Should You Use a Balance Transfer Card to Pay Off Debt?

Is It Shady to Leapfrog Debt From One Credit Card to Another?

There’s nothing wrong with using balance transfer cards to manage debt, so long as you understand the fine print.

We remodeled our bathroom recently, and I was charging up to $10,000 on one card, and then flipping it to another that was interest-free for a year or so, and then I’d pay it off over the year. Are there any dangers or downsides to transferring balances between cards? I’ve done it several times now, and my wife is concerned we were being dodgy. —John, St. Paul, Minnesota

I have enough trouble getting through the day without adding to my wife’s frustrations, and the last thing I want to do is interject myself into other people’s marital discussions.

But ... you’re right. You’re not being shady or unethical when you take advantage of a credit card’s terms and conditions to, essentially, give yourself a no-cost loan. You’re not doing anything wrong.

That said, your wife is right in a larger sense. You can get too cute by half if you’re not careful—it might become difficult for you to keep all of your debt-repayment balls in the air without dropping one.

Let’s zoom out a bit. You talk about taking advantage of two separate, but related, credit card features:

• a long 0% APR introductory period on purchases (the stuff you buy)
• a long 0% APR introductory period on balance transfers (the debt you move from one card to another)

If your eyes glaze over at the sight of acronyms, a card’s APR (annual percentage rate) is simply the interest you pay on your balance. A 0% APR means you won’t pay interest until the intro period is over.

A long time to pay off debt

It works like this: You need to spend $10,000 to renovate your bathroom, but you’d rather not (or can’t) write a check for $10,000 in one fell swoop. Instead, you pay for your Home Depot excursions with a 0% APR credit card that gives you a long time to pay off your balance before interest kicks in. Our top pick, the Chase Freedom Unlimited, comes with a 15-month 0% APR period on purchases, for instance.

But 15 months isn’t that long. You have to pay roughly $667 each month to absolve yourself of the entire $10,000 balance before the bell tolls. If you still have, say, $5,000 left on your balance but your 15 months is nearly up, that’s when you might want to look for a card that offers good terms on a balance transfer.

A balance transfer is when you move debt from one card to another. No one opens credit cards and relocates IOUs for the fun of it—the bank needs to incentivize you, usually with a period of no interest. One of our favorite balance transfer cards, the BankAmericard, offers 18 billing cycles (in non-legalese, one billing cycle is roughly a month) of 0% intro APR on balance transfers. You pay a 3% balance transfer fee on whatever you move, but you also get a lot more time to whittle down the remaining cost of your new bathroom.

It could go something like this:

• In January 2020, you put all of your Home Depot shopping ($10,000) on your Chase Freedom Unlimited card, which gives you 15 interest-free months to pay it off.
• You pay only half of your total balance by March 2021, so you roll over what’s left ($5,000) to your BankAmericard, which gives you another 18 billing cycles of 0% APR.
• You pay your remaining balance in full by September 2022. You didn’t pay a cent in interest, though you did fork over a 3% balance transfer fee ($150) on the $5,000 you moved.

If you can’t make that work, perhaps the bubblegum-pink tile in your bathroom doesn’t really need an upgrade.

The risks of 0% APR purchases and balance transfers

You likely encounter little marital disharmony when you use a 0% APR credit card to pay for stuff, so you apply for one and swipe it at the register.

As you mention, though, life gets a bit hairier when it comes to the whole balance transfer hot-potato strategy. First you need to pick a card that dovetails with your budget. You basically have two options:

• a card that won’t charge you balance transfer fees but gives you only 15 months of 0% APR (such as the Amex EveryDay, the Chase Slate, and the no balance transfer fee version of the BankAmericard)
• a card that charges you balance transfer fees but gives you longer 0% APR periods (like one of these)

The trade-off is this: You either get a card that has no balance transfer fee but essentially requires you to make higher monthly payments to eliminate your balance by the end of the intro period, or you get a card with up-front costs in exchange for lower monthly payments and extra time to pay off your balance.

The cost to transfer $10,000 to three popular balance transfer cards

Credit Card	Number of 0% APR billing cycles (or months)	Cost to transfer $10,000 to this card*	Average amount you need to pay each month to retire your debt within the 0% APR period
Amex EveryDay	15	$0	$667
BankAmericard (18-month version)	18	$300	$556
Citi Simplicity	21	$500	$476

*This assumes you make your balance transfer within the time frame stated in your card’s terms and conditions. You generally have two months after you receive the card to take advantage of a $0 balance transfer fee (if offered) and a 0% APR period.

But back to the crux of your wife’s concerns.

One potential worry is that you could have too much debt to transfer your entire balance to another card. Most balance transfers are between $1,000 and $5,000, according to the Consumer Financial Protection Bureau (PDF). In your example, you start with $10,000—twice that top number—which may make it harder for you to find a balance transfer card that gives you a credit limit large enough to accommodate your debt.

So if you still owe $7,000, and your balance transfer card lets you move over only $5,000, you need to cough up the rest, or pay the interest on that $2,000 still left on your current card. And if you use up your new card’s entire credit limit to help pay down your debt, your credit score may suffer. Banks don’t like when your credit utilization ratio is too high—they may see you as a high-risk customer.

In addition, you need to have a credit score that’s high enough in the first place to qualify for a good balance transfer card. Many people don’t.

Still, there’s nothing inherently wrong with your plan—and kudos for avoiding interest for so long. But it sounds like it could up your marital harmony to quash your bills as soon as possible, preferably before you make it to your second balance transfer card.

The fewer balance transfer and 0% APR cards in your life, the happier you and your spouse will be. When it comes to marital finances (and as they say in pop songs), you want to meet your partner in the middle.