Balance transfer cards to consolidate debt: pros and cons
By Rebecca Lake
Reviewed by James Heflin
Jan 16, 2024
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:
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.
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.
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.
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.
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 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.
Frequently asked questions
How does a balance transfer affect your credit score?
Applying for a balance transfer credit card could trim a few points off your credit score, since it usually requires a hard credit check. However, a transfer card could also help your score if it improves your credit utilization ratio, which measures how much of your available credit you're using at any given time.
How does a balance transfer affect your rewards points?
You won't earn any rewards points for transferring balances to a new card. Transferring balances from your old card shouldn't make you lose any rewards points, miles, or cash back you've accumulated, either.
What's the best way to consolidate debt?
The best way to consolidate debt depends on how much you owe and your goals for paying it off. Some of the options for consolidating debt include:
Personal loans for debt consolidation
Using a home equity loan or line of credit to pay off debts
You might also consider a debt management plan to streamline your debts if you can afford a significant monthly payment, or debt resolution if you'd like to get rid of debt while paying less than you owe.