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Credit Cards

How to use a balance transfer card to pay off your holiday debt

Here's how you can transfer your credit card balance to a 0% APR card to save on interest charges.

Steve Prezant | Image Source | Getty Images

The holiday season can be expensive for many Americans with the average family spending nearly $1,000 in 2021, according to the National Retail Federation. Even before all the shopping and decking the halls, credit card debt was on the rise in the U.S., with the latest data indicating an increase from $787 billion in the second quarter to $800 billion in the third quarter of 2021.

If you put $1,000 or more on your rewards credit card during your holiday shopping, moving your balance to a 0% intro APR credit card can result in huge savings, and it can help you pay off your debt faster if you make a plan.

Select explains how you can move your balance from one credit card to another, and what you need to consider before you do.

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How to transfer your credit card balance to a 0% APR card

Making a balance transfer requires applying for a new card. First, you'll want to take a minute to check your credit score. The best 0% intro APR cards require a good to excellent credit score, so you'll want to know your score before you apply.

Next, do your research to find a new card that has a generous 0% intro offer that includes balance transfers (some only apply to new purchases). Select has a round-up of the best balance transfer credit cards that fit almost anyone's needs.

Once you find a card that fits your needs, and you're approved, you can begin the balance-transfer process. You'll need to contact your new credit card company and provide them with the following information:

  • Credit card issuer name
  • The amount of debt
  • The account information

In some cases, the new card issuer will ask you for the card information with the outstanding balance as you're filing out the initial card application.

It can sometimes take a few weeks to process, so be sure to continue paying at least the minimum on the first card until the balance is officially transferred.

Once you complete a balance transfer, your original card isn't closed. Even if you don't plan on using the card, it's better to leave it open to avoid a ding on your credit report, unless the card has an annual fee, in which case you may decide it's better to close it.

Things to keep in mind when using a balance transfer credit card

While using a balance transfer credit card can save you a lot of money, there are a few things to keep in mind.

First, most balance transfer credit cards come with a balance transfer fee, which is likely 3% to 5% of the balance. So for a $1,000 balance, the new card issuer will charge you between $30 and $50 in fees.

Also, balance transfer credit cards usually have time limitations. For example, the Citi® Diamond Preferred® Card offers 0% intro APR offer for 21 months on balance transfers from the date of the first transfer. After 21 months, the interest rate will increase to 18.24% - 28.99% variable; (see rates and fees). Cardholders will need to pay a balance transfer fee of $5 or 5% of the amount of the transfer, whichever is greater, and all transfers must be completed in the first four months. To avoid any accruing interest, you can either aim to have the card paid off before the end of the intro APR period, or you can transfer the balance again to continue avoiding interest.

Typically, you cannot transfer a balance to another credit card from the same issuer. For example, if you have an existing balance on a Chase credit card, you cannot transfer to a card like the Chase Slate Edge℠.

You also can only make a balance transfer up to your credit limit — and sometimes even less, depending on the issuer. So for example, if you're transferring a $5,000 balance from card A to card B, the second card must have at least a $5,000 credit line to complete the transfer.

Some balance transfer cards come with additional benefits that you may be able to use. For example, the Citi Double Cash® Card offers 2% cash back: 1% on all eligible purchases and an additional 1% after you pay your credit card bill (see rates and fees). However, you won't earn cash back on the balance transferred. Rewards only apply to purchases made using the card.

And last but not least, you must pay the minimum monthly payment each month on the balance transfer credit card. If you fall behind, the credit issuer may revoke the 0% balance transfer promo.

How much you can save using a balance transfer card

The biggest benefit of a balance transfer credit card is the ability to save on interest payments. And the numbers are staggering.

Say you have a $1,000 balance, and you have 21 months to pay it off, you will need to pay at least $55 per month to have it eliminated before interest accrues. If you open the card at the start of 2022, you won't have to pay off your Christmas debt until 2023.

But if you just left that $1,000 on a card charging you an average interest rate of 17.13%, and you were paying the same $55 per month, it would take you 22 months to pay off the balance and you would have to pay $166 in interest charges.

Bottom line

Holiday credit card debt is not a great way to start off the new year, but a 0% intro APR credit card is a solid option to refinance credit card debt. However, interest-free debt shouldn't be a reason to rack up more debt. So if you've spent more than you aimed to, consider applying for a credit card with a 0% intro APR balance transfer offer.

As the new year approaches, it's a great time to establish solid personal financial habits like having a budget, building an emergency fund, determining your short- and long-term financial goals and start investing for the future.

Catch up on Select's in-depth coverage of personal financetech and toolswellness and more, and follow us on FacebookInstagram and Twitter to stay up to date.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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