Use Credit Card Balance Transfers to Pay Off Debt Faster (and Save Over $10,000 in Interest)

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Using a credit card to get out of credit card debt sounds crazy, but the math is hard to argue with. In this video I compare paying $10,000 at 20% interest with minimum payments against moving that same balance onto credit cards offering 0 interest on balance transfers for an intro period, then rotating it from card to card until the debt is gone.

Same $200 a month either way. One path takes nine years and costs you $21,680. The other takes four and a half years and costs you about $10,600.

What you'll learn

• Why I don't put much faith in the snowball method, and where the avalanche method actually makes sense
• What $10,000 at 20% interest really costs when you pay the 2% minimum
• How a 0% intro balance transfer works, including the typical 3% transfer fee
• How to roll the balance from card to card until it's paid off
• The rules you have to follow for this to work: good credit, on-time payments, and no new charges

The three methods people talk about

The first is the snowball method: pay extra on your smallest balance first so you go from three cards to two to one. People say it helps mentally. I don't buy it, and it doesn't help you financially. Forget it.

The second is the avalanche method: apply extra money to the highest interest rate first. That one makes sense, but honestly that's just the standard way to attack debt. Write down everything you owe and start with the highest rate. If your credit card is 21%, your personal loan is 12%, your car loan is 7% and your mortgage is 4%, you start with the card and work down. The problem is you're still paying that high rate while you do it.

The third method, and the fastest one, is moving the balance to a card that charges you 0% on balance transfers for an introductory period, usually around 18 months.

The $10,000 example at 20% interest

I used $10,000 because that's about the average American credit card balance from what I saw. At a 20% rate with a 2% minimum payment, the card will happily accept $200 a month. Do that and it takes nine years to pay off, and the interest comes to $11,680. You pay $21,680 total to clear a $10,000 balance.

Think about what that means. Every $100 pair of shoes you charged actually cost you $200. Walk through all your items that way and it makes no sense.

The same $10,000 using balance transfers

Now transfer that $10,000 to a 0% intro card. There's usually a transfer fee, typically 3%, so $300 gets added and your balance is $10,300. For 18 months you pay 0% interest, so every dollar of your $200 payment goes to principal. Eighteen payments of $200 is $3,600, leaving $6,700.

Transfer again. The 3% fee is about $201. Another 18 months at $200 knocks off another $3,600. Transfer one more time, pay the small fee, and 18 more months of $200 finishes it off.

Total time: 54 months, or four and a half years, instead of nine. Total cost: the $10,000 plus roughly $300, $201 and $100 in fees, so about $10,600 instead of $21,680. Half the time and about half the money. If you want to run your own numbers, use the credit card payoff calculator before you apply for anything.

The rules that make it work

You still have to be approved, so you need a decent credit score. You have to make every payment on time. And you cannot charge anything during this period. If you can throw extra money at it, do it, because during the 0% window every dollar you send goes straight to the balance. If you can finish inside one 18-month window, finish it there. Worst case you rotate it. Even one rotation makes a huge dent. For more detail on setting one up, see how to do a 0% balance transfer, and if you want the step-by-step plan, start with the get out of debt course.

Key steps

1. Write down your balance, your interest rate and what you're actually paying each month.
2. Run the payoff at your current rate so you see the real interest total, not just the minimum payment.
3. Apply for a card with a 0% intro rate on balance transfers, usually around 18 months.
4. Transfer the balance and add the transfer fee (typically 3%) to your new balance.
5. Keep paying at least the same amount every month. During 0%, all of it goes to principal.
6. Stop charging. No new purchases on any card while you're paying this off.
7. If there's a balance left when the intro period ends, transfer it again and repeat until it's gone.

FAQ

Doesn't the transfer fee cancel out the savings?

Not even close in this example. Three transfers cost roughly $300, $201 and $100, about $600 total. Paying 20% interest on the same balance for nine years costs $11,680. The fee is small money compared to what the interest rate was doing to you.

What if I can't get approved for a 0% card?

Then this method is off the table for now and you go after the highest interest rate first with every extra dollar you have. That's the approach I walk through in debt snowball vs. avalanche. If your credit improves later, you can revisit the transfer.

Can I keep using the card while I'm paying it off?

No. The whole example assumes you stop charging. If you keep adding purchases, you're refilling the balance faster than $200 a month can empty it and the 0% window gets wasted.

How long does it take to pay off $10,000 with balance transfers?

In my example it takes 54 months, or four and a half years, paying $200 a month. That's three rounds of 18 months at 0%, with transfer fees of roughly $300, $201 and $100. The total cost is about $10,600, compared with nine years and $21,680 when you pay the 2% minimum at 20% interest.

How long do no interest credit card transfers last?

The 0% intro period on a balance transfer is usually around 18 months. During that window every dollar of your payment goes to principal. If a balance is left when it ends, I transfer it again and repeat until it's gone. If you can finish inside one 18-month window, that's where I'd finish it, but even one rotation makes a huge dent.