The average credit card balance , and American consumers now hold more than $1 trillion in collective revolving debt, most of which is on plastic. These numbers probably sound scary, but they can’t be that surprising. After all, many of us have a penchant for using credit for rewards or convenience but lack the discipline to pay our balances off each month.
If you find yourself struggling with credit card debt or other unsecured debts, you may be wondering if a balance transfer could be the answer to your money woes. Many of the best balance transfer cards offer 0% APR for up to 21 months, after all, which could provide you with a long enough timeline to get out of debt for good.
You’re probably aware that zero-interest cards don’t provide a perfect solution, particularly since many charge upfront balance transfer fees of 3% to 5%. But, that isn’t the only problem with balance transfer cards — not even close.
If you move forward with a balance transfer without thinking it through, or you don’t have the discipline to stick to a repayment plan, a balance transfer could leave you exactly where you started in the end — or even worse off than where you are now.
Six Signs Your Balance Transfer Might Go Off the Rails
That introductory 0% APR can only help you if you’re ready to help yourself. Here are six signs a balance transfer might be the last thing you need:
#1: You can’t promise you’ll pay more than the minimum payment.
Some balance transfer credit cards offer the opportunity to pay down your debt at 0% APR for up to 21 months, but the average is between 12 and 18 months. During that time, every penny you pay toward your debt goes directly toward your balance and not toward interest charges. As a result, the introductory 0% offer you receive is the ideal time to attack your credit card debt with fervor. The more you can pay down now at 0% APR, the less interest you’ll pay when the introductory offer ends, and the closer you’ll be to becoming debt-free.
The problem is, nobody’s going to make you pay more than the minimum payment on your credit card, which is usually somewhere between 2% and 5% of your total balance. If you’re tempted to pay only the minimum payment, you won’t make nearly as much progress as you could.
If you’re considering a balance transfer offer to avoid interest for a while but aren’t dedicated to paying as much as you can while you have that 0% APR, you’ll wind up right back where you started when your card’s introductory offer ends. Remember that 0% APR cards offer zero interest for a while but not forever. And when your card’s introductory offer is over, your credit card’s interest rate will reset back to normal, which is currently over 17% on average.
#2: You want to keep using credit cards for regular spending and bills.
To get the most out of a balance transfer credit card, you have to use it strategically and with a plan in place. If you have $5,000 in credit card debt and think you could qualify for a card that offers 0% APR for 15 months, you should run the math. If you can pay a little over $333 per month during that time, you’d find that you could use the balance transfer introductory timeframe to work your way out of debt altogether.
But, you’ll face a huge problem if you also want to use credit cards for spending while you pay down debt. Not only do you run the risk of charging more than you’re paying off each month, but you could face an even scarier crisis if you plan to use your balance transfer card for purchases, too.
While some balance transfer cards offer 0% APR on balance transfers and purchases for a limited time, not all do. If you use a 0% APR card that doesn’t extend the offer to purchases, you’ll start paying interest on those charges as you continue tackling your transferred balance that’s at 0% APR.
Even worse, carrying a balance on that credit card means As a result, you’ll begin accruing interest on your purchases from the date you make them.
#3: You’re looking for a balance transfer card that also offers rewards.
Balance transfer offers can help you save a ton of money if used wisely. Rewards credit cards, on the other hand, can be insanely lucrative if you pay your balance each month and always spend responsibly. The thing is, these worlds should never collide. Sure, some balance transfer cards offer rewards, but you should never try to take advantage of them.
Remember, you’re trying to pay down debt — not continually rack up more. A travel or rewards card that offers points or miles could wind up enticing you to spend and spend to earn more points. That’s exactly the opposite of what you should be focusing on when you sign up for a balance transfer card.
#4: You haven’t taken the time to figure out a repayment timeline that could leave you debt-free.
As we mentioned already, you need to spend some time figuring out a plan of attack before you sign up for a balance transfer card. Not only should that involve figuring out exactly how much debt you have to pay off, but you should also sit down to create a monthly budget so you know how much cash you can allocate toward debt each month.
You may also need to look for ways to cut your spending to get out of debt faster. While you’re paying off debt, you could eat more dinners at home, cut cable television, or walk to work, for example. Anything you could do to cut your expenses could help you free up cash to pay down debt faster.
If you haven’t taken the time to think through any of these details, chances are good your balance transfer won’t end well. You need to have a plan if you want to use a balance transfer to your advantage, and that plan requires some upfront legwork.
If you decide to “wing it” instead, you’re not doing yourself any favors.
#5: You transferred balances from one card to another in the past without ever paying off your debt.
If you’ve already transferred a balance from one card to another in the past and it’s still with you, you’re already off to a tragic start. Old habits die hard, and it’s far too easy to transfer debts from one card to another to get 0% without making much progress at all.
If you want this time to be different, you must do things differently. For most people, that means taking some of the steps we’ve described above — creating a budget, coming up with a debt payoff plan, and cutting your spending to make the most of your 0% APR introductory period.
You should also avoid using credit cards while you’re paying down debt. Credit cards may be convenient, and they do offer perks and important consumer protections, but using plastic while you’re trying to reduce what you already owe isn’t going to help.
#6: Your credit score isn’t that great.
Finally, don’t forget that the best balance transfer credit cards require good or excellent credit. This typically means a FICO score of at least 670 or higher, although different issuers have their own rules.
If you have poor credit or fair credit, you’ll probably have access to a different set of credit cards that don’t offer 0% APR or many perks. With that in mind, it makes sense to spend some time building up your credit score before you apply for a balance transfer card.
Make sure to get a free copy of your credit score so you know where you stand, then look for simple ways to improve it over time. For starters, make sure you’re paying all your bills on time, keep your credit balances as low as possible, and don’t open too many new accounts. Also strive to keep old credit accounts in good standing open; they could be helping your credit score by lengthening your average credit history — even if you don’t use them.
The Bottom Line
Balance transfer cards can be valuable tools if you have a plan in place and the mindset required to get out of debt. But, if you’re not disciplined or you haven’t put much thought into it, there’s a good chance avoiding interest for a while won’t change your situation much.
Before you sign up for a balance transfer card, ask yourself a few tough questions: Are you serious about getting out of debt? Are you ready to make a lifestyle change? Or, are you simply trying to prolong your misery by scoring a lower monthly payment for a while?
Be honest with yourself, and only apply when you’re truly ready. Otherwise, you’re treading water instead of making the long swim toward the shore. If you want your freedom, you have to take off the floaties and swim.
Holly Johnson is an award-winning personal finance writer and the author of . Johnson shares her obsession with frugality, budgeting, and travel at .
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