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How to Get Out of Payday Loan Debt

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

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Payday loans come with high interest rates and fees, on top of short repayment terms of a few weeks. If you’ve failed to pay off a payday loan debt, you’ve likely rolled the balance into a new payday loan with additional fees. Once you’ve entered a debt cycle – where you use new debt to pay for old debt – it can feel impossible to get out.

There are several strategies to escape payday loan debt, such as debt consolidation and debt counseling. Here’s what you should know about them.

9 ways to get out of payday loan debt

1. Ask for an extended payment plan

Check if your payday lender is a member of the Community Financial Services Association of America (CFSA). If so, they are required by law to offer you an extended payment plan at no cost if you are unable to repay your loan in a single payment. However, you can only apply for an extension once a year, and the length of your extension varies depending on the state where you get the loan.

The benefit of an extended payment plan is getting more time to pay off your loan without racking up additional fees or service charges or ending up dealing with a collections agency.

2. Start a debt avalanche

A debt avalanche is a repayment strategy where you make additional payments on your highest-interest debt. In the meantime, you’ll only make minimum monthly payments on your other debts. The quicker you pay off high interest debts, the less you will pay in interest over time.

3. Sign up for a debt management plan with a nonprofit credit counseling agency

Signing up for free credit counseling services from a nonprofit agency that can help you put together a reasonable plan to pay off debt. You’ll work with a credit counselor who is well-versed in assessing a financial situation and coming up with helpful, clear steps for paying down your debt. Your credit counselor may even recommend a debt management plan.

With a debt management plan, your credit counselor will negotiate with creditors on your behalf to potentially reduce fees and interest rates on your debt, as well as your monthly payments. They can stop collection calls and help you repay your debt, in full, over time. These services, including workshops and educational materials, can come with a monthly fee but may be free depending on your circumstances.

You can look for reputable nonprofit credit counseling agencies through places like your local financial institution or credit union, consumer protection agency, universities, military bases or housing authorities. You can also search by your state of residence on a list of agencies approved by the United States Trustee Program.

4. Refinance your payday loan with a payday alternative loan

Federal credit unions are nonprofit alternatives to banks that could offer a great exit strategy, called a payday alternative loan, or PAL. These loans typically offer amounts between $200 and $1,000, with repayment terms of one to six months. Fees are capped at $20 and interest rates cannot exceed 28%, which is a stark contrast to what you could pay for predatory payday loans.

To get a PAL, you must have been a member of the federal credit union for at least one month. Some offer free financial counseling to their members, as well. You can search for credit unions near you at MyCreditUnion.gov.

5. Refinance with a personal loan

Traditional personal loans are unsecured, meaning they don’t require collateral, and are a common way to refinance or consolidate debt. They are offered by banks, credit unions and online lenders.

If you qualify for a personal loan, it could enable you to pay off your debt at a lower interest rate than what’s on your payday loan. Because personal loans come with longer repayment terms, usually from 12 to 60 months, you’ll also have more time to pay off your debt.

Personal loan lenders typically require fair or better credit to qualify, however. If you don’t qualify – or you’re only seeing high interest rates – you could seek out a secured loan like a secured personal loan or home equity loan. Securing a loan with a tangible asset could get you lower interest rates, saving you money in the long term. However, it can also be riskier as you could lose the asset that you provide as collateral if you default on the loan.

6. Get financial help from family and friends

Asking for help from loved ones can sometimes be difficult. However, if you can’t qualify for a loan from a lender, consider asking a friend or family member for any cash they can spare.

Even if they do decide to charge you interest, their terms could be much more reasonable than what the payday lender is currently charging you. You could pay them back in small amounts and take the time you need to fully relieve your debt without additional penalties.

Remember, though, that borrowing money from friends and family can sour the relationship if you don’t follow through on the terms you set. A February 2020 survey from LendingTree found that about 1 out of 3 family or friend lenders hadn’t been paid back, and another third of respondents said the lending arrangement had negative consequences.

7. Get a side hustle

Consider increasing your income and your ability to pay off your debt more quickly by turning free time into extra cash – at least temporarily. You might get a side hustle that won’t cut into your regular work schedule, such as:

  • Driving or delivering for Uber or a similar ride-sharing service
  • Monetizing valuable skills on Fiverr
  • Running errands on TaskRabbit

Another option is to tap into the sharing economy by renting out your assets online, whether it’s your parking spot or a spare room in your home.

8. Consider debt settlement

Debt settlement could take place in one of two ways. One option is to hire a third-party debt settlement company to negotiate with your creditor and reduce the amount you owe the creditor.

The typical debt settlement process starts with you stopping payments on your existing debts and instead making monthly payments to an account the settlement company creates for you. After anywhere from 90 to 180 days, the debt settlement company will negotiate with your creditors. If there’s an agreement for a payoff amount, the settlement company uses the money in your account to pay.

This method carries significant risks, such as having to pay hefty fees to the settlement company and not reaching a solution with the creditor. In the meantime, you could incur significant damage to your credit rating or even be taken to court. Also, the IRS may consider some of the savings from your settlement as taxable income.

Another way is to try negotiating with your creditor yourself. Explaining your situation won’t cost you anything, but it could help you work out a more manageable repayment plan. You could be pleasantly surprised at your creditor’s willingness to negotiate with you.

9. File for bankruptcy

Although bankruptcy is a way to escape payday loans and other unsecured debts, it should be your last resort. Bankruptcy is a long and arduous process that will damage your credit and should only be sought after in dire circumstances.
If you choose this option, you will first have to get pre-bankruptcy credit counseling to determine whether you need to file for Chapter 7 or Chapter 13.

  • In Chapter 7 bankruptcy, some of your assets may be seized and sold to pay back your creditors. Other assets may be considered safe from liquidation, but this depends on your state.
  • With Chapter 13 bankruptcy, you must agree to pay back your creditors over three to five years with a court-approved repayment plan.

Both types of bankruptcy will fully discharge your debts once the process is completed.

FAQ: Payday loans

In some cases, your lender may be willing to negotiate your repayment terms. Some lenders might offer you an extended repayment plan that could break your loan up into smaller payments.

You cannot simply stop paying a debt to which you have committed, without facing legal consequences. The lender could pass your debt to a collections agency or sue you and demand wage garnishment.

However, you can stop electronic debits from your bank account if you want to change your payment method in one of the following ways:

  • Call the lender to tell them you revoke your authorization to allow them to withdraw from your account.
  • Call your bank and let them know you’ve revoked authorization for the withdrawals.
  • Ask your bank to make a stop payment on the lender’s withdrawal at least three days before the payment date.
  • Keep an eye on your account to make sure the payment doesn’t go through. If it does, contact your bank.

The federal government does not provide payday loan relief. However, the Federal Trade Commission (FTC) could take legal action against payday lenders that employ illegal lending tactics.

If you feel your payday lender has done something illegal, get in touch with your state attorney general and the Consumer Financial Protection Bureau (CFPB) for advice.

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How Does a 401(k) Loan Work?

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A 401(k) loan allows you to borrow from money in your retirement account. With this type of loan, you don’t make payments to a lender. Instead, your payments including interest go back into your 401(k).

This type of loan can be appealing, as there generally aren’t credit requirements and interest rates are low, typically one point below the prime rate. However, borrowing from your retirement plan can cost you more money in lost earnings compared with fees charged on traditional loan products like a personal loan.

Read ahead to see if a 401(k) loan may be worth pursuing for you.

What is a 401(k) loan?

With a 401(k) loan, you borrow money from your retirement account. Payments are typically deducted from your paycheck and you can usually select whether you want to pay back the loan on a quarterly or monthly basis.

401(k) loans are a flexible form of financing. Ways you could use this loan include:

  • Home or car down payment
  • Paying back debt
  • Home renovations
  • Childcare expenses
  • Education expenses, such as graduate school

Interest rates for these loans are typically one point above the prime rate. As of March 2020, the prime rate is 3.25%, meaning your loan would carry an interest rate of 4.25%. Unlike traditional loans, each 401(k) plan is allowed to set its own interest rate, you can check your summary plan description or ask your employee benefits administrator for details about your plan.

The borrowing limit is the lesser of $50,000 or 50% of your total balance, and the maximum repayment term is usually five years. The exception is if you use the loan toward your primary residence, in which you might have up to 25 years to pay it back. There isn’t a penalty for early repayment.

401(k) loans: Benefits and drawbacks

Pros

Cons

  • Easier to secure than other forms of financing and requires no credit check.
  • Won’t affect your credit score if you default.
  • Payments are normally deducted from paychecks, making you less likely to fall behind.
  • Is often more costly than other forms of financing in the long term because of missed retirement earnings.
  • Doesn’t build your credit history or help your score like other types of financing.
  • Not all plan administrators allow 401(k) loans.
  • If you leave your job, the money will be counted as a distribution, and you could be penalized and taxed.
  • If you leave your job, you will likely have to pay back the balance within 90 days.

How to apply for a 401(k) loan

If you’re interested in borrowing from your 401(k), you can apply through your 401(k) plan administrator’s website. Your employee benefits administrator will be able to help you find the proper webpage to apply if you’re unable to.

When applying for a 401(k) loan, you may asked for basic information such as:

  • Loan amount
  • Loan duration
  • How often you are paid
  • State of legal residence
  • If the loan will be used to purchase a primary residence

The application process for 401(k) loans doesn’t include a credit check because you’re borrowing your own money. However, if you’re married, your spouse might be required to sign off on the loan.

How much can you borrow?

Figuring out how much you can borrow from your 401(k) can be somewhat complicated.

If you haven’t had an outstanding 401(k) loan balance in the past 12 months, you are allowed to borrow the lesser of:

  • $50,000, or
  • 50% of your vested 401(k) balance, or
  • Up to the full balance if your vested amount is $10,000 or less, or
  • Up to $100,000 if you qualify for the coronavirus-related relief provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

If you have had an outstanding 401(k) balance within the past 12 months, the amount you’re allowed to borrow is reduced by the largest balance you had over that period.

Here are some examples:

  • Example #1: Chris has $12,000 vested in his 401(k) and has not had a 401(k) loan balance in the past 12 months. He is allowed to borrow $12,000.
  • Example #2: Isabelle has $30,000 vested in her 401(k) and has not had a 401(k) loan balance in the past 12 months. She is allowed to borrow $15,000.
  • Example #3: Michael has $160,000 vested in his 401(k) and has not had a 401(k) loan balance in the past 12 months. He was recently diagnosed with COVID-19. He is allowed to borrow $100,000.
  • Example #4: Eliza has $50,000 vested in her 401(k) and did have a 401(k) loan balance of $10,000 within the past 12 months. She is allowed to borrow $15,000.

What happens after 401(k) loan approval

Once you’re approved to borrow the money, you will sign an agreement to pay the loan back with interest within five years. Putting the money toward a house means the term may be extended to a maximum of 25 years. Funds are typically dispersed in your next paycheck, although this varies by company.

Payments will be automatically deducted from your paycheck until the loan is repaid. While the principal and interest you pay is credited to your 401(k) account, the interest is typically less than the investment earnings that would have resulted on your loan balance had you not taken the loan, which reduces your retirement earnings.

If you leave your job suddenly, the remaining loan balance is typically considered a distribution. That means your employer will report it to the IRS and you’ll be hit with a 10% early distribution tax on the outstanding balance.

What happens if you default on your 401(k) loan?

A 401(k) loan defaults if you aren’t able to comply with the terms of the loan and pay it back on time. That means you either didn’t make a regular payment, or you left the company and didn’t pay the loan back before your income tax return is due.

When that happens, the remaining loan balance is counted as an early distribution from your 401(k). An early distribution has the following ramifications:

  1. Unless you’re already 59½ or meet other special criteria (including coronavirus-related relief distributions), the money will be taxed and hit with a 10% penalty.
  2. The defaulted amount can’t be rolled over into an IRA, meaning you can’t avoid the taxes and penalties.

CARES Act increases borrowing limits, adds borrower protections

If you’ve been negatively affected by the COVID-19 crisis, you may be able to do an early withdrawal of 100%, or up to $100,000, of your account balance, because of the CARES Act provisions to help Americans through the crisis. You’ll need to check with your employer to see if your plan has adopted the new rules.

You can borrow more under the CARES Act provisions if:

  • You, your spouse, or your dependent were diagnosed with COVID-19 through an FDA-approved test, or
  • You’ve had financial hardship because of having been quarantined, laid off, furloughed, or had hours cut because of the pandemic, or
  • You’re unable to work because of trouble securing childcare during the pandemic or
  • You’ve had to scale back or close your business because of the pandemic.

Tax-deferred accounts affected by the CARES Act changes include traditional IRAs and employer retirement plans including 401(k), 401(b), and other defined contribution plans. It also gives you more time to pay the money back, allowing for repayments to coronavirus-related relief distributions to be deferred for up to a year.

The CARES Act can also protect you if you leave your employer before the loan is paid off. You won’t be charged the extra 10% tax you’d typically pay for early distributions. Tax payments for early 401(k) distributions can be spread out for up to three years, while taxes for 401(k) distributions are usually paid the same year.

401(k) loan vs. 401(k) withdrawal: What are the differences?

401(k) loans typically aren’t dependent on circumstances. Many retirement plans also allow for you to withdraw money from your plan early in case of hardship. These 401(k) withdrawals are supposed to be used for immediate and heavy financial needs, so consumer purchases such as for a vehicle typically don’t qualify. The IRS considers the following as immediate and heavy expenses:

  • Medical expenses for you, your spouse, or your dependent
  • Expenses related to purchasing a home
  • Rent or mortgages payments being made to avoid foreclosure or eviction
  • Tuition and education-related expenses
  • Funeral or burial expenses
  • Expenses to repair damage to your home

Hardship withdrawals are subject to income taxes and might be subject to a 10% tax for early distributions.

FAQ: 401(k) loan

Yes, you can use a 401(k) loan toward paying for a house. You’ll also have longer to repay the loan – up to 25 years compared with the typical five years.

Loans are typically repaid within five years, though many personal finance experts recommend paying it off in three years or less to minimize the loss in retirement earnings. As noted earlier, the exception is if you’re buying a house, in which you have up to 25 years to pay back.

No credit check is required for 401(k) loans, and it’s often just a matter of requesting the amount. If you’re married, your spouse might be required to sign off on the loan.

How long it takes your money to arrive varies depending on your company and plan and could take days or weeks.

There is no penalty for paying back your 401(k) loan early.

If you leave your employer, you have until you file income taxes to pay back the loan. If not, it defaults and is counted as an early distribution. You will be taxed and could be penalized 10% unless you qualify for the CARES Act or another exception.

Borrowing from a 401(k) tends to be more expensive than other types of borrowing in the long-term because of lost retirement earnings. 401(k) loans can be useful when there is an immediate financial need and the borrower has exhausted other options.

On the other hand, if you can repay the debt early, a 401(k) loan can be more appealing than financing with a higher interest rate and/or prepayment penalties.

  • Personal loans can be used for a variety of options, including consolidating debt and home expenses.
  • A balance transfer credit card may be a viable option for borrowers with high credit scores who want to refinance or consolidate credit card debt. These cards can come with an introductory 0% APR for 12 to 21 months.
  • Homeowners can utilize a home equity loan, which allows you to tap the value you have in your property. The loan is secured through your house, meaning you can access lower interest rates than on other types of loans. However, if you default on the loan, you risk losing your home.
  • Payday, title and pawnshop loans can offer short-term cash but should only be explored with extreme caution because they are often incredibly expensive to repay.

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Best Balance Transfer Credit Cards: Intro 0% APRs up to 18 Months

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.

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If you’re carrying a balance on your credit card, you’re not alone. Fifty-nine percent of Americans carry a balance month-to-month, with the average balance $6,354 per cardholder, according to a study by CompareCards. Carrying a balance from one month to the next is never ideal, but it can happen to the best of us.

If your balance is incurring high interest charges, you should consider transferring your debt to a balance transfer card. These cards offer no or low interest and can save you a substantial amount of money. There’s often a 3%-5% balance transfer fee, but it can be worthwhile — just do the math to make sure by using this balance transfer calculator.

Most balance transfer cards require good or excellent credit, so you may not qualify depending on your credit score. It’s a good idea to check your credit score before you apply for a card, so you know which cards provide you with the best approval odds. LendingTree, our parent company, lets you view your credit score for free and provides insight into what affects your score and outlines steps you can take to improve it. If your score prevents you from qualifying for a balance transfer card, you can explore taking out a personal loan instead.

We’ve selected the best balance transfer cards from our database of over 3,000 credit cards, so you can find the card that best fits your needs — whether it’s a card with a long intro 0% APR period, no balance transfer fee, or a low promo APR for several years.

Longest balance transfer offers

When you’re looking to transfer a large balance, it may be in your best interest to choose a balance transfer card with a long intro period. Most balance transfer cards have intro periods of 12 or 15 months, but that may not be enough time to pay off your debt. Consider cards offering no interest for 18 or 21 months.

Here are some of the best cards:

Citi Simplicity® Card - No Late Fees Ever

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The information related to Citi Simplicity® Card - No Late Fees Ever has been independently collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication.

Citi Simplicity® Card - No Late Fees Ever

Intro Purchase APR
0% for 18 months on Purchases
Intro BT APR
0% for 18 months on Balance Transfers
Regular Purchase APR
14.74% - 24.74% (Variable)
Annual fee
$0
Balance Transfer Fee
Balance transfer fee – either $5 or 3% of the amount of each transfer, whichever is greater.
Credit required
good-credit
Excellent/Good
The Citi Simplicity® Card - No Late Fees Ever offers one of the longest balance transfer periods available: intro APR of 0% for 18 months on balance transfers. Additionally, the card comes with an intro APR of 0% for 18 months on purchases, which is helpful if you plan to use this card for more than just a balance transfer. After the balance transfer and purchase intro periods end, there’s a 14.74% - 24.74% (Variable) APR). Just know, this card charges a balance transfer fee of Balance transfer fee – either $5 or 3% of the amount of each transfer, whichever is greater.

Discover it® Balance Transfer

The Discover it® Balance Transfer stands out from other balance transfer cards by offering a rewards program: 5% cash back on everyday purchases at different places each quarter like grocery stores, restaurants, gas stations, select rideshares and online shopping, up to the quarterly maximum when you activate. While this is a great benefit, don’t let this distract you from your primary goal — getting out of debt, not earning rewards, so it’s best not to rack up new charges on a balance transfer card.

Wells Fargo Platinum card

The information related to Wells Fargo Platinum card has been independently collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication.

Wells Fargo Platinum card

Regular Purchase APR
15.49%-24.99% (Variable)
Intro Purchase APR
0% for 18 months
Intro BT APR
0% for 18 months on qualifying balance transfers
Annual fee
$0
Balance Transfer Fee
3% for 120 days, then 5%
Credit required
excellent-credit

Excellent/Good

The Wells Fargo Platinum card also offers an intro 0% for 18 months on qualifying balance transfers, but this applies to new purchases as well. After the intro period ends, a 15.49%-24.99% (Variable) APR for purchases and balance transfers applies. The balance transfer fee is 3% for 120 days, then 5%. While this card has no rewards, you can receive cell phone protection up to $600 (subject to a $25 deductible) against covered damage or theft when your monthly cell phone bill is paid with your card.

No balance transfer fee cards

If you want to maximize savings with a balance transfer, you should consider cards that don’t charge a balance transfer fee. These cards can save you the typical 3%-5% fee most balance transfer cards charge. Just know, cards with no balance transfer fees often have shorter intro periods of 15 months or less. You can read our roundup for an extensive list of no balance transfer fee cards.

Here are some of the best cards:

The Amex EveryDay® Credit Card from American Express

The Amex EveryDay® Credit Card from American Express is a well-rounded card that offers an intro 0% for 15 months on balance transfers and purchases (after, 12.99% - 23.99% variable APR). In addition to the intro periods, you can benefit from a rewards program tailored to U.S. supermarket spenders where you earn 2x points at US supermarkets, on up to $6,000 per year in purchases (then 1x), 1x points on other purchases.

The intro offers, coupled with the rewards program make The Amex EveryDay® Credit Card from American Express the frontrunner among balance transfer cards. This card presents cardholders with the unique opportunity to transfer a balance and make a large purchase during the intro period without incurring interest, and earn rewards on new purchases.

Chase Slate®

The Chase Slate® offers the same 0% Intro APR on Balance Transfers for 15 months and 0% intro apr on purchases for 15 months as the previous two cards. After the intro period ends, there’s a 16.74% - 25.49% Variable APR. This is a no-frills card that won’t earn you rewards or noteworthy benefits, but can help you get out of debt.

Low rate balance transfer cards

If you think it will take longer than 21 months to pay off your credit card debt, you might want to consider a low rate balance transfer card. Rather than pay a balance transfer fee and receive a promotional 0% APR, these cards offer a low interest rate for three years or more. The longest offer can give you a low rate that only goes up if the prime rate goes up. If you can’t get that offer, there is another good option offering a low rate for three years.

Variable Rate Credit Visa®Card from UNIFY Financial CU

Variable Rate Credit Visa®Card from UNIFY Financial CU

Regular Purchase APR
8.99%-17.49% Variable
Intro Purchase APR
N/A
Intro BT APR
N/A
Balance Transfer Fee
$0
If you need a long time to pay off debt at a reasonable rate, and have great credit, it’s hard to beat this deal from Unify Financial Credit Union. The Variable Rate Credit Visa®Card from UNIFY Financial CU offers an ongoing 8.99%-17.49% Variable APR. Plus, there’s no balance transfer fee.

Note: Membership to Unify Financial Credit Union is required to open this card, but anyone can join through one of their affiliate partners, the Surfrider Foundation or Friends of Hobbs, at no additional charge.

Prime Rewards Credit Card from SunTrust Bank

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on SunTrust Bank’s secure website

Prime Rewards Credit Card from SunTrust Bank

Regular Purchase APR
12.74%–22.74% Variable
Intro BT APR
3 year introductory offer at Prime Rate (currently 4.75% variable APR) on balance transfers made in the first 60 days after account opening.
Annual fee
$0
Rewards Rate
Earn 1% Unlimited Cash Back on all qualifying purchases.
Balance Transfer Fee
None for all balances transferred within 60 days of account opening, then $10.00 or 3% of the amount of the transfer, whichever is greater
The Prime Rewards Credit Card from SunTrust Bank offers a 3 year introductory offer at Prime Rate (currently 4.75% variable APR) on balance transfers made in the first 60 days after account opening. After, 12.74%–22.74% Variable APR. There’s also an intro balance transfer fee: None for all balances transferred within 60 days of account opening, then $10.00 or 3% of the amount of the transfer, whichever is greater. Beware, the low variable APR doesn’t apply to new purchases, and new transactions will incur a 12.74%–22.74% Variable APR.

Balance transfer card for fair credit

Aspire Platinum Mastercard® from Aspire FCU

Regular Purchase APR
8.15% - 18.00% Variable
Intro Purchase APR
0% Intro APR on Purchases for 6 months
Intro BT APR
0% Intro APR on Balance Transfers for 6 months
Annual fee
$0
Balance Transfer Fee
$5 or 2% of the amount of each balance transfer, whichever is greater
Credit required
fair-credit

Average

If your have fair credit, you may qualify for the Aspire Platinum Mastercard® from Aspire FCU. On their site, Aspire states a “fair to good credit score [is] required.” This is good news for people with less than stellar credit. However, the balance transfer offer is significantly lower than cards for good or excellent credit — 0% Intro APR on Balance Transfers for 6 months (after, 8.15% - 18.00% Variable APR). Regardless, six months is better than nothing. And, with careful planning, you can pay off transferred balances during the intro period.

Note: This is a credit union card, so membership is required. Anyone can become a member of the Aspire Federal Credit Union by joining the American Consumer Council at no additional cost.

Learn more

Checklist before you transfer

Never use a credit card at an ATM

If you use your credit card at an ATM, it will be treated as a cash advance. Most credit cards charge an upfront cash advance fee, which is typically about 5%. There is usually a much higher “cash advance” interest rate, which is typically above 20%. And there is no grace period, so interest starts to accrue right away. A cash advance is expensive, so beware.

Always pay on time

If you do not make your payment on time, most credit cards will immediately hit you with a steep late fee. Once you are 30 days late, you will likely be reported to the credit bureau. Late payments can have a big, negative impact on your score. Once you are 60 days late, you can end up losing your low balance transfer rate and be charged a high penalty interest rate, which is usually close to 30%. Just automate your payments so you never have to worry about these fees.

Get the transfer done within 60 days

Most balance transfer offers are from the date you open your account, not the date you complete the transfer. It is in your interest to complete the balance transfer right away, so that you can benefit from the low interest rate as soon as possible. With most credit card companies, you will actually lose the promotional balance transfer offer if you do not complete the transfer within 60 or 90 days. Just get it done!

Don’t spend on the card

Your goal with a balance transfer should be to get out of debt. If you start spending on the credit card, there is a real risk that you will end up in more debt. Additionally, you could end up being charged interest on your purchase balances. If your credit card has a 0% balance transfer rate but does not have a 0% promotional rate on purchases, you would end up being charged interest on your purchases right away, until your entire balance (including the balance transfer) is paid in full. In other words, you lose the grace period on your purchases so long as you have a balance transfer in place.

Don’t try to transfer between two cards of the same bank

Credit card companies make balance transfer offers because they want to steal business from their competitors. So, it makes sense that the banks will not let you transfer balances between two credit cards offered by the same bank. If you have an airline credit card or a store credit card, just make sure you know which bank issues the card before you apply for a balance transfer.

Comparison tools

Savings calculator – which card is best?

If you’re still unsure about which cards offer you the best deal for your situation, try our calculator. You get to input the amount of debt you’re trying to get a lower rate on, your current rate, and the monthly payment you can afford. The calculator will show you which cards offer you the most savings on interest payments.

Balance transfer or a loan?

A balance transfer at 0% will get you the absolute lowest rate. But you might feel more comfortable with a single fixed monthly payment, and a single real date your loan will be paid off. A lot of new companies are offering great rates on loans you can pay off over 2, 3, 4, or 5 years. You can find the best personal loans listed on our site here.

And you might find even though their rates aren’t 0%, you could afford the payment and get a plan that takes care of your debt for good at once.

Use our calculator to see how your payments and savings will compare.

Questions and Answers

It depends, some credit card companies may allow you to transfer debt from any credit card, regardless of who owns it. Though, they may require you to first add that person as an authorized user to transfer the debt. Just remember that once the debt is transferred, it becomes your legal liability. You can call the credit card company prior to applying for a card to check if you’re able to transfer debt from an account where you are not the primary account holder.

Yes, you can. Most banks will enable store card debt to be transferred. Just make sure the store card is not issued by the same bank as the balance transfer credit card.

As a general rule, if you can pay off your debt in six months or less, it usually doesn’t make sense to do a balance transfer.

Here is a simple test. (This is not 100% accurate mathematically, but it is an easy test). Divide your credit card interest rate by 12. (Imagine a credit card with a 12% interest rate. 12%/12 = 1%). In this example, you are paying about 1% interest per month. If the fee on your balance transfer is 3%, you will break even in month 3, and will be saving money thereafter. You can use that simplified math to get a good guide on whether or not you will be saving money.

And if you want the math done for you, use our tool to calculate how much each balance transfer will save you.

With all balance transfers recommended at MagnifyMoney, you would not be hit with a big, retroactive interest charge. You would be charged the purchase interest rate on the remaining balance on a go-forward basis. (Warning: not all balance transfers waive the interest. But all balance transfers recommended by MagnifyMoney do.)

Many companies offer very good deals in the first year to win new customers. These are often called “switching incentives.” For example, your mobile phone company could offer 50% off its normal rate for the first 12 months. Or your cable company could offer a big discount on the first year if you buy the bundle package. Credit card companies are no different. These companies want your debt, and are willing to give you a big discount in the first year to get you to transfer.

If you transfer your debt and use your card responsibly to pay off your balance before the intro period ends, then there is no trap associated with the 0% APR period. But, if you neglect making payments and end up with a balance post-intro period, you can easily fall into a trap of high debt — similar to the one you left when you transferred the balance. As a rule of thumb, use the intro 0% APR period to your advantage and pay off ALL your debt before it ends, otherwise you’ll start to accumulate high interest charges.

Balance transfers can be easily completed online or over the phone. After logging in to your account, you can navigate to your balance transfer and submit the request. If you rather speak to a representative, simply call the number on the back of your card. For both options, you will need to have the account number of the card with the debt and the amount you wish to transfer ready.

You will be charged a late fee by missing a payment and may put your introductory interest rate in jeopardy. Many issuers state in the terms and conditions that defaulting on your account may cause you to lose out on the promotional APR associated with the balance transfer offer. To avoid this, set up autopay for at least the minimum amount due.

No, you can’t. Balances can only be transferred between cards from different banks. That includes co-branded cards, so be sure to check which issuer your card is before applying for a balance transfer card — since you don’t want to find out after you’ve been approved that both cards are backed by the same issuer.

Many credit card issuers will allow you to transfer money to your checking account. Or, they will offer you checks that you can write to yourself or a third party. Check online, because many credit card issuers will let you transfer money directly to your bank account from your credit card. Otherwise, call your issuer and ask what deals they have available for “convenience checks.”

In most cases, you cannot. However, if you transfer a balance when you open a card, you may be able to. Some issuers state in their terms and conditions that balance transfers on new accounts will be processed at a slower rate compared with those of old accounts. You may be able to cancel your transfer during this time.

Yes, it is possible to transfer the same debt multiple times. Just remember, if there is a balance transfer fee, you could be charged that fee every time you transfer the debt. Also, don’t keep on transferring your debt without making payments because you won’t accomplish much.

You can call the bank and ask them to increase your credit limit. However, even if the bank does not increase your limit, you should still take advantage of the savings available with the limit you are given. Transferring a portion of your debt is more beneficial than transferring none.

Yes, you decide how much you want to transfer to each credit card. For example, if you have $3,000 in debt, you can transfer $2,000 to Card A and $1,000 to Card B.

No, balance transfers are excluded from earning any form of rewards whether it’s points, miles or cash back.

No, there is no penalty. You can pay off your debt whenever you want without a penalty. It’s key to pay off your balance as soon as possible and within the intro period to avoid carrying a balance post-intro period.

Mathematically, the best balance transfer credit cards are no fee, 0% intro APR offers. You literally pay nothing to transfer your balance and can save hundreds of dollars in interest had you left your balance on a high APR card. Check out our list of the best no-fee balance transfer cards here. However, those cards tend to have shorter intro periods of 15 months or less, so you may need more time to pay off your balance.

If you are running out of time on your intro APR and you still have a balance, don’t sweat it. At least two months before your existing intro period ends, start looking for a new balance transfer offer from a different issuer. Transfer any remaining balance to the card with the new 0% intro offer. This can provide you with the additional time needed to pay off your balance. Ideally, look for a card that has a 0% intro APR and also no balance transfer fee.

The information related to The Amex EveryDay® Credit Card from American Express and Chase Slate® has been independently collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication. Terms apply to American Express credit card offers. See americanexpress.com for more information.

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