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Good Debt vs. Bad Debt — What’s the Difference?

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.

When you think of debt, you might picture someone faced with thousands of dollars in credit card or student loan bills. Or perhaps you’ll think about a substantial loan someone secured to launch their small business.

Although these are all forms of debt, they are not all created equally in the eyes of lenders or credit bureaus. No form of debt is inherently “good,” but there are forms of debt that are not necessarily as bad and can contribute to someone’s financial future in meaningful ways.

Learning to spot the difference between good debt and bad debt, knowing which type of debt to pay off first, and determining what forms of debt you should never take on can allow you to have financial stability and peace of mind.

What is good debt?

Good debt is debt that in some way contributes to your financial future in a significant way.

“When people are financing either assets or other things that have some sort of true and intrinsic value — and maybe even an ascending value — then you can make a pretty good argument that it’s good debt,” said John Ulzheimer, founder of The Ulzheimer Group and a credit-reporting expert formerly of FICO and Equifax.

Gerri Detweiler, a consumer credit expert and author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, said good debt boils down to whether someone comes out of debt with something to show for it.

“I think overall, generally good debt is debt where you come out ahead,” Detweiler said. “Whether that’s investing in a home that’s later paid for and provides you with a place to live, or an education that results in higher earning power over your career, or even small business debt that allows you to start or grow a small business that brings an income — those are all examples of debt that can be good debt.”

But Detweiler adds that all forms of good debt must be looked at on a case-by-case basis.

“[They’re not] automatically ‘good’ debt, because it’s possible, of course, to get into a house that ends up being a money waster,” she said. “You could end up spending a lot of money for an education and not be able to translate that into a career or a steady income. Or you could invest in a small business that fails. There’s no guarantee that those types of debt that are often good will be good for you. You have to be sure you’re making a smart decision.”

Experts agree that generally speaking, the following are all forms of good debt.

Mortgages

A mortgage taken out to finance a home is considered a good debt because as a buyer, you are investing in a piece of property that will hopefully provide you a return on investment one day. And depending on your income level, a mortgage could provide a deduction on your taxes.

“You can make a pretty strong argument that debt incurred to buy a home is good debt, presuming that you’re buying a home that is going to appreciate over time, and when you sell it someday, you’re going actually make money out of it,” Ulzheimer said.

Mortgages also tend to have lower interest rates than other types of loans. The average interest rate in the U.S. for a 30-year fixed rate mortgage is currently 4.55 percent, according to the Federal Reserve Bank of St. Louis. On the other hand, the average interest rate for new credit cards in the U.S. is nearly 14 percent, according to the Federal Reserve Bank of St. Louis.

Student loans

Perhaps the most valuable debt someone will incur in their lifetime, according to Ulzheimer, is student loan debt to pursue a college education.

“I think studies are pretty clear that people who have a college degree over their lifetime are going to earn more than people who do not,” Ulzheimer said. “In my mind, that may be the best of all debts in terms of return on investment.”

Interest rates on federal student loans vary, but currently sit between 4.45 and 7 percent, according to the U.S. Department of Education.

The earning potential for college graduates is starkly higher than that of non-graduates. Men with a bachelor’s degree earn an average of $900,000 more in their lifetime than men with only a high school education, while women with a bachelor’s degree earn an average of $630,000 more in their lifetime than their high-school educated counterparts, according to data from the Social Security Administration. The numbers only increase with graduate degrees: Men earn an average of $1.5 million more and women $1.1 million more in their lifetimes than those with only a high school education.

Small business loans

Taking out a small business loan can be beneficial — investing in a small business, assuming it succeeds, means investing in something that could provide you significant future earnings.

Loans guaranteed by the Small Business Administration (SBA), for example, typically have lower down payments, lower interest rates and flexible overhead requirements, according to the organization.

“You’re making an investment in yourself, in your future, in your business,” said Kathryn Bossler, a credit counselor with GreenPath, a nationwide consumer credit counseling agency.

That being said, there are some very high-cost short-term business loans available that could cause a strain on your bottom line; approach these with caution.

Home equity loans

Home equity loans fall into the “good” category because they allow someone to borrow against him or herself (instead of from an outside lender) to make a large purchase or investment, or to pay off debt with a higher interest rate.

In addition, home equity loans typically come with lower interest rates — they range from about 4.25 to 6 percent, according to LendingTree — and can help someone consolidate and pay back other higher interest rate debts.

However, home equity loans used for the wrong purpose, such as financing a vacation or an unnecessary large purchase, could become a form of “bad” debt — ultimately, it all depends on what the home equity loan proceeds are used for.

What is bad debt?

When Detweiler was in her 20s, she went to Sears and got approved for a credit card. She purchased a couch, an answering machine and a lamp. “Before that debt was paid off, the couch had a rip in it, the answering machine had been zapped by lightning and the lamp was broken,” she said. “I still had a bill, and nothing to show for it. That’s definitely bad debt.”

Detweiler said “bad” debt is debt in which the borrower has nothing to show for it, save for the fact that they’ve spent a significant amount of money.

Forms of bad debt typically come with very high interest rates, making it difficult for borrowers with significant debt to pay it back in a timely manner.

Experts agree that generally speaking, the following are all forms of bad debt.

Credit card debt

Credit card debt is perhaps the most pervasive form of “bad” debt in the U.S., with 121 million Americans currently carrying credit card debt. The average credit card debt per person is $4,453, while the average credit card debt per household is $8,683.

Credit card debt falls into the “bad” category mainly because of the high interest rate that often accompanies credit cards. In fact, the average interest rate for a new credit card in the U.S. is around 14 percent, according to the Federal Reserve Bank of St. Louis.

“Typically, it’s a red flag if you need to carry a balance on your credit card,” Bossler said. “Credit cards are really designed for convenience. There are lots of consumer perks in terms of points and rewards … But carrying a balance is probably going to come with a high interest rate, and is promising money that you don’t have right now.”

Luckily, consolidating credit card debt can help borrowers pay it back more quickly than they might be able to pay back other forms of “bad” debt.

Payday loans

Payday loans should be avoided at all costs.

“I think the worst of the worst, most people would agree, would be payday loan type debt, because the interest rates are so high and the repayment requirements are so immediate,” Bossler said. “And usually someone who is taking out that type of loan is in serious financial distress.”

Because payday loans are typically smaller and paid back in a couple of weeks, borrowers might not feel their impact. But that doesn’t mean it’s not there.

“They’re called ‘lenders of last resort’ for a reason,” Ulzheimer said. “Their interest rates are, when you annualize them, in some cases several hundred percent APR. You don’t feel that because they have short-term amortization schedules.”

“Gray area” debt

Some debts may not be inherently good or bad. It all depends on how you use them.

401(k) loans

Borrowing against your 401(k) might not seem like a terrible decision in the short-term — after all, you’re taking out a loan from yourself — but it can come with a number of consequences. Ulzheimer said he often sees people take money out of their retirement accounts to pay off debt, but then fail to pay back their 401(k) loan.

“You’re almost compounding the problem by doing something silly like that,” he said. By not paying it back, people face countless consequences, including delaying their retirement plan, potentially paying more in taxes (401(k) funds are pre-tax), and potentially paying a penalty for not paying back the loan in time.

In addition, if someone leaves a job before paying back their 401(k) loan, he or she must repay the loan over a set period of time or it could be treated like a distribution and taxed accordingly.

Auto loans

Auto loans fall into the murky territory between good and bad. A car can be a necessary purchase for many people. And someone with the right financial know-how can take on an auto loan that is neither bad nor good, but rather necessary.

However, Detweiler said people often get swept up into higher car payments than they can afford, which can lead to a situation in which someone is paying for a car that is either not running or not worth investing in anymore. “You really have to be on guard when going into debt for something like a car, because it’s very easy to get talked into or psyched into spending more than you can afford.”

Bossler said that when she first began working as a credit counselor 12 years ago, three to five-year loans were common. Now, because cars are more expensive and because consumers want the lowest interest rate possible, she’s seeing terms as long as 72 and 84 months.

“That’s when I would say we’re getting into dangerous territory,” she said. “The car is probably not going to be worth what you owe a couple years down.”

Learn more: Revolving debt vs installment debt

Installment debt is a standardized loan that is paid back in installments that are typically monthly. Mortgages and auto loans are common forms of installment debt. The amount the borrower pays typically remains the same month-to-month.

Revolving debt, on the other hand, doesn’t have a set amount to be paid by the borrower each month, though there is a limit to how much a borrower can use. Credit cards and home equity lines of credit are common forms of revolving debt, because credit is borrowed, then paid back, then borrowed again in a revolving manner, with the amount changing each month.

Both forms of debt affect your credit report and credit score, though revolving debt is typically seen as riskier by the credit bureaus, as credit scores often hinge on the amount of available credit a consumer uses. Installment debt is often associated with an asset (i.e. a home or car), making it a safer form of debt in the eyes of credit bureaus.

It’s generally viewed as positive to carry a mix of both installment and revolving debt, with fewer of the latter in your credit mix. Credit mix makes up 10% of your credit score.

How to eliminate debt

Regardless of what type of debt you have, paying it off in a timely manner is crucial for achieving financial freedom. Keep these best practices in mind when you begin paying off your debt.

1. Know your interest rates.

Detweiler said she has spoken to countless consumers who have no idea what their interest rates are. They will throw money at a debt trying to get out of it before actually looking at what the numbers say.

By taking a look at the interest rates for all of your loans, you can determine whether refinancing or consolidating is a good option. Or, you can identify which loan has the highest interest rate, and then prioritize paying back that loan first.

2. Consider refinancing your debt.

Getting a lower interest rate on your debt can be integral for paying it off. “While you’re paying off debt,” said Detweiler, “look at whether you can refinance some of that debt to make the interest rate less expensive.”

For personal loans, such as mortgages and student loans, this could mean refinancing to get a lower rate. For credit card debt, it could mean taking on a lower-interest debt consolidation loan or transferring a balance to a card with a better interest rate.

3. Establish your priorities.

Ulzheimer said you should first ask yourself what your priority is. Is your priority to get out of debt as quickly as possible? Is it to pay down your most expensive debt first? Is it to eliminate nuisance balances on retail store credit cards? Is it to improve your credit score?

Once you identify your priorities, you can begin effectively paying off your debt.

One strategy Ulzheimer recommends for paying off credit card debt is paying down the cards you use the most while also paying off your nuisance balances.

“Credit scores hate balances on credit cards, and credit scores hate to see highly leveraged cards, to the extent you can take care of those first,” Ulzheimer said. “A. You’re getting out of debt which is good, and B. Your credit scores are going to start to improve because your utilization ratios are going to go down, and the number of accounts you have balances with is also going to go down.”

4. Be conscious of the credit you use while paying off debt.

Bossler said she would advise someone looking to get out of debt pursue the strategy that is not only going to give them the best interest rate, but is also going to stop them from using the credit again and digging themselves into the same hole.

“What we see sometimes is that people will refinance their home or take out equity to pay off credit cards or get into those 0 percent interest credit cards, and then go back around and use the old cards again,” she said. “Something we talk a lot about with consumers is yes, we have this strategy to address your debt, but what are the other steps you’re going to take to avoid it again?”

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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.

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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.

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 collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication. Terms Apply.

Citi Simplicity® Card - No Late Fees Ever

Intro Purchase APR
0%* for 12 months on Purchases*
Intro BT APR
0%* for 21 months on Balance Transfers*
Regular Purchase APR
16.49% - 26.49%* (Variable)
Annual fee
$0*
Balance Transfer Fee
5% of each balance transfer; $5 minimum
Credit required
good-credit
Excellent/Good
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.

Discover it® Balance Transfer

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Rates & Fees

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Discover it® Balance Transfer

Regular APR
13.74% - 24.74% Variable
Intro Purchase APR
0% for 6 months
Intro BT APR
0% for 18 months
Annual fee
$0
Rewards Rate
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.
Balance Transfer Fee
3% intro balance transfer fee, up to 5% fee on future balance transfers (see terms)*
Credit required
good-credit
Excellent/Good
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

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

Wells Fargo Platinum card

Regular Purchase APR
17.24%-26.74% (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
good-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 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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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.

This post contains links to CompareCards, similar to MagnifyMoney, is also owned by our parent company, LendingTree.

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Alexandria White
Alexandria White |

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