How to pay off credit card debt with a balance transfer
What’s the best way to pay off credit card debt? While there are many different techniques for paying off credit card debt, a credit card with balance transfer can help you pay off credit card debt fast. If you use one of the best balance transfer credit cards today, you could have over a year to pay off your transferred balance before it starts to accumulate interest.
How do balance transfer credit cards work? Balance transfer cards allow you to transfer and consolidate outstanding credit card balances onto a single card. This reduces the number of credit card payments you make each month, which can help you focus your debt repayment efforts and pay off your debt faster.
Plus, balance transfer credit cards often come with 0 percent intro rate offers that give you the option to pay off your transferred balance without interest. The best balance transfer credit cards offer at least one year of 0% introductory APR on balance transfers – and some balance transfer cards, like the Citi® Diamond Preferred® card, offer cardholders a full 18-month introductory offer with no interest on both balance transfers. and purchases (14.74% to 24.74% variable APR thereafter).
Are Balance Transfer Credit Cards a Good Idea? If you know how to use a balance transfer card wisely, this can be one of the best ways to pay off credit card debt. Want to know how to pay off credit card debt with a balance transfer? Here are some tips and tricks to help you pay off your credit card debt fast.
Consolidate all your credit card balances
One of the best ways to pay off credit card debt is to consolidate your debt into one monthly payment. When you consolidate multiple credit card balances into one outstanding balance, you no longer need to use strategies like the Snowball Method or the Avalanche Method to decide which credit card debt to prioritize. Plus, having only one debt payment per month means you can focus on making that big payment as possible.
When you use a 0% APR balance transfer credit card to consolidate your debt, you not only combine multiple credit card balances into one payment, but you also benefit from your card’s introductory 0% APR. balance transfer to save money on interest charges. . It’s a win-win.
Put as much money as you can into paying down the debt
With an introductory APR of 0%, 100% of your monthly payments go towards paying off your balance, at least until the introductory APR rate expires. If you want to save money on interest charges and pay off your debt faster, pay off as much of your debt as possible during your introductory APR period.
When it comes to paying off credit card debt fast, start by asking yourself how much money you can afford to spend on your debt each month.
Then ask yourself if you can increase that number by $ 50. Or $ 10. Or even $ 5.
Use Bankrate’s credit card debt repayment calculator to find out how many months it will take you to pay off your debt with the payments you are currently making and how quickly your debt would go away if you increased those payments by a few dollars each month. . .
For example, suppose you transfer a balance of $ 2,000 to a balance transfer card like the Citi® Double Cash Card, which offers 18 months of 0% introductory APR on balance transfers (variable APR of 13 , 99% to 23.99% thereafter). If you make a monthly payment of $ 75, you’ll be on your way to paying off $ 1,350 during your APR introductory period. This means that you will be left with a balance of $ 650 when your new interest rate goes into effect. If you are able to contribute $ 100 to your balance each month, you will only have a balance of $ 200 after your APR period. Whereas a monthly payment of $ 125 will allow you to pay off your entire balance with two months to spare.
Create a budget to help you prioritize debt repayment
If you’re struggling to find the extra cash to spend on paying down your debt, it might be time to create a budget. A good budget helps you prioritize your most important financial goals (like getting out of debt, setting up an emergency fund, or saving for a down payment) while giving you just enough ‘fun money’ to make sure that you don’t feel like you have to miss out on life’s little pleasures.
A budget is also a great tool if you’re trying to pay for a credit card balance transfer before the introductory APR expires. Divide your transferred balance by the number of months you’ll get your introductory 0% APR rate to find out how much you’ll need to put on your balance transfer credit card each month, then set a budget that allows you to achieve. your goal.
If you transfer $ 3,000 of credit card debt to a balance transfer credit card with a 0% introductory 15-month APR like the Wells Fargo Cash Wise Visa® card, you will need to pay at least $ 200 each month to clear your debt before the introductory 0% APR expires (qualifying balance transfers, 14.49% to 24.99% variable APR thereafter). Can you budget that will allow you to set aside that money? This is the best way to pay off your credit card debt.
You can create a budget on your own, with pen and paper or a spreadsheet, or you can use one of today’s best budgeting apps to help you stay on target. Whichever route you choose, remember that budgeting is only the first step. You have to respect your budget to enjoy it! Otherwise, you could find yourself spending more than you can afford, neglecting your financial goals, and in some cases increasing your credit card debt.
Avoid putting new purchases on credit
If you’re in the process of paying off your credit card debt, don’t overdo it by adding new debt to your current balances. Avoid putting new purchases on credit, especially if it will take you a few months to pay off the new charges.
How do you know if making new credit card purchases is a good idea? If you can’t pay your statement balance in full at the end of each billing cycle, you may be charging more to your credit card than you can afford. It might be a good idea to cover your daily expenses with cash or a debit card until you’ve paid off your credit card debt.
Once you stop making monthly debt payments, you’ll have a little more financial leeway and you might even have a little more spending money each month. Think of it as one more reason to learn how to pay off your credit card debt fast.
Pay your balance transfer before the APR introductory period expires
If possible, try to pay off your transferred balances before the APR introductory period of your balance transfer credit card expires. What happens when your 0% interest rate ends? Any remaining balance on your credit card will start earning interest at the usual interest rate, which means you can save money by paying off your balance transfer before your credit card issuer starts paying. charge interest on your transferred balance.
Remember, the best balance transfer credit cards offer 0% introductory rates that last for at least a year. While some 0% APR cards apply an introductory rate only to purchases and some offer 0% for a limited time on balances, still others have introductory APRs for transferred balances and new purchases. So make sure you know what type of balance transfer card you have.
Once you understand how your 0% APR intro rate works and for how long, do your best to pay off your outstanding balances before your APR intro period expires. Not only will this method help you pay off your credit card debt quickly, it can also help you save a lot of money in interest charges.
The bottom line
Paying off credit card debt isn’t easy, but a balance transfer credit card can help you consolidate debt, save money on interest, and prioritize paying off debt. This is one of the best ways to pay off credit card debt, especially if you have a plan (and budget) that allows you to pay off your debt before the introductory 0% period expires. your balance transfer credit card.
Wells Fargo Cash Wise Visa® card information was collected independently by Bankrate.com. Card details have not been reviewed or approved by the card issuer.