How to Use a Balance Transfer for Holiday Debt

Quick Answer

Balance transfer cards offer a low or 0% APR on transferred balances during an initial promotional period. As a result, more of your payment goes toward the principal balance instead of interest, allowing you to pay off the balance sooner.

A woman holding a balance transfer credit card while using a laptop on the couch. There is a holiday tree in the background.

Many people use credit cards to pay for travel, gifts and outings with friends and family during the holidays. And while some might be able to quickly pay off the balances after a few paychecks or receiving a tax refund, others need more time. Using a balance transfer to move credit card debt that accrued during the holiday season to a new card with a lower interest rate might help you save money and get out of debt faster.

How Does a Balance Transfer Work?

A balance transfer is a relatively simple process that moves a balance from one or more credit cards to another. You can often request a balance transfer when opening a credit card, from your online account, using a balance transfer check or by calling the credit card company.

Some credit card issuers extend balance transfer offers to existing cardholders. But people often apply for a new credit card to take advantage of balance transfer offers that are only available to new cardholders.

In either case, there are a few terms and rules to remember:

  • You receive a low or 0% APR. Balance transfer offers give you a lower annual percentage rate (APR) on the transferred balance, sometimes down to 0% APR. You can use the money that you'd otherwise spend on interest to pay off the card's balance faster.
  • The lower APR lasts for a limited time. Balance transfer APR offers only last for a limited promotional period, which may be anywhere from nine to 21 months, depending on the offer.
  • Purchases might not receive a lower rate. Some balance transfer offers will also give you the same low or 0% APR on purchases that you make with the card. If they don't, your purchases might accrue interest based on the card's standard purchase APR.
  • There may be a balance transfer fee. Credit cards often charge 3% to 5% of the amount you transfer on each balance transfer. You might still be able to save money if you save more on interest than you spend on fees.
  • Your balance transfer requests could be denied. You generally can't transfer balances between two credit cards from the same company. Your account may also have a balance transfer limit, which could be lower than its credit limit.

After you complete a balance transfer, try to create a plan for paying off the transferred balance during the promotional period. Otherwise, the remaining balance accrues interest based on the card's standard APR.

Find the best balance transfer credit cards with Experian.

How to Pay Off Holiday Debt With a Balance Transfer

You can transfer and pay off holiday debt—along with other credit card balances—by opening a new credit card with a balance transfer offer. Here are six steps you can follow:

1. Check Your Credit Score

Start by checking your credit score—you can check your FICO® Score for free from Experian. Your score can impact the credit cards you're eligible for and the credit limit you receive.

2. Compare Balance Transfer Offers

Compare relevant credit card offers based on your credit score. Consider the balance transfer APR, length of the promotional period and balance transfer fee. And look for good options from different card issuers—you can't transfer balances between cards from the same company. Experian can also match you with balance transfer cards from its partners based on your credit profile.

3. Apply for a Balance Transfer Card

Once you identify a good card offer, apply to find out if you get approved. Some, but not all, credit card issuers have a prequalification option that you can use first to see if you'll likely get approved without affecting your credit.

4. Request a Transfer

You may be able to request balance transfers during the application process, or by logging in to your account or calling the card issuer after receiving your new credit card. To request the transfer, you may need your current credit card number and the card issuer's billing address. Don't wait too long because sometimes balance transfers will only receive the promotional APR if you request or complete the transfer within a limited initial period.

5. Monitor the Original Account

It can take several weeks for your balance transfer request to be fulfilled and for the payment to apply to your original credit card. Even if you're using a balance transfer to pay off the card, continue monitoring the account and making any required minimum payments. You don't want to let an accidental late payment lead to new fees or hurt your credit scores.

6. Make a Plan for Paying Off the Balance

Once you've transferred all the balances that you can or want to your new card, figure out how much you'll need to pay each month in order to pay off the balance by the end of the promotional period. You may even want to plan as if you'll pay off the balance a month or two early in case unexpected expenses throw you off course.

How Much Money Can You Save With a Balance Transfer?

Consider someone who has a $5,000 balance on a credit card with a 23% APR. They apply for and get approved for a new credit card with a 15-month 0% APR balance transfer offer, 3% balance transfer fee and no annual fee.

Here's how much they would have to pay each month and overall to pay off the transferred balance during the promotional period. The far right column shows how that compares to paying off the original card in the same period or using the same monthly payment.

Credit Card Payoff Options Compared
Balance Transfer Card Pay Off the Original Card in 15 Months Pay Off the Original Card With the Same Monthly Payment
Total balance (including balance transfer fee) $5,150 $5,000 $5,000
Monthly payment $344 $387 $344
Months to pay off balance 15 15 18
Total paid $5,150 $5,800 $5,920

Even with the addition of a $150 balance transfer fee, the person still comes out ahead if they transfer and pay off the $5,000 balance during the 15-month promotional period.

If they want to pay off the original card in the same 15-month period, they'll need to pay $43 more each month and would wind up paying $650 more overall. Or, if they want to make the same monthly payments, they will pay $750 more overall and it will take three months longer to pay off the balance.

Find a New Balance Transfer Card

Getting your free credit report and score from Experian can be a good first step when you're considering applying for a new credit card or loan. If you think a balance transfer might be a good way to manage your credit card debt, you can also compare balance transfer offers from Experian's partners. Or, sign in to your Experian account and get matched with offers based on your credit profile.