published october 2023
We’ll walk you through some of the pros and cons.
So, you’re thinking about a balance transfer but want a little bit more information?
Great! Moving high-interest balances to a lower rate through a balance transfer can be a good tool for managing your debt. If you're considering one but need more information, you're in the right place. We'll cover the basics to help you decide if it's the right choice for you.
What is a balance transfer?
Simply put, it’s usually a credit card offer that allows you to transfer outstanding balances from other credit cards or certain types of loans onto a promoted card. Typically, the offer comes with a lower interest rate.
Those lower interest rates typically only last for a promotional period, so they’re not a permanent solution for debt payoff.
What are the pros of a balance transfer?
There are lots of advantages a balance transfer can offer, especially when it comes to managing debt. These include:
- Lowering interest costs: Transferring your debts to a card with a lower interest rate saves you money on interest payments.
- Making debt management easier: Consolidating multiple credit card or loan balances onto one card means you don’t have to keep track of all those payment due dates. It can all be made to one place.
- Paying off debt quicker: With lower interest, more of your payments go toward the principal balance.
Who should consider a balance transfer?
They’re a good option if you’re looking to consolidate your debt and lower your interest rates. Have a payoff plan in mind and stick to it.
What are the cons of a balance transfer?
- Possible fees: Many balance transfer credit cards will charge you a percent of the amount you’re transferring.
- Temporary promotional period: Regular interest rates will apply when it’s over.
- Opening the door for more debt: Having more credit available may tempt you to use it before you pay off the debt you already have.
Who shouldn’t consider a balance transfer?
Balance transfers aren’t the right option for everyone.
If you’re tempted to use the cards you moved balances from or aren’t sure you can realistically pay off the debt on the card you transferred your balances to, then it might not be a fit for you.
Balance transfers can be an effective way to help manage debt and ultimately make bigger steps toward paying it off. By understanding how they work, who should (and shouldn’t) consider them, you can decide it they’re right for you.
Pro-tip: Consider only transferring the amount you can realistically pay off during the promotional period. This will help you avoid higher interest rates in the future.