A balance transfer card lets you move high-interest debt from one card to another that charges 0 percent interest for an introductory period, often between 12 and 21 months. Used well, it can save hundreds or even thousands of dollars in interest. Used carelessly, it simply delays the problem.
The first cost to account for is the transfer fee, usually 3 to 5 percent of the amount moved. Transferring $6,000 with a 3 percent fee costs $180 up front. Compare that with the interest you would pay over the same period at your current APR; if the savings are not clearly larger, the transfer is not worth it.
Build a payoff plan before you apply
Divide the transferred balance by the number of months in the promotional window. That is the monthly payment that clears the debt before the regular APR kicks in. If that number does not fit your budget, a balance transfer may still help, but you need a plan for what remains when the promotion ends.
Avoid the common traps
New purchases on a balance transfer card may not share the 0 percent rate, and payments are often applied to the lowest-rate balance first. The cleanest approach is to stop using the card for spending entirely. Also keep paying on time: a single late payment can cancel the promotional rate on some cards.
Finally, resist the urge to run the old cards back up. A transfer only works if the total amount you owe goes down, not if it moves around.
