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It's not uncommon for American consumers to go into debt during the holidays. With the coronavirus pandemic throwing the finances of many into disarray, the debt load could end up more than normal. During the 2019 holiday season, Americans put an average of $1,325 on their credit cards, according to a survey by Magnify Money. That's in addition to the average credit card balance, which Experian pegs at $5,315.

Even if you're just tackling your holiday-related balance, it can still be easy to rack up a lot of interest charges over time, especially if you don't have a clear payoff plan. Here's how you can use balance transfer credit cards to help you plan your debt repayment and save money.

How Balance Transfer Credit Cards Work

One of the biggest roadblocks to paying off credit card debt is the interest rate. Balance transfer credit cards can help alleviate this problem by offering an introductory 0% APR promotion, which you can use to pay off your debt interest-free. Once you're approved for the card, you can request to transfer a balance from another credit card, then pay down the balance before the promotional period ends.

For example, let's say you have $1,235 in holiday debt on a credit card with a 16.43% APR, which is the average credit card interest rate, according to the Federal Reserve. If you were to plan to pay off the balance within 15 months — a common promotional period for balance transfer cards — your monthly payment would be roughly $92, and you'd pay $139.56 in total interest.

Now, let's say you can qualify for a balance transfer credit card with a 15-month period with no interest and a 3% balance transfer fee. In this scenario, the 3% fee, which comes to about $37, would be added to your balance to make $1,272. If you were to make equal payments for 15 months, you'd pay about $85 monthly, and you'd have no interest charges at all.

The result is a savings of about $102, which may not sound like a lot, but it's better than nothing. Also, the 15-month 0% APR promotion could help you stay motivated to pay off the balance before the card's regular APR kicks in.

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It's also important to note that some balance transfer cards don't charge an upfront balance transfer fee, which means your savings could go as high as $140. And if you have more debt on top of your holiday balance, you could stand to save even more.

Picking the Right Balance Transfer Card

To be clear, balance transfer credit cards typically require good or excellent credit to get approved, which can mean a FICO credit score of 670 or higher (though each card issuer has its own credit criteria). If your credit isn't quite there yet, it may not be possible to get the card you need.

If your credit is in good shape, though, take your time to compare multiple balance transfer cards to find the best fit. Here are some features to watch out for as you shop around:

  • Promotion length: Depending on where you look, you can find balance transfer promotions as long as 20 months — the U.S. Bank Visa® Platinum card is currently the top option in that regard. If you have a lot of debt you want to pay off in addition to your holiday debt, a longer promotion may be worth it.
  • Rewards: Many balance transfer credit cards offer more than just an introductory 0% APR promotion, including rewards. In fact, if you want a balance transfer card that will still provide value after the promotional period is over, consider one with rewards. One example of this is the Citi Double Cash® Card, which offers 2% cash back on every purchase you make, including 1% back when you make purchases and another 1% back as you pay them off.
  • New purchase promotion: Some balance transfer credit cards offer an introductory 0% APR on both balance transfers and new purchases. For example, the Citi® Diamond Preferred® Card offers an interest-free promotion on both for 18 months. It won't give you rewards, but if you have a lot of expenses coming up while you're paying down previous charges, this card can give you time to pay off all of it. After the promotional period, a 18.24% - 28.99% (Variable) APR applies.
  • Balance transfer fee: Most balance transfer credit cards charge between 3% and 5% up front to perform a balance transfer. The card issuer adds this fee to your balance, and it can eat into your savings. While that can be worth it if the card offers other perks, such as a longer promotional period and rewards, it can add up on larger transfer requests. Unfortunately, there are currently no major credit cards that offer no balance transfer fee, likely due to the pandemic. But keep this feature in mind as you compare credit card options in the future.

Is a Balance Transfer Credit Card Right for You?

Balance transfer credit cards can be an excellent way to pay off unwanted debt, but they're not the best fit for everyone. For example, if you're struggling to stay motivated, the 0% APR won't necessarily change your tune automatically. Also, it doesn't stop you from racking up another balance on your old card.

Finally, you'll want to use a balance transfer calculator to run the numbers on your specific situation to determine how much you can save. Depending on your situation and the savings potential, it may or may not be worth the trouble.

Whatever you do, it's important to be proactive about paying off the credit card debt you accumulate during the holidays and throughout the rest of the year. As you do, you'll have a better chance of paying it off and improving your overall financial health.


Ben Luthi

Ben Luthi is a personal finance and travel writer and credit card expert. He has a degree in finance from Brigham Young University and worked in financial planning, banking and auto finance before writing full-time for NerdWallet and Student Loan Hero. Ben is now a full-time freelance writer and enjoys traveling and spending time with his two kids. His work has appeared in several publications, including U.S. News & World Report, USA Today, Money, Success and Slickdeals.