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Credit Cards

How to use a balance transfer to pay off credit card debt

Credit cards typically comes with high interest rates, making it hard to pay off debt quickly. Here's how a balance transfer can help you pay off credit card debt it 2021.

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Credit card debt can add up fast, especially right after the holiday season. But for anyone looking to tackle their debt, there are a handful of credit cards that can help you wipe out a big balance without getting dinged with expensive interest charges.

The average credit card APR is 16.28%, but you could be paying even more if you have a less than stellar credit score. These interest charges can hinder your ability to repay debt since any payments you make go toward your principal balance and interest.

But if you move your debt to a balance transfer card that offers no interest for up to 20 months, you can save a large chunk of money and pay off your credit card faster. With an intro 0% APR balance transfer card, any payments you make will go toward your principal balance.

Here’s how you can save money with a balance transfer, some helpful tips for choosing the best balance transfer card and CNBC Select's recommendations for the best balance transfer cards.

How much money can you save with a balance transfer?

A balance transfer card is a great way to temporarily avoid interest charges while you repay debt. If you’re aggressive with your repayment plan, you can manage to save hundreds or even thousands of dollars.

Let’s take a scenario where you have a $5,000 balance and pay $200 each month toward that debt. Assuming you have the average 16.28% APR, you’ll pay $1,149 in interest charges, and it will take you 31 months to repay your debt.

But if you transfer your balance to the U.S. Bank Visa® Platinum Card — which offers a 0% APR for the first 18 billing cycles — and maintain the same $200 monthly payment, you’ll only wind up paying about $193 in interest and fees (that’s $43 in interest and a one-time $150 balance transfer fee). After the intro period, a 18.74% - 29.74% variable APR applies, but for our calculations we assumed the average 16.28% APR. Balances must be transferred within 60 days from account opening.

Overall, you’ll save roughly $956 and pay off your debt five months faster if you open a balance transfer card.

How to choose the best balance transfer card

While a balance transfer is pretty straightforward, you’ll have to look out for a few things before moving your debt to a new card. Here are some tips that can help you find the right card.

  1. Review the credit requirements: Many balance transfer cards require good credit or excellent credit. If you have bad credit, it can be difficult to qualify for a balance transfer card, and you should consider alternatives, like a personal loan.
  2. Understand the terms of your balance transfer: Before applying for a balance transfer credit card, review the terms associated with your offer, including: limits on the amount of debt you can transfer, length of the intro 0% APR, timeframe to transfer your debt and the balance transfer fee.
  3. Assess any fees associated with the balance transfer: More likely than not, you'll need to pay a balance transfer fee ranging from 3% to 5% of the total transfer. Calculate how much the fee will be, then see if it’s worthwhile. You can also consider a no-fee balance transfer card, like the Wings Visa Platinum Card, but there are currently few alternative no-fee cards available.

Best balance transfer cards

Balance transfer cards come in all shapes and sizes, with some offering rewards and others offering a long intro 0% APR on both balance transfers and new purchases. Here are CNBC Select’s picks for the best balance transfer credit cards.

U.S. Bank Visa® Platinum Card

Information about the U.S. Bank Visa® Platinum Card has been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.
  • Rewards

    None

  • Welcome bonus

    None

  • Annual fee

    $0

  • Intro APR

    0% for the first 18 billing cycles on balance transfers and purchases

  • Regular APR

    18.74% - 29.74% (Variable)

  • Balance transfer fee

    An introductory fee of either 3% of the amount of each transfer or $5 minimum, whichever is greater, for balances transferred within 60 days of account opening. After that, either 5% of the amount of each transfer or $5 minimum, whichever is greater

  • Foreign transaction fee

    3%

  • Credit needed

    Excellent/Good

See rates and fees. Terms apply.

Citi Double Cash® Card

  • Rewards

    Earn 2% on every purchase with unlimited 1% cash back when you buy, plus an additional 1% as you pay for those purchases. To earn cash back, pay at least the minimum due on time. Plus, for a limited time, earn 5% total cash back on hotel, car rentals and attractions booked on the Citi Travel℠ portal through 12/31/24

  • Welcome bonus

    Earn $200 cash back after you spend $1,500 on purchases in the first 6 months of account opening. This bonus offer will be fulfilled as 20,000 ThankYou® Points, which can be redeemed for $200 cash back.

  • Annual fee

    $0

  • Intro APR

    0% for the first 18 months on balance transfers; N/A for purchases

  • Regular APR

    19.24% - 29.24% variable

  • Balance transfer fee

    For balance transfers completed within 4 months of account opening, an intro balance transfer fee of 3% of each transfer ($5 minimum) applies; after that, a balance transfer fee of 5% of each transfer ($5 minimum) applies

  • Foreign transaction fee

    3%

  • Credit needed

    Fair/Good/Excellent

  • See rates and fees. Terms apply.

Citi Simplicity® Card

On Citi's Secure Site
  • Rewards

    None

  • Welcome bonus

    None

  • Annual fee

    $0

  • Intro APR

    0% Intro APR for 21 months on balance transfers from date of first transfer and 0% Intro APR for 12 months on purchases from date of account opening.

  • Regular APR

    19.24% - 29.99% variable

  • Balance transfer fee

    There is an intro balance transfer fee of 3% of each transfer (minimum $5) completed within the first 4 months of account opening. After that, your fee will be 5% of each transfer (minimum $5).

  • Foreign transaction fee

    3%

  • Credit needed

    Excellent/Good

  • Terms apply.

Aspire Platinum Mastercard®

Information about the Aspire Platinum Mastercard® has been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.
  • Rewards

    None

  • Welcome bonus

    None

  • Annual fee

    $0

  • Intro APR

    0% for the first 6 billing cycles on purchases and balance transfers

  • Regular APR

    8.15% to 18.00% variable

  • Balance transfer fee

    2%, $5 minimum

  • Foreign transaction fee

    1%

  • Credit needed

    Good/Fair

See our methodology, terms apply.


Information about the Wings Visa Platinum Card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.

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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