Why Now Is the Time To Transfer Your Credit Card Balance

Young woman paying bills/ shopping online with credit card.
Astarot / Getty Images/iStockphoto

According to the Federal Reserve, the average credit card annual percentage rate is 14.58%, a ghastly number in and of itself, and one that can easily travel into the neighborhood of 20% and above. For those who don’t pay off their statements every month, interest rates like that can quickly lead to crushing debt that seems impossible to claw out from under, particularly if you’re playing financial whack-a-mole with several cards at the same time.

Read More: Should I Contribute to My 401(k) or Pay Off My Credit Card Debt?

If your New Year’s resolution involved sprucing up your finances, consider applying for another credit card moving into February. That might seem counterintuitive — the last thing you need, after all, is more credit card debt. But you’re not applying for more purchasing power. You’re applying for a card specifically designed to transfer high-interest revolving debt, which might just be the fastest and easiest path to financial freedom. 

Helpful: 19 Ways To Tackle Your Budget and Manage Your Debt

A Balance Transfer Can Provide Shelter for All of 2021 and Beyond

Earn More Perks From Your Credit Card
Sponsors of

Balance transfer cards offer special introductory rates, the best of which come with zero percent interest for 12, 18 or in some cases even 20 months. When you get the card, it comes with instructions on how to move the high-interest debt that’s bogging you down to your fresh new no-interest card. Then, you can set the minimum monthly payments on auto-pay and forget about it until the special term is up. With the new car smell still lingering in 2021, that means you’ll have the entire rest of the year and beyond to breathe more freely as the world hopefully begins to get back to normal.

Find Out: How To Consolidate Credit Card Debt

You Can Keep the Wolves at Bay Much More Easily

With the exception of paying late, missing payments or defaulting, paying only the minimum balance every month is the single worst strategy for managing credit card debt. You barely chip away at the principal only to have even those modest gains diminished as new finance charges pile up and string your debt out into eternity. None of that matters, however, when you’re not paying interest. When you transfer your balance, you can pay only the minimum knowing that every dollar is slashing your principal debt, which will soon start getting smaller and smaller instead of bigger and bigger.

Paying in Full vs. Partial Payments: Which Is Best for Your Credit Score?

You Can Buy Yourself Some Breathing Room

With your debt now parked safely for a year or more, you have some room to relax, regroup and decide how best to use the money you would have dumped into servicing all that high-interest debt you just put on ice. Moving into February, you’ll be able to plan your entire financial year — maybe that money goes to extra payments on student loans, paying off your car early or building an emergency fund. No matter your choice, it’s not going into your card provider’s profit column. 

You Can Kick the Can Down the Road Later If You Must

When your introductory rate expires, high-interest finance charges will kick in. Provided you didn’t damage your credit somehow in between, more than enough time will have passed for it to be safe to apply for another balance transfer card to start the whole process over again with whatever’s left on your tab. 

Earn More Perks From Your Credit Card
Sponsors of

Did You Know: The 6 Best Store Credit Cards Worth a Spot in Your Wallet

You Can Improve Your Credit

By opening another credit card, you will increase your available credit and therefore lower your credit utilization ratio, which joins on-time payments and derogatory marks as the highest-impact factors that determine your credit score. You might get a small temporary drop at first because of the hard credit pull that comes with every application, but it won’t be much and it won’t last long. After that, you’ll be heading into spring and summer with lower monthly bills, more cash on hand, less high-interest debt, more available credit, a higher credit score and a brand spanking new plastic rectangle in your wallet. All in all, a good start to a new year and new financial goals.

More From GOBankingRates

Last updated: Feb. 1, 2021

About the Author

Andrew Lisa has been writing professionally since 2001. An award-winning writer, Andrew was formerly one of the youngest nationally distributed columnists for the largest newspaper syndicate in the country, the Gannett News Service. He worked as the business section editor for amNewYork, the most widely distributed newspaper in Manhattan, and worked as a copy editor for TheStreet.com, a financial publication in the heart of Wall Street’s investment community in New York City.

Why Now Is the Time To Transfer Your Credit Card Balance
Close popup

Win $500 – and Start the New Year Right!

When you sign-up to receive bi-weekly email updates from GOBankingRates, you’ll automatically be entered for a chance to win our $500 #BestBanksBestYou sweepstakes. Sign up now!

Loading...
Please enter an email.
Please enter a valid email address.
There was an unknown error. Please try again later.

For official contest rules, click here.