Pay off your credit card faster

How to use this tool to explore debt repayment options

The credit card payoff tool can help you determine how much money you can save by using a balance transfer credit card or personal loan to move your credit card debt before paying off the balance.

To get started, look up your current total credit card balance and APR. You can find this on a recent credit card statement, or by checking your account online. Also, review your budget to determine how much you can afford to put toward paying off the debt each month.

By default, the tool uses common balance transfer and personal loan financing terms. For example, it assumes you’ll have to pay a 3% balance transfer fee (for a balance transfer card) or 3% origination fee (for a personal loan).

You can click on “customize” next to the green “see offers” button to change the fees and interest rates. You can also customize the repayment period on personal loans and the length of the 0% interest introductory period for balance transfer cards.

When you click on the green “see offers” buttons, you’ll be brought to the balance transfer card or personal loan marketplaces. Here, you can compare card issuers and lenders to try and find an option that best aligns with your target repayment period, introductory offer and fee amounts.

How does a personal loan or balance transfer help me repay my debt?

Your credit card debt could be quickly accruing interest based on its high interest rate, and a large portion of your monthly payment could be going toward the interest rather than paying down the underlying debt (i.e., the principal balance). Particularly if you’re only making minimum payments, it can take years to pay off a credit card and you can wind up paying more in interest than the amount you borrowed in the first place.

A balance transfer credit card or personal loan could allow you to move the debt in an advantageous way, making it easier, quicker and cheaper to pay off the debt.

Balance transfer credit cards are credit cards that offer a promotional annual percentage rate (APR) on debts that you transfer to the card. You may be able to initiate the transfer electronically, though some cards offer balance transfer checks you can use to pay a bill.

Depending on the card and offer, you might receive an introductory 0% APR that applies to balances you transfer to the card. Some cards also offer a promotional rate on purchases, but if you’re focused on paying off the balance as quickly as possible, you might want to stop using credit cards for purchases until you’ve paid off the debt.

Because the transferred debt won’t accrue interest during a 0% APR promotional period, your entire payment goes toward paying down the principal balance. Even if you continue making the same monthly payments, you’ll be able to pay off your credit card debt faster and pay less interest overall. Ideally, you can pay off the entire credit card during the 0% APR promotional period.

When you apply for a personal loan and are approved, you’ll receive loan funds you’ll use to pay off your credit card. You’ll then repay the personal loan over the predetermined repayment period with monthly payments. If you have good to excellent credit, you may get approved for a loan with a lower rate than your credit card, allowing you to save money and pay off your debt sooner.

Is a personal loan or balance transfer right for me?

1. Approval for a new credit card or loan — and the credit limit or loan amount — depends on your creditworthiness. If you have poor credit and a high debt-to-income ratio (your monthly bills versus your monthly income), you might not get approved for a high enough credit limit or large enough loan to cover your entire credit card balance. However, if the interest rate is lower than what you’re currently paying, you could still use the new card or loan to pay off part of your balance.
2. Your interest rate can also depend on your creditworthiness. Moving your balance generally doesn’t make sense unless you get approved for a low (ideally 0%) promotional APR with a credit card, or a lower interest rate on a personal loan than you’re currently paying on your credit card.
3. Beware charging up more debt once your current card’s balance is repaid. Keeping the card open may be better for your credit scores. However, if you have trouble controlling your spending, you may want to close the card. Otherwise, you could wind up building back the balance on the credit card and having to pay off the balance you moved.

That said, a balance transfer card could be a good option for someone who has control over their spending and the discipline to make the monthly payments without accruing more credit card debt. They’ll ideally have good credit and can get approved for a 0% APR offer with a high credit limit that allows them to transfer all (or most) of their current debt.

If that sounds like you, you can use the tool above to figure out how long it will take you to pay off the balance based on your monthly payments. Then, look for balance transfer cards that offer a promotional period that’s at least that long. Generally, the offers range from 12 to 21 months.

A personal loan might be more expensive since it will start accruing interest right away. However, it could be a better option if you have a large amount of debt, as it might be easier to get approved for a large loan than a card with a high credit limit. Additionally, personal loans often have a fixed interest rate and a predetermined repayment period.

Unlike with credit cards, there isn’t a low minimum payment option on personal loans — you have to make the full monthly payment — which could be a good thing if you want some guidance and pressure to pay off the debt.

FAQs: Paying off your credit card sooner