How to use a balance transfer to pay off credit card debt in 2021

[ad_1]

Select’s editorial team works independently to review financial products and write articles that our readers will find useful. We may receive a commission when you click on product links from our affiliate partners.

Credit card debt can add up quickly, especially right after the holiday season. But for anyone looking to pay off their debt in 2021, there are a handful of credit cards that can help you wipe out a big balance without getting eaten up by expensive interest charges.

The average APR for a credit card is 16.28%, but you might pay even more if you have a credit rating. These interest charges can affect your ability to repay your debts because all the payments you make go toward your principal balance. and interest.

But if you transfer your debt to a balance transfer card which offers no interest for up to 20 months, you can save a lot of money and pay off your credit card faster. With an introductory 0% APR balance transfer card, all payments you make will go to your main balance.

Here’s how you can save money with a balance transfer, some helpful tips for choosing the best balance transfer card, and CNBC Select’s recommendations for the best balance transfer cards.

How much money can you save with a balance transfer?

A balance transfer card is a great way to temporarily avoid interest charges while you pay off debt. If you are aggressive with your repayment plan, you can successfully save hundreds or even thousands of dollars.

Consider a scenario where you have a balance of $ 5,000 and pay $ 200 each month for that debt. Assuming you have an average APR of 16.28%, you will pay $ 1,149 in interest charges and it will take 31 months to pay off your debt.

But if you transfer your balance to American bank Visa® Platinum card – which offers 0% APR for the first 20 billing cycles – and maintains the same monthly payment of $ 200, you’ll only pay around $ 193 in interest and fees (that’s $ 43 in interest and a transfer fee from one-time balance of $ 150). Plus, you’ll be able to pay off your debt in 26 months. After the introductory period a variable APR of 14.49% to 24.49% applies, but for our calculations we have assumed an average APR of 16.28%.

Overall, you’ll save around $ 956 and pay off your debt five months faster if you open a balance transfer card.

How to choose the best balance transfer card

While a balance transfer is pretty straightforward, there are a few things you will need to pay attention to before you transfer your debt to a new card. Here are some tips that can help you find the right card.

  1. Review the credit requirements: Many balance transfer cards require good credit or excellent credit. If you have bad credit, it can be difficult to qualify for a balance transfer card, and you should consider alternatives, such as a Personal loan.
  2. Understand the conditions of your balance transfer: Before applying for a balance transfer credit card, review the terms associated with your offer, including: limits on the amount of debt you can transfer, length of the 0% introductory APR, time limit for transfer your debt and balance transfer fees.
  3. Evaluate the fees associated with the balance transfer: It is more likely than not that you will have to pay a balance transfer fee ranging from 3% to 5% of the total transfer. Calculate the fee amount, then see if it’s worth it. You can also consider a free balance transfer card, as the Wings Visa Platinum Card, but there are currently few alternative no-cost cards available.

Best Balance Transfer Cards

Balance transfer cards come in all shapes and sizes, with some offering rewards and others offering a lengthy 0% APR introduction on balance transfers and new purchases. Here are CNBC Select’s picks for the best balance transfer credit cards.

American bank Visa® Platinum card

On the secure site of US Bank

  • Awards

  • Welcome bonus

  • Annual subscription

  • Introduction APR

    0% for the first 20 billing cycles on balance transfers and purchases

  • Regular APR

  • Balance transfer fees

    Either 3% of the amount of each transfer or $ 5 minimum, whichever is greater

  • Foreign transaction fees

  • Credit needed

Citi® Double Cash Card

  • Awards

    2% Cash Back: 1% on all qualifying purchases and an additional 1% after paying your credit card bill

  • Welcome bonus

  • Annual subscription

  • Introduction APR

    0% for the first 18 months on balance transfers; N / A for purchases

  • Regular APR

    13.99% – 23.99% Variable on purchases and balance transfers

  • Balance transfer fees

    Either $ 5 or 3% of the amount of each transfer, whichever is greater

  • Foreign transaction fees

  • Credit needed

Citi Simplicity® Card – No late fees

Information on the Citi Simplicity® card was independently collected by CNBC and was not reviewed or provided by the card issuer prior to publication.

  • Awards

  • Welcome bonus

  • Annual subscription

  • Introduction APR

    0% for the first 18 months on purchases and balance transfers

  • Regular APR

    14.74% to 24.74% variable

  • Balance transfer fees

  • Foreign transaction fees

  • Credit needed

Aspire Platinum Mastercard®

Information about the Aspire Platinum Mastercard® was independently collected by Select and was not reviewed or provided by the card issuer prior to posting.

  • Awards

  • Welcome bonus

  • Annual subscription

  • Introduction APR

    0% for the first 6 billing cycles on purchases and balance transfers

  • Regular APR

  • Balance transfer fees

  • Foreign transaction fees

  • Credit needed

The information on the Wings Visa Platinum card was independently collected by CNBC and was not reviewed or provided by the card issuer prior to posting.

Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.

[ad_2]

About Nereida Nystrom

Check Also

Today’s Best Mortgage and Refinance Rates for October 29, 2020

Many businesses featured on Money advertise with us. The opinions are our own, but the …

Leave a Reply

Your email address will not be published.