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Chapter 13 Bankruptcy Guide

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The two primary forms of bankruptcy that consumers choose to file are Chapter 7 and Chapter 13. Chapter 7 allows a filer to liquidate nonexempt assets to pay off creditors and discharge their remaining debts. Chapter 13, called a wage earner’s plan, gives filers with regular income the opportunity to create a short repayment plan to pay off their debts.

In 2005, when Congress approved the Bankruptcy Abuse Prevention and Consumer Protection Act, it became more difficult for consumers to qualify for Chapter 7 bankruptcy, pushing more people to use Chapter 13. Since then, of the 12.8 million consumer bankruptcy petitions filed, 4.1 million have been for Chapter 13 bankruptcy.

In this guide, we’ve compiled some of the highlights that consumers should understand about the process, as well as the results and effects of filing Chapter 13 bankruptcy. Reading through may help you prepare for what’s ahead and ensure you better identify whether Chapter 13 is the right choice for you.

How Chapter 13 works

Unlike Chapter 7 bankruptcy, which eliminates a consumer’s debts without a payment plan, Chapter 13 bankruptcy is centered around creating an installment repayment plan that a filer can maintain for several years, which is focused on eliminating secured debts.

The payment amount and duration are not based on what it would take to pay off the full amount of the debt, but are instead based on calculations determined by the income of the filer, their discretionary income, their assets and their debt. Instead of forcing the debtor to tackle the full amount of their current debt at its current interest rates, Chapter 13 gives a debtor the opportunity to pay off a percentage of the debt based on what they can afford to pay over a three- to five-year period.

The amount they can “afford” is based on income calculations and state median statistics as described on the official forms. The focus of the debt repayment is secured debt, which is debt that has underlying collateral. In some cases, however, significant payments may need to be made toward unsecured debts as well.

Chapter 13 is often a good choice for:

  • High-income earners
  • Those who fail the Chapter 7 means test by having too much discretionary income
  • Consumers with assets, such as a home or paid-off car, that they don’t want to lose in a bankruptcy
  • Consumers who are facing foreclosure, lawsuits brought on by debtors and collection notices

Many homeowners are relieved to find out that they may be able to save a home that’s in foreclosure by declaring Chapter 13. But at what point in the foreclosure process must you file before it’s too late? As it turns out, you can file for bankruptcy protection well into the foreclosure process and still save your home, according to Florida attorney Ryan Albaugh.

“A debtor can file a case in the morning and stop a sale for the same day, as long as the debtor complies with all needs,” Albaugh said. “They can file a shell Chapter 13 without all the schedules and get a notice to stop the sale.”

What debts are forgiven or discharged under Chapter 13?

Chapter 13 allows for a broader set of forgivable debts than Chapter 7, including:

  • Debts caused by willful and malicious damage to property
  • Debts due to divorce agreement property settlements
  • Debts for funds borrowed under false pretenses
  • Debts that were taken on to help pay for tax obligations (the tax obligations themselves are not dischargeable)

Other debts that are dischargeable under Chapter 13 include:

  • Medical bills
  • Consumer debt
  • Personal loans

Debts that are not dischargeable under Chapter 13 include:

  • Certain long-term debts, such as a mortgage
  • Alimony and child-support debts
  • Certain tax debts
  • Debts due to DUI
  • Guaranteed or government-funded student loans

Who is eligible?

Chapter 13 bankruptcy provides an accessible way for many individuals, including those who are self-employed, to regain control over their debt, even if they don’t qualify for Chapter 7. But not everyone can declare Chapter 13 bankruptcy since there are still qualifications for eligibility.

The first qualification is that you must be employed. “If a person is unemployed, they won’t qualify for the plan because they won’t have sufficient income,” Albaugh said. Additional requirements include:

  • Unsecured debt must be less than $394,725 (as of 2018)
  • Secured debt must be less than $1,184,200 (as of 2018)

It’s not just the filer’s current situation that determines their eligibility to file for Chapter 13. Some of their actions in the six months leading up to the filing can have a bearing as well. Within 180 days of filing bankruptcy, the filer cannot have:

    • Had another bankruptcy petition dismissed for willful failure to appear before the court
    • Had another bankruptcy dismissed for failure to comply with orders of the court

How to file Chapter 13 bankruptcy

First steps

Credit counseling briefing

Choose an approved provider in the state you’re filing in within the 6 months preceding your filing

Find your court

Depends on the district court in which your state wants you to file

Secure any local forms that are required for your filing

These are forms that are specific to your state and will generally be listed on the website for your local court

Form B2010

Notice Required by 11 U.S.C. § 342(b) for Individuals Filing for Bankruptcy

Forms for the initial petition

Form 101

Voluntary Petition for Individuals Filing for Bankruptcy

Form 121

Your Statement About Your Social Security Numbers

Form 119

Bankruptcy Petition Preparer’s Notice, Declaration and Signature

Form 2800

Disclosure of Compensation of Bankruptcy Petition Preparer

Form 103A (when relevant)

Application for Individuals to Pay the Filing Fee in Installments

Form 101A (when relevant)

Initial Statement About an Eviction Judgment Against You

Form 101B (when relevant)

Statement About Payment of an Eviction Judgment Against You

Certificate from completed credit counseling

A full list of all your creditors

Within 14 days of filing

Form 106Dec

Declaration About an Individual Debtor’s Schedules

Form 106Sum

A Summary of Your Assets and Liabilities and Certain Statistical Information

Forms 106A-J

Schedules to 106 listing property, debtors, income, leases, income, expenses and more

Form 107

Your Statement of Financial Affairs for Individuals Filing for Bankruptcy

Form 2030

Disclosure of Compensation of Attorney For Debtor

Form 122C-1

Chapter 13 Statement of Your Current Monthly Income and Calculation of Commitment Period

Form 122C-2 (when relevant)

Chapter 13 Calculation of Your Disposable Income (for payment of nonpriority, unsecured debt)

Form 113 (unless your local court differs)

Chapter 13 Plan

Copies of all pay stubs and remittances received during the 60 days preceding the filing

First steps

One of the first things consumers need to do before filing bankruptcy is to get a credit counseling briefing from a state-approved provider. It’s required that this is done within the six months before you file. When filing with your spouse, both spouses must have the briefing.

During the briefing, filers will learn alternative options for resolving their debt that can help them avoid filing Chapter 13 bankruptcy. The counseling ranges in price, with online classes offered by some providers for $14.95 per household and one-on-one phone sessions for $50 per person. Lastly, some providers charge an extra fee for the completion certificate sent to the bankruptcy court.

With credit counseling out of the way and a clear decision made to file Chapter 13, the next step is to review the district courts in your state to determine which court should receive your paperwork. After determining the right court, you’ll want to go to their website and download the local forms that the local court requires for your filing, most notably the Chapter 13 Plan, Form 113, which may require the federal form or a local form.

The last step you need to take before petitioning the court is to read Form B2010. This notice gives a brief review of each type of bankruptcy, lists costs associated with filing and lists the debts that cannot be discharged with each type. As of 2018, the cost for Chapter 13 filing and administrative fees totaled $310 (not including attorney fees).

Petitioning the court

After the pre-petition steps are done, it’s time to start completing forms to petition the court and officially file for bankruptcy. For Chapter 13 filers, the process begins with these forms:

  • Form 101: Voluntary Petition for Individuals Filing for Bankruptcy
  • Form 121: Your Statement About Your Social Security Numbers
  • Form 119: Bankruptcy Petition Preparer’s Notice, Declaration and Signature
  • Form 2800: Disclosure of Compensation of Bankruptcy Petition Preparer

You can also include several optional forms, when relevant:

  • Form 103A: Application for Individuals to Pay the Filing Fee in Installments
  • Form 101A: Initial Statement About an Eviction Judgment Against You (individuals)
  • Form 101B: Statement About Payment of an Eviction Judgment Against You (individuals)

Finally, you will be asked to submit a list of all your creditor’s names and addresses. Your local court may have its own requirements for formatting of this list, so check their website for instructions.

No more than 14 days after filing

After filing Form 101, you have 14 days to file the rest of the required forms, which are:

  • Form 106Dec: Declaration About an Individual Debtor’s Schedules
  • Form 106Sum: A Summary of Your Assets and Liabilities and Certain Statistical Information (individuals)
  • Forms 106A-J: Schedules to 106 listing property, debtors, income, leases, income, expenses and more
  • Form 107: Your Statement of Financial Affairs for Individuals Filing for Bankruptcy (individuals)
  • Form 2030: Disclosure of Compensation of Attorney For Debtor
  • Form 122C-1: Chapter 13 Statement of Your Current Monthly Income and Calculation of Commitment Period
  • Form 122C-2 (when required): Chapter 13 Calculation of Your Disposable Income
  • Form 113 (unless your local court differs): Chapter 13 Plan

You will also need to submit copies of all pay stubs and other payment remittances you have received during the 60 days that precede your bankruptcy filing. Check with your court to see if you need to submit these to the court or the trustee.

While it’s not a requirement to file, it should be noted that there is a second financial planning course that must be taken before a filer makes their last payment on the Chapter 13 plan. This course prepares the filer for financial success after the bankruptcy is final, which helps reduce the likelihood that they’ll need to rely on bankruptcy again in the future.

Pros and cons of declaring Chapter 13 bankruptcy

As with any major debt management process, Chapter 13 bankruptcy has both positive and negative aspects to analyze before you proceed. One of the biggest pros for many debtors is that they can usually keep their nonexempt assets when filing a Chapter 13 bankruptcy. Nonexempt assets are generally defined as owned assets that are not necessary to maintain a home or job. These would be property such as a vacation home, a recreational vehicle (RV) or a boat.

Another positive aspect of Chapter 13 is that it stops much of the debt collection, wage garnishment and foreclosure activity against the filer for those debts listed in the bankruptcy. This is especially meaningful for homeowners who want to keep their homes but have fallen behind in payments, including those who currently in foreclosure.

Chapter 13 also makes it easier to repay debt since it effectively consolidates all the listed debt into one payment that can be made to the trustee monthly. In the case of what’s called a “cramdown,” Chapter 13 may even allow a debtor to reduce the amount owed on their secured debt by reducing the balance to match the value of the underlying collateral and effectively reducing the interest.

One of the biggest disadvantages of filing for Chapter 13 is that the value of any nonexempt assets the filer wants to keep can be tallied and used to establish the amount of their responsibility for payment of nonpriority, unsecured debt, such as credit cards and personal loans. The goal here is to ensure that the value of assets that would have been liquidated under a Chapter 7 to pay these unsecured claims are still paid out.

In other words, if you owned a boat valued at $10,000 that would have been sold under a Chapter 7 bankruptcy, then under Chapter 13 you must pay that amount toward nonpriority, unsecured debt. You don’t have to sell the asset to pay that off, but it does increase your overall repayment burden.

For secured debts, the value of the underlying collateral must be paid to those lenders, which can also increase your overall debt burden under the plan. And because the debts take several years to be discharged, the debtor is expected to maintain payments during that time. If they cannot, then they may find their filing dismissed and collections and foreclosure procedures restarting.

“If [a filer] falls behind, then the trustee files a motion to dismiss, which [the filer] would either allow or explain to the judge what happened, and [their] plan for getting back current,” Albaugh said. Without a plan to get back on track, Albaugh said a homeowner could be facing some trouble. “If you were using [Chapter 13] to get caught up on a house, then the foreclosure process starts back up again and you lose that bankruptcy protection,” he said.

Pros

Cons

  • Through Chapter 13, you can save a home from foreclosure
  • Effectively consolidates debt to one payment and reduces the total amount paid
  • During the repayment term, creditors cannot start or continue collection actions
  • Chapter 13 can reduce interest applied to debt
  • In some instances, offers protection to cosigners

  • The value of your nonexempt assets may be added to your debt repayment
  • The bankruptcy case can be dismissed if the filer doesn’t pay for the full duration, if they fail to pay child support or if they fail to file taxes.
  • With Chapter 13, it takes several years for debts to get discharged
  • Lenders with claims secured by collateral must be paid back an amount equal to the collateral’s value
  • Some debts might need to be paid in full, including those purchased within a certain period before the bankruptcy filing

Chapter 13 bankruptcy: FAQs

It will erase any eligible debts that are listed in the bankruptcy and paid according to the plan.

On Form 122C-1, filers work through a calculation that determines their commitment period based on their income and state medians. In addition, they may be required to determine their disposable income through Form 122C-2. These two forms establish the payment and the commitment term. But if the filer has nonexempt assets or assets used to secure some of the debt they are listing in the bankruptcy, the value of those assets might be added to the overall payment expectation.

Generally speaking, Chapter 13 is designed for debtors who have assets that they want to keep while still declaring bankruptcy. But, as noted above, the value of certain nonexempt assets or those used to secure debts listed in the bankruptcy may be added to the overall payment. The debtor can decide whether to then liquidate those assets or find other ways to pay off their value.

As long as the filer continues making payments according to the bankruptcy plan, creditors cannot pursue collection activities.

Life after bankruptcy

One of the biggest considerations people make when deciding whether to file for bankruptcy is the potential impact it will have on their future financial lives. While it can certainly help them clear out massive amounts of debt that they couldn’t handle on their own, it can also restrict their ability to take out loans and credit during the payment term of the bankruptcy by requiring them to get the court’s permission first.

Also, after the payment plan is done, a completed Chapter 13 bankruptcy can show on your credit report for up to seven years. As Albaugh noted, however, a filer will usually have already negatively impacted their credit rating through charge-offs, delinquencies, and repossessions before moving on to bankruptcy. In that case, Chapter 13 can actually help the credit restoration process and limit the amount of damage their score will incur.

One positive note to keep in mind is that the more time that passes after your bankruptcy is completed, the less impact it will have on your FICO Score.

There are ways to rebuild your credit after completing Chapter 13 bankruptcy, including by taking out new loans and credit cards. In some cases, these loans might have higher interest rates and credit cards might be secured by an initial payment until the filer re-establishes themselves and improves their credit.

But the most important step to take when rebuilding your credit after bankruptcy is to incorporate the budgeting and financial planning lessons learned in the second bankruptcy course so that you know you are only taking on debt you can manage.

Alternatives to Chapter 13

Although the number of bankruptcy filings since 2005 seems high, not everyone decides to file bankruptcy to deal with their financial issues. There are other options for consumers who find themselves unable to pay off their debts and facing multiple collections actions, and those other options might be a better choice for some consumers. These options include:

As part of the bankruptcy completion, there are two courses you need to take. The first is the pre-filing credit counseling and the second is the pre-discharge debtor education, which is a financial management course before you make your final bankruptcy plan payment. In taking both courses now, before you file, you can learn about a variety of options for debt consolidation and ways to rework your budget and re-prioritize your spending. It’s possible that this re-education can give you the skills and resources you need to create a personal plan for organizing and tackling your debt without filing for bankruptcy.

Some lenders might be open to renegotiating terms with you to reduce interest rates, create payment plans that get you caught up, remove fees and maybe even forgive portions of balances. Just remember that if this happens, you may have tax consequences since forgiven and canceled debts may be taxable. Additionally, according to Albaugh, sometimes settling with creditors on your own requires a lump-sum payment, whereas bankruptcy allows for installment payments on a lowered amount.

If you have assets that are securing debt, you may want to consider voluntarily surrendering them to your creditors to remove debt. For unsecured debts, you may want to consider liquidating your assets, such as RVs, that you own in full and use the proceeds to pay off the debt.

For consumers who can pass the Chapter 7 means test and have no nonexempt assets to protect, Chapter 7 may be a more cost-effective choice. Through a no-asset Chapter 7 filing, your debts can be discharged without payment or liquidations. This gives you a clean slate much faster and, for those with a lower income, can save a lot of money.

Conclusion

Not only does a Chapter 13 filing require a long-term commitment and an understanding of the impact on your credit, but it also carries an expense, as the filer must pay the court, the trustee and their attorney. Before you consider attempting a Chapter 13 without an attorney, note that the U.S. Bankruptcy Court instruction packet states that it is “… extremely difficult to succeed in a Chapter 11, 12 or 13 case without an attorney.”

While attorney fees can run into the thousands of dollars, they generally have installment plans that make it easier for filers to get the expert help they need on a payment plan they can afford. Attorneys also generally offer a free consultation for the initial meeting, which allows you to get to know several attorneys and find the one that you think will get you the best results at a price you can afford.

To start looking for a bankruptcy attorney, you can check with the American Bar Association, as well as state Bar Associations. You can also look for reviews online to help narrow down your choices.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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The Most (And Least) Charitable Places in the U.S.

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

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In order to find the most charitable places in America, researchers analyzed data for the 100 largest metro areas.

Giving to charity is a good thing, generally speaking. Not only may you support a cause you care about, but it could help lower your tax burden if you itemize deductions.

However, despite these benefits, our researchers found that certain places in the U.S. are more charitable than others. They compared 2017 itemized tax returns and analyzed data for the 100 largest metro areas to determine which places in the U.S. were the most charitable.

Key findings

  • Ogden, Utah, is the most charitable place in the U.S., followed by Birmingham, Alabama and Memphis.
  • In Birmingham, more than 89% of tax returns itemized deduction donations to charity.
  • Southern metro areas tended to be the most charitable. Seven of the top 10 most charitable places are in the South.
  • Religious centers tended to be more charitable than non-religious. The religious South and Utah tended to be the more charitable, while the less-religious Northeast tended to score the worst in our metrics. One obvious explanation for this is that church donations are tax-deductible for people who itemize.
  • Springfield, Massachusetts was the least charitable metro area in the study. People itemizing their tax returns there gave just 2% of their income.
  • Springfield’s neighbors were also stingy when it came to giving to charity. Worcester came in second-to-last. Here, tax returns with itemized deductions showed an average of 1.8% of income donated to charity.
  • The poorest who gave to charity tended to be the most generous, although the poorest tended to donate the least often, a fact that has not changed over time. According to 2016 data, Americans who earned at least $1 but less than $10,000 donated 14% of their income on average, though just 58.5% of them had charitable deductions.
  • The rich are more likely to have charitable deductions but tend to give a smaller portion of their income.

Rankings: The most charitable U.S. metro areas

This map shows how the 100 largest metro areas in the U.S. ranked according to the percentage of people who took charitable donation deductions on their tax returns in 2017. Areas represented by a blue dot are the most charitable, while those represented with orange dots are the least charitable. Purple and red dots represent areas that fall in the middle of our rankings.
The most charitable metro areas are located in states that are known for being heavily religious — Utah and the Bible Belt in the Southeast. The Northeast tends to be less religious and is blanketed with metro areas that have low donation rates.

Utah is a standout state when it comes to charitable giving, with two metro areas in the top 10. Ogden claims the top spot, and Salt Lake City comes in sixth place. Most of the rest of the top 10 is made up of metro areas in the Southeast: Birmingham, Ala. (second), Memphis, Tenn. (third), Atlanta (fourth), and Augusta, Ga. (fifth).
Springfield, Mass., is at the very bottom of our list rankings, with Worcester, Mass., following in the 99th slot. The rest of the bottom five includes: Scranton, Penn. (98th), Allentown, Pa. (96th), and Providence, R.I. (95th). Portland, Ore., represents the west coast as the 97th least charitable metro area on the list.

How charitable Americans are at different income levels

The following graphic shows how rates of charitable giving differ at various income levels. Each blue bar shows the percentage of tax returns on which itemized charitable donations were claimed at each income level. Each purple bar shows the average percentage of one’s income those charitable donations make up in each income bracket.

Overall, 81.9% of people itemized charitable deductions on their tax returns, and those donations make up an average of 3.4% of their income. Those who make more money tend to give to charity more often. Of people making $200,000 or more per year, 91% claim charitable deductions, while only 58.5% of those making less than $10,000 do so.

It’s not those who make the most who give the biggest portion of their income to charity, though. Those who make less than $10,000 a year give the biggest portion of their earnings (14%). Americans who make $100,000 to $199,000 give the smallest proportion of their income at just 2.7%.

Changes in charitable giving by year

In order to determine how charitable Americans are over time, we looked at charitable donations over a 12-year span. The following graphic reveals charitable giving as a percentage of income across various income levels.

Overall, the average percentage of income that’s claimed as a charitable donation has remained at fairly consistent levels between the years of 2004 (3.6%) and 2016 (3.5%). It dipped to a low of 3% in 2008, in the midst of the Great Recession.

Lower income brackets tend to have more ups and downs in charitable giving. In 2004, those making $5,000 or less donated an average 19.4% of their income to charity. But in 2007 and 2012, that average dropped to 14.6%.

Those in the highest income bracket on the graph ($10 million or more) made a significant jump in charitable donations in the last two years we analyzed, with their charitable donations going from 7% to 9.1% of their income.

5 tips if you’re donating to charity

While your intentions to donate to charity may be purely altruistic, if you’re making them, you may as well get credit for them if you can. Here are five things to keep in mind when making charitable contributions:

  • Research charities before donating. Sites such as Charity Navigator and GuideStar provide information about charity missions, as well as how they operate and spend money.
  • Ask for verification of an organization’s tax status before donating. In order for your donation to be tax deductible, it must be made to an organization that qualifies under IRS guidelines as tax-exempt.
  • Remember: You can only claim charitable donations if you itemize your taxes. You won’t qualify for a deduction if you take the standard deduction. If your deductible expenses including charitable donations are greater than the standard exemption ($24,400 for married couples and $12,200 for single taxpayers in 2019) then itemizing can save you money. (If you’re unsure whether itemizing your taxes makes sense, you may need to seek out a pro.)
  • Request and keep your receipts. While you don’t need to submit them with your tax return, if you ever get audited, you want to have them on hand.
  • Keep these two dates in mind. Remember that even though taxes must be filed by April 15 each year, charitable deductions must be made by the end of the calendar year (December 31) in order to be claimed on your taxes for that year.

Methodology

In order to find the most charitable places in the U.S., researchers analyzed data for the 100 largest metro areas. Specifically, we compared them across the following three categories:

  • Percent of itemized returns with charitable donations. Data comes from the IRS and is for the 2017 filing year.
  • Percent of adjusted gross income given to charity. This is the total deducted amount from charitable donations divided by total adjusted gross income for itemized returns. Data comes from the IRS and is for the 2017 filing year.
  • Average itemized charitable donation. This is the total amount donated to charity divided by the number of returns deducting charitable donations. Data comes from the IRS and is for the 2017 filing year.

We then created a score averaging the three percentile ranks each metro scored in each metric. Each metric was given the same weight. For the over-time data, we looked at the percent of adjusted gross income given to charity for each income bracket from 2004 to 2016.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Best Balance Transfer Credit Cards: Intro 0% APRs up to 21 Months

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

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.

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

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The Citi Simplicity® Card - No Late Fees Ever offers the longest balance transfer period: intro 0%* for 21 months on balance transfers*. This provides you with nearly two years to pay off transferred balances without incurring any interest charges. In addition, this card comes with an intro 0%* for 12 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 16.49% - 26.49%* (Variable) APR). Just know, this card has a higher balance transfer fee than most cards at 5% of each balance transfer; $5 minimum.

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The Discover it® Balance Transfer offers three months less than the Citi Simplicity® Card - No Late Fees Ever, with an intro 0% for 18 months on balance transfers (after, 13.74% - 24.74% Variable APR). However, this card has a lower 3% intro balance transfer fee, up to 5% fee on future balance transfers (see terms)* that can save you more money if you’re able to pay of transferred balances during the intro period.

The Discover it® Balance Transfer stands out from other balance transfer cards by offering a rewards program: 5% cash back at different places each quarter like gas stations, grocery stores, restaurants, Amazon.com and more up to the quarterly maximum, each time you activate, 1% unlimited cash back on all other purchases – automatically. While this is a great perk, 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

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Wells Fargo Platinum card

Regular Purchase APR
17.24%-26.74% (Variable)
Intro Purchase APR
0% for 18 months
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3% for 120 days, then 5%
Credit required
good-credit
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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 17.24%-26.74% (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, 14.99%-25.99% 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.

The information related to The Amex EveryDay® Credit Card from American Express has been collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication.

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 perks, but can help you get out of debt.

The information related to Chase Slate® has been collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication.

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

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on UNIFY Financial Credit Union’s secure website

Variable Rate Credit Visa®Card from UNIFY Financial CU

Regular Purchase APR
8.24%-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 8.24%-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
12.99%–22.99% Variable
Intro BT APR
3 year introductory offer at Prime Rate (currently 5.50% 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 5.50% variable APR) on balance transfers made in the first 60 days after account opening. After, 12.99%–22.99% 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 12.99%–22.99% Variable APR.

Balance transfer card for fair credit

Aspire Platinum Mastercard® from Aspire FCU

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on Aspire Federal Credit Union’s secure website

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Aspire Platinum Mastercard® from Aspire FCU

Regular Purchase APR
9.90% - 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, 9.90% - 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 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.

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Alexandria White
Alexandria White |

Alexandria White is a writer at MagnifyMoney. You can email Alexandria at [email protected]