Young woman at home reviewing finances

Debt Consolidation

Balance transfer cards to consolidate debt: pros and cons

Jan 16, 2024

Rebecca-Lake.jpg

Written by

James-Heflin.jpg

Reviewed by

Key takeaways:

  • Balance transfers move debt from one or more credit cards to a new card. 

  • A credit card balance transfer could save money on interest, but you might pay a fee.

  • A balance transfer may not be your best, or only, option for consolidating debt.

It's definitely adulting to decide to streamline your debt so you can manage it better. Bonus points for exploring ways to lower your costs at the same time. On the path to better financial health, each step is a learning experience that contributes to your overall financial savvy. 

If you're considering a balance transfer, read this guide first. Understanding the nuances of balance transfers can make a significant difference in your financial strategy. It's not just about moving numbers around; it's about crafting a plan that works best for you.

What is a balance transfer credit card?

A balance transfer credit card lets you move debt from one or more credit card accounts to another new card, often at a temporarily lower interest rate. Here's a quick rundown of how it works.

  • You apply for a balance transfer credit card.

  • You tell the credit card company which credit card balances to pay off or pay down.

  • Once you're approved, the credit card company pays those balances for you. 

  • You make monthly payments to the new balance transfer card. 

That's the tl;dr version. But the main point is this: balance transfer credit cards let you combine multiple debts into one. 

It's a little different from taking out a personal loan to consolidate debt. In that case, you'd borrow a lump sum, then use it to pay off the debts you want to combine. You'd then pay back the loan, with interest. 

Balance transfer credit cards may charge little or no interest at all for a certain time, called the promotional period. Once the promotional period ends, the regular APR kicks in on any balance that hasn't been paid off yet.

Can you use a balance transfer credit card to consolidate debt?

Balance transfer cards let you consolidate debt by combining balances onto a single card. 

Typically, balance transfers are designed for consolidating credit card debts. But your card issuer might also allow you to transfer other types of debts, including:

  • Medical bills

  • Payday loans

  • Personal loans

  • Auto loans

  • Student loans

Balance transfer cards don't reduce what you owe, but they could make it easier to manage your debts, since you could reduce the number of monthly payments you make. 

Leave debt behind, so you can move forward

Get rid of your debt and free up your cash flow without a loan or great credit.

Pros of balance transfer cards

Balance transfer cards can offer advantages, though how much you benefit depends on your situation and the card you use. 

Here are some of the upsides of balance transfers:

  • Combining debts onto a single card could make budgeting easier if you reduce the number of monthly debt payments you make. 

  • Balance transfer credit cards could drop your APR to 0%, at least during the promotional period. That could result in significant savings.

  • Having a 0% APR could help you get out of debt faster, since all of your monthly payments would go to the principal balance, not to interest charges that are added every month.

  • It's easier to keep track of your debt repayment progress if you have just one balance to monitor. 

That all sounds good, right? And it is, but that doesn't mean using balance transfer credit cards to consolidate debt is a perfect debt solution

Cons of using balance transfer cards

The downsides of balance transfers aren't always obvious, especially if you've never tried one before. Balance transfers can be a little more complicated than they sound at first. Here are the cons to know:

  • The 0% APR doesn't last forever, and once it ends, you will probably face a much higher APR on any remaining balance. 

  • You're almost guaranteed to pay a fee for transferring balances. It could be 2% to 6% of the amount transferred. That'll wipe out some of your interest savings.  

  • Having multiple credit cards with $0 balances could be a temptation to spend on them again, leaving you with more debt. 

  • If you've got a lot of debt to consolidate, you might need multiple balance transfer cards. 

There's another really big potential drawback to using balance transfer credit cards. It may seem like a solid debt solution, but it can lead you to a juggling act. 

For example, say you transfer a $10,000 balance to a card with a 0% APR and a 12-month introductory period. You intend to pay it off before the promo rate ends but… your car breaks down. Or your dog needs emergency surgery. Or your company downsizes you out of a job. Your plan to pay off the debt before the promotional period ends? That's out the window, thanks to a financial emergency. 

Now, you have to decide if you're going to let the regular APR apply to what you still owe, or do another balance transfer to avoid it. You can end up with a financial shell game, moving debt around but not paying much of it down. Your balances may even go up.

A smart solution built for you

Find the right loan in a fast, simple, and stress-free way.

Is a balance transfer card right for you?

Balance transfer cards tend to work better for some people than others. Only you can decide whether it makes sense for your situation, based on what you owe and how quickly you want to get out of debt. 

Here are a few examples of when using a balance transfer to consolidate debt could be the right move: 

  • You've chosen a balance transfer card with a repayment time frame you can definitely meet.

  • Your credit standing is good enough to qualify for the card.

  • You're committed to no more spending on credit so that you don't add to your debt while paying off a balance transfer card. (It may be easier to control this factor by closing the paid-off accounts. Closing credit card accounts could have a temporary negative effect on your credit score.)

  • You've researched debt consolidation loans, and a balance transfer is a better fit for your budget. 

There are some situations in which a balance transfer probably isn't the right option.

If you're behind on credit card payments, that could be a sign of a larger financial hardship that a balance transfer can't fix. In that case, other solutions might be more helpful. For instance, if you genuinely can't afford to fully repay your debts, you might want to learn about debt resolution programs. Resolving debts means negotiating with your creditors to accept less than the full amount you owe.  

What's next

  • Make a list of debts you want to consolidate, including the balances and interest rates for each one. 

  • Do some comparison shopping to see what kind of balance transfer offers are out there and which ones you might qualify for. 

Consider talking to a debt expert about the details of your situation and whether a balance transfer is the right solution for your needs.

Author Information

Rebecca-Lake.jpg

Written by

Rebecca is a senior contributing writer and debt expert. She's a Certified Educator in Personal Finance and a banking expert for Forbes Advisor. In addition to writing for online publications, Rebecca owns a personal finance website dedicated to teaching women how to take control of their money.

James-Heflin.jpg

Reviewed by

James is a financial editor for Achieve. He has been an editor for The Ascent (The Motley Fool) and was the arts editor at The Valley Advocate newspaper in Western Massachusetts for many years. He holds an MFA from the University of Massachusetts Amherst and an MA from Hollins University. His book Krakatoa Picnic came out in 2017.

Related Articles

is-debt-consolidation-a-good-idea.jpg

Debt Consolidation

Debt consolidation can help you pay off what you owe, but it isn't the only way to resolve the debt. Learn more here.

online-debt-consolidation.jpg

Debt Consolidation

Paying off multiple high-interest credit cards at the same time can be expensive and daunting. We show you how online debt consolidation can help.

what-is-debt-consolidation.jpg

Debt Consolidation

If you have high credit card debt, debt consolidation may be able to help you lower your monthly payments. Here’s how.

Achieve Logomark

Achieve is the leader in digital personal finance, built to help everyday people move forward on the path to a better financial future.

Footer Trust Pilot Marker

TrustScore 4.8/5

Footer BBB Marker

.

Personal loans are available through our affiliate Achieve Personal Loans (NMLS ID #227977), originated by Cross River Bank, a New Jersey State Chartered Commercial Bank and may not be available in all states. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, credit usage and history. Loans are not available to residents of all states. Minimum loan amounts vary due to state specific legal restrictions. Loan amounts generally range from $5,000 to $50,000, vary by state and are offered based on meeting underwriting conditions and loan purpose. APRs range from 8.99 to 35.99% and include applicable origination fees that vary from 1.99% to 6.99%. The origination fee is deducted from the loan proceeds. Repayment periods range from 24 to 60 months. Example loan: four-year $20,000 loan with an origination fee of 6.99%, a rate of 15.49% and corresponding APR of 19.54%, would have an estimated monthly payment of $561.60 and a total cost of $26,956.80. To qualify for a 8.99% APR loan, a borrower will need excellent credit, a loan amount less than $12,000.00, and a term of 24 months. Adding a co-borrower with sufficient income; using at least eighty-five percent (85%) of the loan proceeds to pay off qualifying existing debt directly; or showing proof of sufficient retirement savings, could help you also qualify for lower rates. Funding time periods are estimates and can vary for each loan request. Same day decisions assume a completed application with all required supporting documentation submitted early enough on a day that our offices are open. Achieve Personal Loans hours are Monday-Friday 6am-8pm MST, and Saturday-Sunday 7am-4pm MST.

Home Equity loans are available through our affiliate Achieve Loans (NMLS ID #1810501), Equal Housing Lender. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, and credit usage and history. Home loans are a line of credit. Loans are not available to residents of all states and available loan terms/fees may vary by state where offered. Line amounts are between 15,000 and $150,000 and are assigned based on debt to income and loan to value. Example: average HELOC is $57,150 with an APR of 12.75% and estimated monthly payment of $951 for a 15-year loan. Minimum 640 credit score applies to debt consolidation requests, minimum 670 applies to cash out requests. Other conditions apply. Fixed rate APRs range from 8.75% - 15.00% and are assigned based on credit worthiness, combined loan to value, lien position and automatic payment enrollment (autopay enrollment is not a condition of loan approval). 10 and 15 year terms available. Both terms have a 5 year draw period. Payments are fully amortized during each period and determined on the outstanding principal balance each month. Closing fees range from $750 to $6,685, depending on line amount and state law requirements and generally include origination (2.5% of line amount minus fees) and underwriting ($725) fees if allowed by law. Property must be owner-occupied and combined loan to value may not exceed 80%, including the new loan request. Property insurance is required as a condition of the loan and flood insurance may be required if the subject property is located in a flood zone. You must pledge your home as collateral and could lose your home if you fail to repay. Contact Achieve Loans for further details.

Affiliated Business Arrangement Disclosure: Achieve.com (NMLS #138464) and Achieve Loans are both wholly owned subsidiaries of Achieve Company. Because of this relationship, your referral to Achieve Loans may provide Achieve.com a financial or other benefit. Where permitted by applicable state law, Achieve Loans charges: 1) an origination fee of 2.50%, and 2) an underwriting fee of $725. You are NOT required to use Achieve Loans for a home equity line of credit. Please click here for the full Affiliated Business Arrangement disclosure form.

Resolution is available through our affiliate Achieve Resolution (NMLS ID # 1248929). All estimates for Achieve Resolution’s services are based on prior results, which will vary depending on your specific enrolled creditors and your individual program terms. Not all Achieve Resolution clients are able to complete their program for various reasons, including their ability to save sufficient funds. Achieve Resolution does not guarantee that your debts will be resolved for a specific amount or percentage or within a specific period of time. Achieve Resolution does not assume your debts, make monthly payments to creditors or provide tax, bankruptcy, accounting or legal advice or credit repair services. Achieve Resolution’s services are not available in all states, including New Jersey, and their fees may vary from state to state. Please contact a tax professional to discuss potential tax consequences of less than full balance debt resolution. Read and understand all program materials prior to enrollment. The use of Achieve Resolution services will likely adversely affect your creditworthiness, may result in you being subject to collections or being sued by creditors or collectors and may increase the outstanding balances of your enrolled accounts due to the accrual of fees and interest. However, negotiated settlements Achieve Resolution obtained on your behalf resolve the entire account, including all accrued fees and interest. C.P.D. Reg. No. T.S.12-03825.

© 2024 Achieve.com. All rights reserved. NMLS #138464