How to use balance transfer card to pay off your credit card debt, in 5 steps

Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. Business Insider may receive a commission from The Points Guy Affiliate Network, but our reporting and recommendations are always independent and objective.

Hero Images/Getty Images

A balance transfer card is a credit card that offers an introductory period of 0% APR on balance transfers.

• A balance transfer card is a credit card that offers an introductory period of 0% APR on balance transfers, so you can transfer any credit card debt and use that introductory period to pay it off without interest.
• Credit cards like the Chase Freedom and the Chase Freedom Unlimited offer 0% intro APR for 15 months; then a variable APR of 17.24% to 25.99% applies; balance transfer fee is $5 or 3% of the amount of transfer, whichever is greater
• Depending on how much you owe, the 0% interest period on a balance transfer card could be enough time to get out of debt completely - but it's up to you to take advantage of that time.

Imagine for a moment you have a credit card balance of $13,048 (which happens to be the average amount carried in Alaska) with an average interest rate of 17%.

You'd be paying about $185 per month (assuming you're making a monthly payment of $300). At this rate, you would spend $7,372 in interest paying your balance down over 69 months - and that's only if you quit spending on your card the entire time.

Now picture yourself signing up for a balance transfer card like the Chase Freedom and transferring your balance. While you would have to pay a 3% balance transfer fee ($391 in this case) upfront, you would get 15 months with 0% APR (after that, a variable APR of 17.24% to 25.99%). This card doesn't have an annual fee, either.

With your new balance of $13,439 ($13,048 plus $391 in balance transfer fees), you could continue paying $300 per month and pay off $6,300 of your balance with 0% APR before your 15 months were up - a huge leap ahead of where you would be.

If you stayed at 17% APR and kept paying $300 per month, your balance would only be down to $10,254 after 21 months, after all.

No matter your credit card balances or interest rates, you will likely save money if you transfer your debts to a balance transfer card. Most cards that fall into this category offer 0% APR for nine to 21 months, after all. The majority do charge a balance transfer fee of 3% or 5% of your balance, but the interest savings make the fee more than worth it.

Paying off debt with a balance transfer card isn't rocket science, but that doesn't mean it's easy, either. There are myriad pitfalls to avoid and there's also some important steps required to get it right. Here are the five steps to take if you're ready to use a 0% card to get out of debt this year:

Step 1: Shop around for balance transfer cards

First things first. You'll want to shop around for balance transfer cards that offer low or no fees and a long enough time at 0% APR for you to do some damage to your credit card balances. Some even waive balance transfer fees for a limited time.

Some of the top balance transfer cards right now include:

• 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; balance transfer fee is $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; balance transfer fee is $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

Step 2: Run some preliminary numbers and create a plan

Next up you'll want to run some numbers and figure out how to attack your debt. Figure out how much debt you have across various credit cards and loans along with how much you believe you could pay off every month.

This is where it can pay to cut your spending so you can free up cash to pay down more debt. Remember that the more expenses and bills you can reduce, the more money you have available to pay down debt at 0% APR.

Either way, figure out how much debt you have and how much you can pay each month. From there, look for a balance transfer card that offers the introductory offer that will serve you best.

Step 3: Apply and transfer your balance online or over the phone

Apply for the balance transfer card you're angling for and hope for the best. If you're approved, you can usually transfer your balance through your new credit card's online portal or over the phone.

Make sure to transfer all high-interest balances you carry to make the greatest impact on your finances and get out of debt faster.

Step 4: Make sure your old card's balance is down to zero

This tip may seem random, but it's actually very important. Take the time to make sure your old balances are fully transferred and that your old credit cards and loans are down to zero. You don't have to cancel old cards since leaving them open can maintain the average length of your credit history and thus improve your credit rating.

If you fail to make this move and forget about a small balance left on your old card, you could hurt your credit score when you start missing payments. And remember, it's up to you to verify your old cards no longer have a balance. No one will do it for you.

Step 5: Pay off debt like your future depends on it (because it does) and stop racking up more debt

Once your balances are on your new card with 0% APR, it's time to attack them with everything you have. Pay as much as you absolutely can every month with no exceptions, and don't let the fact that you're not paying interest knock you off track in any way.

If you stick to your original debt paydown plan, you could pay off all or part of your debt before your introductory offer ends. And, you should try. Remember that your credit card's APR will reset to a higher rate once your introductory offer is over, so time is of the essence.

Finally, don't forget to stop using your credit cards while you're paying off debt. Switch to a cash or debit budget while you're in debt paydown mode. If you keep spending on credit, you may never get out of debt.

Click here to apply for the Barclaycard Ring Mastercard.

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.

Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.

Business Insider may receive a commission from The Points Guy Affiliate Network, but our reporting and recommendations are always independent and objective.