"I grew up in an upper-middle-class neighborhood, took week-long spring break and summer vacations every year, and almost always got what I wanted for my birthday. I had a TV in my bedroom, a pool in my backyard, and fresh sneakers at the start of every school year. My parents swiped their credit cards constantly, and as a kid, I thought nothing of it. But as I got older, I noticed their “How are we going to pay this?” and “Just use the other card” whisper-yells. Slowly but surely, I realized that we didn’t have any money at all—their debt was suffocating them.
+ how I did Scotland in a week without losing my mind in the planning process
My parents valued memories and comfort above all else. In my youth, I was fortunate for this (and I still am!), but to be honest, it set me up to have a very, very complicated relationship with money. The lifestyle I became accustomed to was not sustainable on my first entry-level salary. (Hell, it’s not even sustainable now!) But I wasn’t ready to give it up, and my parents made paying things off look easy. So I did what any other financially uninformed 19-year-old does, and I opened up a credit card… or two. Thus began my long-standing relationship with my very own credit card debt.
That was 10 years ago, or 120 months of credit card payments ago, and up until last year, I was drowning in interest. Paying off my credit cards felt impossible until I took advantage of a little thing called a balance transfer, which allowed me to pay off my debt with zero interest. Just last week, I finally made my last credit card payment. So, just in case you have found yourself in a mound of debt you don’t know what to do with, I’m here to share how balance transfers can get you back on your feet.
How do balance transfers work?
A balance transfer does exactly what you’d think: It transfers the balance of your credit card to another credit card. If you’re thinking, “What the hell is the point of that?” Allow me to explain: This transaction allows you to move your debt to a card with a lower interest rate and, ideally, one with a zero percent introductory APR. Ultimately, this makes paying down the balance of your card feel a lot less like an uphill battle. (If you’ve ever made a $200 payment while owing $100 in interest per month, you know what I mean.) Basically, by accruing less or zero interest, there is less to pay off in the long run.
How a balance transfer helped me pay off my debt
I’ve paid off my cards and racked them back up again quite a few times, but over the last few years, I had a lingering balance of $4,000. Every time I made a payment, I swear the balance hardly moved. For a while, I accepted it for what it was. I was making my monthly payments, and as far as I was concerned, I was doing everything I could. Considering I have an anxious-avoidant money attachment style, I’m shocked I ever looked at the statement to see what was going on with my balance, but once I did, everything changed. I noticed that my $200 payments were doing basically nothing to pay down my debt, considering I was accruing $70-80 in interest every month.
At the time, I had two credit cards. My Chase card held the $4,000 balance, and my Bank of America credit card was paid off but promoting a balance transfer offer of zero percent APR for 18 months. Naturally, I quickly submitted a balance transfer request, got approved, and became dedicated to never paying a single cent of interest again. My goal: paying off the entire balance before the 18 months were up.
“Not only did a balance transfer help me pay off my credit card, but it also gave me the motivation to get out of the financial hole I was in.”
Luckily for my situation, this meant only needing to pay about $22 more per month than I already was paying. ($4,000 divided by 18 months is roughly $222 per month.) Finding that extra $22 was as simple as not letting my eyes wander in Target or making coffee at home for a few extra days. Thanks to the handful of months I was able to make larger payments, I was debt-free (besides my student loans…) well before my 18-month timer was up.
If I had never taken advantage of a balance transfer offer, I would still be paying off my credit card. What’s worse, I’d probably still be putting money on it, too. I was getting to the point where I thought I’d always have credit card debt—like it was something I needed to add to my list of bad personal qualities. I mean, what’s another $100 added to the balance when I want a new pair of sunglasses? Not only did a balance transfer help me pay off my card, but it also gave me the motivation to get out of the financial hole I was in.
What to know before doing a balance transfer
Balance transfers are an incredible hack for paying off debt faster; however, some caveats can make your life harder, not easier, if you’re not aware of them. Here are a few things you should know before doing one yourself.
You will accrue interest after the introductory period ends
If you don’t pay your card off in the offer’s designated number of months, your entire remaining balance will start to accrue interest again as usual. That’s why it’s a good idea to make a plan for how you can pay off the entire balance before your introductory period is over. For example, as I previously mentioned, I made payments of $222 even though my minimum payment was much less than that, so I could pay off my debt during my introductory period.
You will accrue interest on new purchases (most of the time)
With most offers, zero percent APR typically only applies to the transfer amount, not new purchases. So, just because you’re reaping the benefits of no interest on your balance transfer doesn’t mean you’re free from paying interest as a whole. For example, if you transfer $5,000 but then put $500 of new purchases on the card, you will accrue interest on that $500 monthly.
There can be a transfer fee
It may seem counterintuitive, but sometimes you have to spend money to save money. (At least that was the case for me!) Often, if you transfer your balance to a card you already have (instead of opening a new one), the transfer can be subject to a small percentage fee. For example, you might pay a 4 percent fee to transfer $5,000. This would cost you $200 to do the transfer. When you consider how much interest you’re accruing month over month and how many months it will take you to pay your card, the fee typically pays for itself and then some.
However, there are ways around paying a fee. For example, one of our editors shared with me that she opened up a new credit card because the balance transfer was free. This was the best move for her from a cost perspective, even though opening up another credit card seems backward. With that said, if you want to transfer a much larger balance and the fee would be too high, this is a great move for you. NerdWallet has an easy-to-use balance transfer calculator that can help you figure out how much you’d save on interest depending on the terms of your offer and your existing balance.
Not everyone is eligible for balance transfers
Considering I already had two credit cards open, I didn’t have to apply for a new card to do a balance transfer; however, if you only have one card, aren’t offered a balance transfer offer on another card, or want to avoid transfer fees, you would need to apply for a new credit card. Unfortunately, approval varies by company and isn’t guaranteed. If you’re worried about getting approved, call the credit card companies before applying online. They can usually check your pre-approvals without hard credit checks. Similarly, you might not be able to move all of your debt—so ask about that too before applying. If you get approved, the credit card company you choose will tell you how much or how little you are approved to transfer.
How to do a balance transfer
If I’ve convinced you that this is your ticket to freedom (AKA no more credit card payments), here’s exactly how you can do it.
- Choose where you will transfer your balance: Either apply for a card with a zero percent introductory APR (these are some of the best ones to consider!) or use an offer on a card you already have.
- Submit a request for the balance transfer: Submit a request through the account you want the balance to be transferred to, not the account that has the debt currently. This is easy to do in your account online, but it can also be done over the phone with a customer service rep.
- Wait for the transfer to go through: This takes anywhere from a few days to a few weeks. Once your transfer goes through, you will see your balance (along with your transfer fee) in your account. Make sure that you continue to make payments on the card you are transferring the balance from in the meantime.
- Make a plan to pay down the balance: Get as aggressive with your payments as possible to avoid accruing more interest! Divide your balance by the number of months in your offer, and make those payments (or as close to them as you possibly can) consistently until your balance is zero.
Hailey Bouche, Associate Editor
As an Associate Editor for The Everygirl, Hailey Bouche oversees, writes, and edits content across various categories on the site. From the pitching stage through publishing, she works alongside the team to ensure that the content that our readers see every day is inspiring, relatable, and timely.