Paying interest on a credit card balance is expensive — the Federal Reserve Bank of St. Louis found that the average credit card APR on accounts charged interest in February 2024 was 22.63%. And since that interest compounds daily, carrying a credit card balance is more expensive the longer you do it.
If you want a break on that interest, you might consider applying for a balance transfer credit card. The best ones have long 0% intro APR periods — sometimes a year, 15 months, or longer.
If you move an existing balance to one, you might be able to pay off your debt without accruing more interest on it. But not so fast! Read these two signs that a balance transfer card isn’t right for you — and see what your other options are to get out of debt.
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1. You can’t qualify for one
If you’ve been carrying a large credit card balance for a while, your credit score might be suffering as a result. So depending on the state of your score, you might not actually be able to qualify for a good balance transfer card with a long 0% intro APR. Or, you may not be given a large enough credit line to let you move all your existing debt over to it.
2. You don’t have a plan to pay off debt for good
You need a real plan to get out of debt and stay out of it. Ideally, you’d take the amount of your debt and divide it by the number of months you have with 0% APR if you use a balance transfer card.
If you’ve got $10,000 in debt and an interest-free period of 15 months to pay it off, you’d pay about $667 per month and have the balance paid off by the time your card’s go-to APR is charged. But if you haven’t decided how you’ll earn or free up that much money per month to send to the card, transferring the balance won’t do you any good.
Another potential problem is that transferring your balances will leave you with newly freed-up credit cards. If you turn around and spend on those cards again, you could end up even deeper in debt.
What are your other options?
If a balance transfer card isn’t right for you, one of these options might be a better move.
Debt consolidation loan
The interest rate on a debt consolidation loan is likely to be a lot lower than the rate you’re paying on a credit card, even if you don’t have a very good or exceptional credit score. And unlike a credit card APR, the loan rate will be fixed for the duration of your pay-off period.
If you get a $10,000 loan at a rate of 12%, and pay it back over five years, you’ll pay $222.44 every month, and by the time you’ve paid off your loan, you’ll have paid $3,346.67 in interest. To achieve that same payoff time while leaving the debt on a credit card charging you that average APR of 22.63%, you’d have to pay $280 per month — and would end up paying $6,787 in interest along the way.
Skip the consolidation and work more
For full disclosure, this is how I got out of debt in 2022. I decided that the best way out was through — and since I was fortunate enough to have time and flexibility, I decided to start working a side hustle. This worked out better for me than expected, since my side hustle was freelance writing and editing work, and I ended up coming to love it so much that I quit my W-2 job the following year and now I’m a full-time freelancer.
But a side hustle doesn’t have to be something you’re passionate about — it can just be a means to an end. If your end is getting debt paid off, you can funnel a lot of money toward it if you can work more hours at your main job or pick up a casual side gig, like driving for Uber or DoorDash. The money you earn won’t already be committed to your bills, so you can send all of it (less taxes, of course) to your debt.
Meeting with a debt counselor
If you’re really struggling with your finances, and watching your credit card balances mount thanks to high interest rates, all hope isn’t lost, even if you can’t make either of the above moves. It might be time to reach out to a nonprofit credit counselor.
You can find one via the National Foundation for Credit Counseling, and they can help you drill down on your financial situation. They’ll offer solutions to your budgeting and debt issues, and create an action plan for you to follow. Remember, it took a while to get into this situation, and it won’t be a snap to get out of it. But with the right support and tools, you can get a handle on your debt.
If you’ve got a high enough credit score and a plan to pay off what you owe, a balance transfer credit card can be a great way to achieve your goal. But if not, you’ve still got options. Make the best choice for you and your finances.
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