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With more than $107,000 in credit card debt, Alex Young, 33, and his wife, Alexandria, 31, turned to balance transfer cards in 2018. But not just one; the couple made multiple balance transfers at once, which led to months of financial sacrifice and a strict budget to pay off balances before interest was applied.
The Youngs accumulated their debt over time, thanks to general overspending, a higher cost of living than they could afford, and a lack of financial knowledge. But they eventually reached a point where the debt became insurmountable, says Young. In March 2018, they decided to tackle high-interest debt and opened multiple balance transfer cards in April.
“I think we opened a total of about eight cards in one afternoon,” says Young, who works as a real estate agent in the Green Bay, Wisconsin, area. This allowed them to transfer their entire debt balance to various cards with introductory 0% APR offers. Then they devised a strategy to pay off as much as they could within the introductory periods that ended around the same time.
“That felt so uncomfortable, incredibly uncomfortable. Suddenly, we had a ton of new credit inquiries and available balances,” says Young. They also had to accept the sacrifices that a plan like his required; they would give up a series of experiences and celebrations to pay off the debt. They had to give up vacations and birthday celebrations to pay off thousands before eight introductory terms were over in 18 months.
While the Youngs’ experience is an extreme example, balance transfer cards can be a great way to consolidate high-interest credit card debt and avoid additional interest charges. While it’s possible, experts say most people should avoid using multiple new balance transfer cards at the same time.
For starters, the high monthly payments you’ll need to pay off so many balances in a limited amount of time can be a huge financial burden. Applying for and opening multiple new credit cards at once can also hurt your credit score. Even the Youngs admit they made a lot of sacrifices, had lower credit scores and worked within a strict budget to put every extra dollar toward their debt.
If you have to pay off high-interest credit card debt, here’s what you need to know about the risks and considerations of using multiple balance transfers at once, and how it can affect your credit.
- 1 Can you do multiple balance transfers?
- 2 Multiple Balance Transfer Risks
- 3 Consolidate multiple debts with a balance transfer
- 4 Make a plan to pay for your balance transfer in advance
- 5 The best balance transfer cards right now
Can you do multiple balance transfers?
As the example of the Youngs shows, it is possible to make multiple balance transfers at the same time. But that doesn’t mean it’s a good idea.
In general, the amount transferred (including the balance transfer fee) cannot exceed the credit limit of the card. If you intend to use multiple balance transfer cards to avoid paying interest charges, you may be left with very high monthly payments to ensure you pay off before the promotional balance transfer rates end.
The Youngs experienced this when they had to factor in higher monthly payments than they had allocated in the past. The couple kept a strict monthly budget and kept track of everything while contributing as much money as possible toward their debt. They also kept a spreadsheet of each card’s balance and the date the promotional offer ended to keep them up to date.
“We tracked everything down to Netflix subscriptions or monthly music subscriptions. We cut as many frivolous expenses as needed and then found other means to increase revenue,” says Young.
So if you plan to use multiple balance transfer cards to consolidate debt, be prepared to make very large monthly payments to pay off multiple balances before the introductory periods end. Otherwise, each of those cards will start accruing interest on the remaining balance and you’ll end up in the cycle of debt again.
Balance transfer fees are another thing to consider. Most balance transfer cards charge fees of 3% to 5% on each balance transferred. And the fees can add up quickly, especially if you’re transferring multiple balances from different cards. Remember to factor the balance transfer fee into your budget and your card limit.
Multiple Balance Transfer Risks
While it’s possible to pay off debt with multiple balance transfers like Young’s, experts caution against it.
If you’re doing a balance transfer, it should be used as a one-time lifeline to get out of debt instead of repeating the cycle, says Terry Savage, author of “The Wild Truth About Money, Markets, and the Economy.”
Opening multiple lines of credit to transfer balances can have a big impact on your credit score. Especially if you’re opening multiple lines of credit within a short period of time, new accounts and new inquiries can take a toll on your credit.
Instead, use a balance transfer card as a strategic tool in your overall debt repayment plan. If you have a debt balance that exceeds what you can transfer to one card, consider waiting to pay off the balance on one balance transfer card before opening another card to ensure you can pay off one balance instead of several at once. . And if your debt is very high, a balance transfer can help you pay off some of the debt along with other methods, such as a debt consolidation loan or repayment techniques like snowball and avalanche.
Consolidate multiple debts with a balance transfer
In general, and when possible, a better option for consolidating debt is to transfer balances from multiple cards to a single balance transfer card, says Jim Triggs, president and CEO of Money Management International, a nonprofit credit counseling organization. profit. But it depends on the card issuer and the card limit it is approved for. You may be able to transfer all of your debt to a single card to pay off your balance without interest.
But if your debt exceeds the limit on one balance transfer card and you want to use multiple balance transfer cards to consolidate and pay off debt, you can choose to gradually open another card over time to pay off balances instead of facing a huge financial burden of steep payments that you may not be able to afford comfortably.
- Introductory offer:
- Annual quota:
- ordinary APR:
13.99% – 23.99% (varies)
- Recommended credit:
670-850 (Good to Excellent)
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Make a plan to pay for your balance transfer in advance
The Youngs took a risk by doing several balance transfers at once, but some of the debt settlement tricks they learned along the way can help you on your journey.
First, they prepared. When Young and his wife started paying off the debt, they created a spreadsheet with outstanding balances, interest rates and the length of each promotional period. They also increased the amount of money they could devote to paying off debt each month: Young was able to increase her real estate clientele, and the couple created a strict budget that cut as much frivolous spending as possible.
“We had to give up getting together with friends and family, taking trips and giving gifts on birthdays or holidays,” says Young. While it wasn’t an easy decision, Young says they were willing to sacrifice in the short term to pay off debt as quickly as possible. “We were very fortunate to be able to overcome a lot in a relatively short period of time considering how long it took to build up to start.”
Before you apply for a balance transfer card, make a plan to pay for it within the introductory period ahead of time, so you can avoid the need for multiple balance transfers altogether.
After all, balance transfers are great as long as they’re used to get out of credit card debt, not just stay afloat by paying only the minimum payments and not creating a plan to pay off the debt, a risky move that accrues interest. and it leads to more credit card debt, says John Ulzheimer, a credit expert, formerly of FICO and Equifax.
Triggs recommends using a balance transfer calculator to estimate how long it will take to pay off your balance transfer and your monthly payments. As he figures out how much he can afford in monthly payments, consider ways you can refine your budget:
Another thing to consider is how you took on the debt to begin with. If you continually find yourself stuck in a cycle of debt, or if you have a very high balance that seems insurmountable, consider seeking help from a nonprofit credit counseling agency to evaluate your options, such as a personal loan or a credit management program. debts.
“Ultimately, if you continue to transfer balances and it has to do with the minimum payment being difficult to make, you may want to seek help and see if other help is available to you,” adds Triggs.
The best balance transfer cards right now
The Citi Simplicity® Credit Card has a 0% introductory APR for new purchases for the first 12 months, but a longer introductory period of 21 months for balance transfers after account opening. There is a variable APR of 14.74% – 24.74% after that. To qualify for the introductory period, you must complete the balance transfer within the first four months.
The card has no annual fee, fees for late payment, or penalty APR. However, there is a balance transfer fee of 5% or $5, whichever is greater.
Wells Fargo Reflection
The Wells Fargo Reflect℠ Credit Card has a 0% APR for purchases and balance transfers for the first 18 months. There is a variable APR of 12.99% – 24.99% thereafter. If you make on-time payments during this time, you may qualify for up to three additional months of 0% APR. To qualify for the promotional offer, you must make the balance transfer within 120 days of opening the account.
The card has no annual fee, but you can expect a 3% balance transfer fee ($5 minimum). After the introductory period, it increases to 5%.
Citi Double Cash
The Citi® Double Cash Card has an 18-month 0% introductory APR period for balance transfers. Transfers must be made within the first four months of account opening. After that, you can expect a variable APR of 13.99% – 23.99%.
There is no annual fee for this card, but it does come with a 3% ($5 minimum) balance transfer fee during the introductory period, then it increases to 5% for each transfer.
US Visa Platinum Bank
The US Bank Visa Platinum Card has a 0% introductory APR for the first 20 billing cycles after account opening, for both new purchases and balance transfers. Balance transfers must be made within 60 days of account opening to qualify for promotional offer. After the introductory period ends, you can expect a variable APR of 14.49% – 24.49%.
The card comes with a balance transfer fee of 3% or $5, whichever is greater.