7 mistakes to avoid when using a balance-transfer credit card

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Is a balance transfer right for you?

• Balance transfer cards make it possible to avoid interest charges on your debts for a certain amount of time.
• It's important to watch out for balance transfer fees as well as the interest rate you can expect after the 0% intro APR ends.
• Other pitfalls to avoid include late payments and racking up new debt to earn credit card rewards points.
• Some of the top balance transfer cards right now include the U.S. Bank Visa Platinum Card, BankAmericard® credit card, and the Barclaycard Ring Mastercard.

No matter how diligent you are at monitoring your spending, using plastic can make it far too easy to accumulate a balance on your credit card. That's part of the reason why the average American household carried $5,700 in credit card debt earlier this year.

Paying off debt isn't easy, but it is doable if you're committed to making it happen. You may have to spend a few years focused on your goal before you become debt-free.

There is one strategy that - when used appropriately - can speed up the process: Using a balance transfer credit card.

How to transfer your credit card balance to pay off debt

Balance transfer credit cards, also known as 0% APR credit cards, offer an introductory period up to 21 months with zero interest charges. If you can pay your debt off during the period where no interest charges accrue, you have the potential to save money and get out of debt faster.

Transferring your balance isn't too difficult. You can typically apply for a balance transfer card online, and if approved, contact the company to initiate the transfer.

Some of the top balance transfer cards right now include:

• U.S.Bank Visa Platinum Credit Card: 0% intro APR for 18 billing cycles; then a variable APR of 14.74% to 25.74% applies; 3% balance transfer fee
• BankAmericard credit card: 0% intro APR for 18 billing cycles; then a variable APR of 15.24% to 25.24% applies; either $10 or 3% of the amount of transfer, whichever is greater
• Barclaycard Ring Mastercard: 0% intro APR for 15 months on balance transfers made within 45 days of account opening; then a variable APR of 14.24% applies, $5 or 2% of the amount of transfer, whichever is greater
• Chase Freedom: 0% intro APR for 15 months; then a variable APR of 17.24% to 25.99% applies; $5 or 3% of the amount of transfer, whichever is greater
• Chase Freedom Unlimited: 0% intro APR for 15 months; then a variable APR of 17.24% to 25.99% applies; $5 or 3% of the amount of transfer, whichever is greater
• Capital One SavorOne Cash Rewards Credit Card: 0% intro APR for 15 months; then a variable APR of 16.24%-26.24% applies; 3% balance transfer fee
• Capital One Quicksilver Cash Rewards Credit Card: 0% intro APR for 15 months, then a variable APR of 16.24%-26.24% applies; 3% balance transfer fee

Taking full advantage of a balance transfer offer - and determining if the strategy is right for you in the first place - is not as simple as it sounds. There are myriad pitfalls to be aware of as well as instances where a balance transfer card could leave you worse off than where you started.

Here are the biggest considerations to keep in mind when deciding whether to use a balance transfer credit cards to help you pay down your debt.

Don't forget about balance transfer fees

While scoring 0% interest for a limited time sounds amazing, keep in mind that these offers aren't always free. Many balance transfer credit cards charge a transfer fee of 3% to 5% of the total balance. This means that, if you're transferring $10,000 to a balance transfer card, you could pay a $300 or $500 fee depending on the card you select.

If you're currently paying 17% on a $10,000 balance, that means you're paying $1,700 in interest every year, or about $141 a month. In that case, paying a balance transfer fee probably makes sense, especially if you are committed to paying off your debt before the 0% intro APR ends.

Certain balance transfer cards waive the a fee if you complete a balance transfer in the first 60 days, so make sure to read the fine print carefully to to get the best deal.

Compare the card's future interest rate to your current interest rate

If you still have a balance after the initial 0% interest rate is up, you could see your interest rate spike on your balance transfer card. Before making a transfer, compare your current card's interest rate to the future rate on the balance transfer card.

If you aren't confident in your ability to pay off the debt before the interest rate spikes, make sure you're comfortable with the future rate. In some cases, it might make sense to refinance your credit card debt with a fixed rate personal loan, so that you can budget for your monthly payments.

Stop using credit cards and focus on paying off your debt

If you're using a balance transfer credit card to get out of debt, the last thing you need to do is continue spending on credit cards. If you keep using credit, you're bound to erase any progress you make paying off the balance you transferred.

If you're prone to overspending with credit, the best thing you can do is switch to paying with cash or a debit card until your debt is paid off. Once you're debt-free, you can decide whether to start using credit cards again.

Don't use your balance transfer card for new purchases

Some balance transfer cards send consumers some very mixed signals offering reward points for new purchases, in addition to a 0% intro APR.

Don't let the promise of rewards lure you into racking up a ton of new debt that works against their efforts. Plus, you could be hit with finance charges if you don't pay off your new purchases in full during the month you make them.

If you absolutely need access to credit while you pay down debt with a balance transfer card, you should use a separate card for purchases. This will help you stay on top of your spending without conflating new purchases with the old debts you're trying to pay off.

Pay down debt aggressively during the promotional period

Balance transfer cards help you reduce your debt without paying additional interest. If you can pay down your debt during the promotional period offered by your balance transfer card, you could avoid new interest charges entirely and emerge from the other side entirely debt-free.

Unfortunately, balance transfer cards also make it far too easy to pass the buck. When you know interest charges aren't accruing, it can be tempting to make only the minimum payment and spend your extra money however you want.

If you fail to attack your debt with fervor while you're enjoying 0% APR, you will likely regret it when your introductory offer ends and the interest starts piling up again.

Confirm that the balance on your old card transferred correctly

Once you transfer a balance from your old credit cards and loans, you aren't out of the woods yet. You still have to check your old cards and loans to make sure that the entire balance transferred - and that their balances are finally at zero.

Some people forget this important step and stop making payments on their old cards without confirming the entire balance has been transferred to the new card. Obviously, this can lead to damage to your credit score if you make late payments or let old debts fall into default.

The bottom line: Make sure you have a $0 balance on all your old cards before you stuff them in a sock drawer.

Always make payments on time

Finally, it would be impossible to overstate how important it is for you to make your credit card payment on time. Not only is your payment history the biggest factor used to determine your FICO score, but late payments on balance transfer cards can be especially detrimental since they can bring your 0% offer to a screeching halt.

Yes, you read that right. Because balance transfer cards have clauses that can end your introductory offer overnight, a single late payment could cause your interest rate to skyrocket. If your credit card payment becomes more than 60 days late, you could even get stuck with a penalty APR that is significantly higher than your card's standard variable APR.

Don't let late credit card payments derail your debt payoff plans. Set your bill to autopay, set a reminder on your cell phone, and do whatever it takes to make sure your bill is paid on time every month.

The bottom line about balance transfer credit cards

Balance transfer offers aren't that complicated, but they can be perilous for your finances if you don't follow the rules. Read the fine print, pay off as much debt as you can every month, and make sure you're never paying your bills late.

Click here to apply for the Barclaycard Ring Mastercard.

Click here to learn more about the U.S.Bank Visa Platinum Card from our partner, The Points Guy.

Click here to learn more about the BankAmericard credit card from our partner, The Points Guy.

Click here to learn more about the Chase Freedom from our partner, The Points Guy.

Click here to learn more about the Chase Freedom Unlimited from our partner, The Points Guy.

Click here to learn more about the Capital One SavorOne Cash Rewards Credit Card from our partner, The Points Guy.

Click here to learn more about the Capital One Quicksilver Cash Rewards Credit Card from our partner, The Points Guy.

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