Struggling with Record-High Credit Card Debt? Try This Method to Pay it Off


As credit card debt hits a record high of $986 billion, many Americans are resorting to balance transfer cards as a way to reduce their credit card debt. Balance transfer offers can be a valuable tool in accelerating the process of debt reduction, provided the balance transfer fees aren’t too high. Nevertheless, it’s essential to be mindful of the promotional periods, as well as any impact the balance transfer may have on the borrower’s credit score.

As inflation shows some signs of easing, a significant number of Americans continue to face financial challenges. In an effort to cover the widening gap between their earnings and mounting expenses, many have resorted to using credit cards, leading to a surge in credit card debt.

But what happens when credit card debt becomes insurmountable? In this article, we’ll discuss one of the more unknown methods of paying down your credit card debt: balance transfer cards.

Why has credit card debt increased?

New data on household debt from the Federal Reserve Bank of New York revealed that credit card balances soared to $986 billion in the fourth quarter of 2022, exceeding the pre-pandemic peak of $927 billion.

At the onset of the pandemic, consumers were actively reducing their debt, as many retail outlets were closed and state-imposed stay-at-home orders curtailed spending and credit usage. Consequently, the U.S. savings rate as a percentage of disposable personal income reached a historic high of 33% in April 2020, before plummeting to 3.4% in December.

Although delinquency rates remain relatively low, the Fed reported “signs of stress” among younger credit card users, who are starting to miss payments. The rise in interest rates is believed to be one of the contributing factors. As borrowing costs increase, the minimum monthly payments for credit card balances also go up.

How can balance transfer cards help reduce credit card debt?

If you’re looking to manage your credit card debt, one strategy is to transfer the balance to another card that offers 0% interest for a limited period. Surprisingly, 37% of consumers with credit card debt were unaware of such balance transfer offers.

“These offers are hiding in plain sight, as they are widely available but not necessarily widely known,” explained Ted Rossman, a senior industry analyst at Bankrate. “I believe this could be the best way to pay off credit card debt quickly and at the lowest possible cost.”

Although the Fed has been raising interest rates to curb inflation, balance transfer offers remain abundant. “If you have credit card debt, which around 50% of cardholders do, this could be an incredible opportunity,” according to Rossman.

Pros and cons of balance transfer offers

While using debt to pay off debt is not an ideal practice, a balance transfer offer can be an effective way to accelerate your debt reduction plan. Here are some advantages and disadvantages to keep in mind when evaluating 0% promotional offers.


Here is a list of the benefits and drawbacks to consider.

  • Savings on interest
  • Imposes discipline on repaying debt
  • Numerous cards available
  • Transfer fees can add up
  • Will impact your credit score
  • Promotional periods only 15 to 21 months long

Pros of balance transfers explained

There are several advantages to using a balance transfer offer to pay off credit card debt:

  1. Interest savings. The average credit card interest rate is around 20.3%. By transferring a $5,805 debt balance (the average credit card debt for borrowers, as per TransUnion) to a 0% card for 21 months, you can pay it off in under two years with a monthly payment of around $276. However, if you continued to pay the same $276 per month on a card with the average interest rate, it would take 27 months to pay off the debt. Not only that, but you’d also end up paying over $1,430 in interest.
  2. Imposes discipline. While it’s possible to make significant payments on your credit card without transferring the debt to another card, using a promotional offer with a deadline can encourage you to pay off your debt faster. Additionally, when the offer expires, the interest rate is usually higher than the old card, which may provide additional motivation to reduce the balance.
  3. Wide availability. 0% promotions are typically accessible to consumers with a credit score of 670 or higher. Considering the average FICO credit score of 716, many applicants are likely to qualify.

Cons of balance transfers explained

As with any financial product, balance transfer cards can be a great tool to lower or help consolidate your debt. However, they also come with some downsides.

  1. Transfer fees. Moving your debt to another card can come with a transfer fee of around 3% of the balance. For instance, in the example mentioned earlier, transferring a balance of $5,805 would cost $174. While this amount may not be substantial, it could be wasted if you’re unable to pay off the balance within the promotional period. Schulz notes that a small number of cards now charge a higher balance transfer fee of 4% or 5%.
  2. Impact on credit score. When you apply for credit, lenders will typically pull your credit report, which leads to a “hard” inquiry. Credit scoring models take into account whether you’re actively seeking to borrow, and new credit activity accounts for 10% of your score. Depending on your credit history, a hard inquiry could lower your credit score by five to 10 points for a few months. Nevertheless, a balance transfer could benefit your credit score in the long run, by reducing your credit utilization ratio and enabling you to pay off the balance more rapidly.
  3. Short promotional period. Most balance transfer offers have relatively short promotional periods, typically ranging from 15 to 21 months. After the offer expires, the interest rate may spike, with rates starting from 17% on the low end, and climbing close to 30% on the higher side. It’s important to be realistic about whether you can pay off your balance within the promotional period and whether the long-term benefits of the balance transfer outweigh the risks.

To avoid spending too much on transfer fees, make sure to look for a no balance transfer fee card. This way, you can put more money towards your debts and reduce your overall credit card balance.

And in case you can’t qualify for a balance transfer card with a 0% APR introductory period, consider taking out a debt consolidation loan instead.

Key Takeaways

  • Credit card balances in the U.S. soared to $986 billion in Q4 2022, which is higher than the pre-pandemic peak. As the minimum monthly payments increase, many young credit card users are starting to miss payments.
  • Transferring a credit card balance to another card with 0% interest for a limited time could be an effective way to pay off credit card debt quickly and at the lowest possible cost. However, although balance transfer offers remain abundant, around 37% of consumers with credit card debt are unaware of them.
  • Using a balance transfer offer to pay off credit card debt can impose discipline on repaying debt, save interest, and is accessible to many consumers.
  • That said, balance transfer fees can impact how much money can go toward your debts. In addition to affecting your credit score and a limited promotional period, remember to be realistic about whether the long-term benefits of the balance transfer outweigh the risks.
View Article Sources
  1. Household Debt and Credit Report — Federal Reserve Bank of New York
  2. Personal Saving Rate — Bureau of Economic Analysis
  3. How to Choose a Balance Transfer Credit Card — SuperMoney
  4. Should You Do a Balance Transfer? — SuperMoney
  5. Is a Credit Card Balance Transfer a Good Idea? 5 Questions to Ask Yourself Before Deciding — SuperMoney
  6. How to Consolidate Credit Card Debt — SuperMoney
  7. How Long Does a Balance Transfer Take? — SuperMoney
  8. How Do I Transfer a Balance to a New Credit Card? — SuperMoney
  9. How to Avoid Credit Card Debt — SuperMoney
  10. Best No Balance Transfer Fee Credit Cards — SuperMoney
  11. Best Balance Transfer Credit Cards — SuperMoney
  12. Consumer Credit Card Industry Study — SuperMoney