Money

These credit cards can save you thousands if you're in debt, but half of Americans don't know they exist

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If you're in revolving credit card debt, you may want to consider getting a balance-transfer card, which allows you to transfer a balance from a card with a high interest rate to one with a low interest rate. That gives you an opportunity to pay off debt faster and at a lower cost.

Considering how much they can save you in interest payments, CompareCards.com Senior Industry Analyst Matt Schulz calls them a "godsend."

But most Americans who could benefit from a balance-transfer card have never used one, according to a survey for CompareCards.com by Lending Tree. In fact, "49 percent of U.S. adults don't even realize balance transfer cards exist," says industry analyst Ted Rossman, citing a recent CreditCards.com survey.

How balance-transfer credit cards work

The average American borrower had a credit card balance of $5,644 last year. If you maintain that balance and pay interest on it at an annual percentage rate of 15 percent, you'd pay about $850 in interest every year. If you started paying off the card at $200 per month, it would take 36 months and cost $1,360 in interest payments to wipe out the debt.

Now, let's say you transfer the balance to the U.S. Bank Visa Platinum card, which has an introductory offer of 0 percent APR for 20 months on any balance you transfer to the card. Assuming you transfer the entire balance of $5,644 to this card and pay it off at the same rate, it will take 30 months and cost you only $265 on top of the principal to pay it off.

That's accounting for the balance transfer fee, too, which tacks on an additional 3 percent of your balance, or $170 in this case, to your debt. It's also assuming your variable APR after the introduction period is 11.99 percent, the lowest the U.S. Bank Visa Platinum offers.

The American Express EveryDay requires no balance transfer fee and has 12 months of no interest. Assuming you qualify for a 14.99 percent APR, it would take you 31 months to pay off the balance and cost you $405 on top of the principal.

Credit card
Total interest you'll pay
Months to pay it off
Current card with no introduction offer $1,360 36 months
US Bank Visa Platinum $265 30 months
American Express EveryDay $405 31 months
Source: CNBC Make It

How payments are structured

Keep in mind that, when you use a balance-transfer card to make new purchases, it can get complicated if the no-interest introductory offer only applies to balance transfers and not new debt. This is the case when a credit card has different rates for its introductory balance transfer APR and introductory purchase APR.

When you make a minimum payment — which is usually 1 to 3 percent or around $25 — your credit card issuer will put it toward your balance with the lowest interest rate. If you're still in the introductory period, it will go toward the balance you transferred onto the card with a 0 percent APR.

Any payment above the minimum will go toward your balance with the highest interest, thanks to the Credit CARD Act of 2009.

Let's say your new card has no introductory APR offer for purchases and requires a minimum payment of $25. If you put $500 on it one month and then go to pay that off, your first $25 would go toward the balance you transferred over from another card, not the balance you just accumulated making new purchases.

In order to pay off what you borrowed that month in full and avoid a potentially high purchase APR, you'd have to pay off the amount you spent on the card plus the minimum payment — in this case, $525. Any additional payment would then go toward the balance with 0 percent APR that you transferred over.

If you're paying hundreds or thousands of dollars per year in interest on revolving credit card debt, you may want to consider consolidating your debt onto a low-interest credit card. As long as you use the card appropriately, making payments on time and not adding to your balance with purchases you can't afford, the move can speed you on your way to becoming debt-free.

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This story was originally published in August 2018 and has been updated to include the CreditCards.com survey and reflect American Express EveryDay and U.S. Bank Visa Platinum policy changes.