Using new debt to pay down old debt might sound like using a mop to fight back the ocean tide: fruitless and a terrible idea. And, in most cases, that's about right. But the credit card balance transfer is a rare exception, and used strategically, can be a highly effective tool for reducing your debt burdens.
“Americans owe a record $1.211 trillion on their credit cards, a figure that increased 4% over the past quarter and 7% over the past year,” says Ted Rossman, senior industry analyst at Bankrate. “With an average APR of around 20%, there's a good chance credit card debt is your highest-cost debt. But a 0% balance transfer card allows you to transfer your high-cost debt and avoid interest for up to 21 months.”
A balance transfer is a way to pay off debt on one account and move it to another—generally to a credit card offering a 0% introductory APR period. Consumers often use balance transfers to get a reprieve on expensive interest charges by moving debt from an existing credit card to a new card with an intro offer. However, balance transfers can also be used to pay off other debt, such as from a personal loan. Once the intro period ends, you incur interest on any remaining balance at the card’s regular interest rate.
This is something you should only pursue if you’re sure the benefit outweighs the cost. Erika Kullberg, a lawyer and award-winning personal finance expert you may have come across on social media, reminds us that balance transfers aren’t free. Typically speaking they’ll run you 3-5% of the amount you transfer, which can eat into the amount you’ll save on interest.
Plus, ensure that you can successfully pay off the entire balance before the promotional period ends. If you can’t, you’ll more or less be right back where you started, having merely kicked the can down the road and delayed paying off your high-interest debt.
These were all factors I had to consider recently when trying to decide the best way to pay off an outstanding loan. My husband and I had borrowed money to pay for some home improvements, and due to the circumstances at the time, we had to take out an unsecured loan with a hefty 11.5% interest rate—lower than most credit cards, but higher than a home equity line would have been.
After making payments for a while and feeling like we weren’t making progress fast enough, it was time to explore alternative options. We decided to apply for the Citi Simplicity credit card and take advantage of its lengthy balance transfer intro offer. Here’s what we learned along the way.
Applying for a balance transfer card doesn’t guarantee a big impact
First, a bit of context: We originally took out the loan with the 11.5% rate in September 2023. It wasn’t ideal, but when you need new doors, windows, and a roof, you do what you have to. I knew right away I’d want to explore a balance transfer in the future, and first applied for a balance transfer card in early 2024.
Much to my dismay, the issuing bank only approved a credit line of $2,000. With an outstanding balance of $20,000 on the loan, that was barely a drop in the bucket, and wouldn’t have been helpful to my long-term goals. I canceled the application and continued making payments throughout the year, then decided it was time to try again in January 2025.
I applied for the Citi Simplicity credit card because it offered a 0% APR on balance transfers for 21 months, followed by a variable APR of 18.24% - 28.99%. That would give us nearly two years to pay down the transferred balance with no interest charges—meaning every dollar of our payments would go toward the debt’s principal.
For any balance transfers made in the first four months, the Simplicity would charge me a 3% balance transfer fee (increasing to 5% afterward). Plus, it charges no annual fee or late fees, giving me plenty of flexibility without increasing my liability.
This time, I was approved for a limit of $8,000. At this point my balance on the loan had been reduced to $13,000, which meant that a balance transfer of $7,500 (leaving wiggle room for fees) would help me cut the balance by more than half. Now I could do some cost/benefit analysis to determine if following through on the balance transfer would be worthwhile.
Calculating interest savings versus transfer fees is crucial
I knew that if I was going to commit to the balance transfer, it would need to provide me with substantial savings. Kullberg suggests comparing how much interest you’re currently paying versus what you would save with a 0% APR offer, factoring in the balance transfer fee. From there, figure out whether or not you can realistically afford to pay off the total balance before that promotional period ends. “You’ll want to budget plenty of extra room here, just in case a financial emergency pops up in the meantime,” she adds.
Thankfully, the bank where I hold the unsecured loan has a handy tool that tells me how much interest is being accrued each day. With a $13,000 balance, it hovered at just under $5 daily. So, let’s inventory some of the figures I had to assess:
- Total balance: $13,000
- Maximum balance transfer amount: $7,500
- Time it would normally take to pay off that amount: Roughly one year at $625 per month
- Estimated interest that would accrue in that time: $1,500 ($3-5 per day)
- 3% balance transfer fee on $7,500: $225
- Total savings: $1,500 minus $225 = $1,275
Transferring $7,500 to the Citi Simplicity card was going to cost me $225, but would save me an estimated $1,275 in interest payments. That sounds like a no-brainer, right? But there was one more calculation to make: Could I pay the card off in full before the promo period ends?
Failing to pay off the total balance of $7,725 on the Citi credit card within the promo period would mean I’d start accruing interest charges once again, and at a significantly higher interest rate than I’d been paying on the original loan. Thankfully, by my calculations this shouldn’t be a problem.
I’ll have to focus my efforts on paying off the remaining $5,500 at my original bank quickly, while making minimum payments to Citi. But once that personal loan is closed—which will take less than a year as long as I stick with the plan—I will still have over a year to pay off the Citi Simplicity card. And, without interest accruals driving up the balance, paying off the card shouldn’t take me long at all.
Barring any unforeseen circumstances, I intend to have the entire balance paid off within 18 months—a solid three months before the promotional period draws to a close.
Balance transfers aren’t right for every situation
Before we go any further, I should mention that balance transfers won’t be the right choice in every situation. For starters, you need to have at least good credit to have a chance at getting approved for a balance transfer card. That generally means a FICO Score of at least 670.
In addition, you can’t do a balance transfer between credit cards from the same issuer. So, if you’re carrying debt on a Discover credit card, for example, don’t apply for another Discover credit card hoping to transfer that debt.
Kullberg notes: “It’s important to really evaluate your spending habits here, too. If you continue to accumulate new high-interest debt while trying to pay off your balance transfer, what’s the point? It pays to be honest here and ensure you’re proactively working to get out of high-interest debt long term.”
Let’s say your credit is good or better, and you’ve identified a balance transfer card with an attractive offer from a different issuer than the one that holds your existing account. There are still a few more things to know.
The balance transfer process can take a while
If the math works out for you as it did for me, and you determine a balance transfer is worth the inherent risks, keep in mind that the process isn’t instantaneous.
I applied for the card on New Year’s Eve (yes, I’m a true party animal). Even with a credit score over 800, I didn’t receive an instant approval, and was told I’d receive more information in 7-10 business days. I sat back and waited… and waited… and waited some more, occasionally checking my application status online. There were never any updates.
Finally, I received a physical letter—telling me “more information is required” to process the application and that I should check the website for details. Unfortunately, this ended up being the same web page I was already using to check the application status, and there were no further details to be found.
I finally decided to contact Citi by phone and was directed to an automated system, where I provided my name and date of birth. With no further questioning, the system congratulated me on being approved for the card in question. To this day, I’m not certain what the holdup was, but at least at this point I could make some progress.
By Jan. 23, a little over three weeks after submitting my application, I finally had the card in hand and was able to initiate the balance transfer request through Citi’s online portal. This was a simple process, only requiring me to provide my name, the address of the bank holding the loan, and the account number. I did receive a message saying it could take up to 14 days to process a balance transfer request on a new account, but thankfully the check was issued to my bank less than a week later.
Then, all I could really do was sit back and wait. It took a few more days for my bank to process the check from Citi, but it cleared on Feb. 5; about five weeks from when I initiated the application process for the card. My credit card balance was updated in my Citi user dashboard two days later, and the balance transfer was finally complete.
Now, all I have to do is pay it off!
The takeaway
Balance transfers can be a powerful way to reallocate your debts and reduce your interest burden. They can also be an excellent option for someone seeking to consolidate multiple debts in one place so that there’s only one payment to track. As Kullberg advises, “A balance transfer can be a crucial part of a good approach to getting free from your debt, but there should be a wider plan in place.”
She also notes that you should consider options carefully. If the transfer fees outweigh the interest savings, or if you’re just going to continue racking up high-interest debt, a balance transfer may not be the best choice for you. She adds, “You might also be locked out of the most effective balance transfer offers due to a lower credit score, ultimately making a balance transfer financially unviable.”
Last—but certainly not least—you need to have a realistic plan to pay off your balance in full during the promotional period so that you don’t find yourself getting charged interest at a high rate once your balance transfer card’s regular APR kicks in.
So, take a careful look at your debt, potential fees, and how much you might save on interest before you commit to applying for a balance transfer card. And shop around! There are numerous balance transfer offers out there with various parameters to help you find one that meshes well with your goals.
