On this episode of Financially Naked: Stories from The Financial Gym, two of our Certified Financial Trainers, Kadri and Mike, sit down to talk about balance transfer cards. These can be a great tool for debt repayment or planning large purchases. Kadri and Mike go through how these cards work, the benefits of balance transfer cards, and things to keep in mind when considering if they’re a good fit for you.

Podcast Notes

There are different forms of debt consolidation, including personal loans. Which one is the best choice for you depends on a few different variables. Mike has used balance transfer cards on his own personal financial journey and he and Kadri recommend them to their clients. They are a great tool and can be used for a few different things.

What is a balance transfer card, and why consider applying for one?

Balance transfer cards offer 0% APR for a one-time fee (or low low fixed rate) for a certain amount of time, usually between 12-18 months. They can be used to:

Consolidate multiple smaller debts together for one monthly payment
Transfer one high-interest debt to a new card to allow more time and flexibility
To strategically finance a large purchase.
They can be used to lower monthly payments and provide flexibility in your budget.
If you need more time by the end of the promo offer, you can apply for another balance transfer card.

It’s important to be strategic when opening any new credit card. There are a few factors to consider, such as your credit score, current income, monthly expenses, debt to income ratio, and already existing debt payments.

What to consider before applying for a balance transfer card?

The first step is to understand where you stand financially. Start by making a list of all of your debts: include the total owed, APR, and minimum monthly payment. It’s important to understand the whole picture in order to make the best choices.
Take some time to reflect on your debt. There’s no need to feel shame or fixate during this process. It’s about addressing the cause to be able to break through old patterns and cycles.
Read and understand the terms, agreements, and options for each card. Does the fee make sense for your current scenario, or is this debt better suited for a personal loan?
Be proactive and make a plan for paying off the debt. Use this time of 0% interest to make progress on those goals.
Make saving a priority, even while paying down debt. Having an emergency fund is the number one step toward breaking out of the debt cycle.

Where do you find a balance transfer card?

Check existing offers with cards you already have. For example, you may be able to transfer your American Express Balance to one of your Discover cards.
You can’t transfer balances between two cards from the same provider. One Discover card can’t be transferred to another Discover card.
If you have a credit score of 700+, you’ll likely be approved for a balance transfer card pretty easily. Depending on your overall financial picture, you may qualify even with a lower credit score.
To find a balance transfer card that is a great fit for you, check out the BFF Approved Products Page.
If you want a Certified Financial Trainer to walk you through the process, schedule a free warm-up call to learn more!

Listen to Kadri and Mike talk about consolidation loans on Financially Naked: