee, and that you can save considerable sums if you opt for a fee-free option. The Chase Slate® is one of the best options available since there is no annual fee and you get 15 months at 0% APR for balance transfers.

Figure out how much time you need to pay down debt.

Take the time to figure out how much debt you need to transfer and how long you will need to pay it off at 0% APR at your current pace. If you owe $5,000 on credit cards and can afford to pay $400 per month right now, for example, you’ll need 0% APR for at least 13 months (13 months @ $400 per month = $5,200). Make sure to factor the balance transfer fee into the equation as well if you opt for a card that charges this fee.

Find the longest 0% APR offer possible.

If you need as much time as possible to pay down debt, you may want to look for a card with the longest 0% APR period available, regardless of whether it charges a balance transfer fee. Very often, it is worth paying the fee to get a longer promotional period and more time to pay down debt.

Make sure to run the numbers before you decide, and weigh the pros and cons of paying a balance transfer fee to score several more months without interest on your debts.

How to Use Balance Transfers to Your Advantage

Once you decide on a balance transfer card, you need to take steps to make the most of the time you have at 0% APR. Here’s exactly how to maximize your balance transfer offer:

  • Transfer all your high interest balances to your new card immediately. To make the most of your new balance transfer card, you’ll want to transfer all your high interest debts as quickly as you can. This can include not only credit cards but personal loans and other debts as well.

  • Read your card’s fine print. Make sure to read your card’s fine print to check for special conditions. Some balance transfer cards only offer 0% APR on balances transferred within 45 or 60 days of account opening, which is yet another reason to transfer balances as quickly as you can.

  • Pay as much as you can toward your debts every month. If you want to use your balance transfer card to get out of debt, you have to make sure you pay as much as you can each month. Don’t slack off just because you aren’t paying interest. If you do and you pay only the minimum on your new card each month, you won’t be much better off when your card’s 0% APR offer ends.

  • Stop using credit! In order to pay down the debts you have, you have to stop borrowing money and using credit. For this reason, you should switch to cash or debit for bills and regular purchases and stash your credit cards somewhere safe. If you keep using credit cards, you will never get out of debt.

The Bottom Line

While it may seem strange that a credit card could help you get out of debt, balance transfer cards are a rare breed. These cards give you a limited time to pay down balances without any interest, which can be a huge advantage if you use that time wisely.

With that being said, there are numerous pitfalls to avoid if you try this strategy for yourself. It’s far too easy to become complacent about your debt when you know interest isn’t being charged. You may also never get out of debt if you continue using credit cards.

At the end of the day, a balance transfer card can help you get out of debt if you are also willing to help yourself. To make the math work, however, you have to be disciplined and committed to becoming debt-free.




Advertiser Disclosure

CreditSoup is an independent, advertising-supported comparison service. The card offers that appear on this site are from companies from which CreditSoup receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). CreditSoup does not include all card companies or all card offers available in the marketplace. CreditSoup may use other proprietary factors to impact card offer listings on the website such as consumer selection or the likelihood of the applicant’s credit approval.