Balance transfer credit cards save you money. Here’s a real-life example

The answer is: you never would. The interest is accumulating way too fast for $50 payments to make a dent. 

But what if you upped the monthly payments to $125? 

At that rate, it would take you 27 years and one month. And by the time you paid off your $5,000 debt, you’d have paid an additional $35,543.53 in interest. 

Examples like these are why balance transfers are so powerful. Instead of paying a Toyota Camry-worth of interest, you could move your $5,000 balance onto a card with 0% APR and pay it off in 18 months, saving $35,000+ in interest – and your credit score – along the way. 

But how exactly do balance transfers work? Are there fees and hidden strings attached? And how did a single balance transfer help to save my friend’s house (and relationship)? 

Read on to find out.

What is a balance transfer? 

A balance transfer is when you move credit card debt from a high-interest card to a low-interest card to save money. As illustrated above, a well-timed balance transfer can save you thousands, if not tens of thousands in interest payments and help you clear your debt much faster. 

To the uninitiated, a balance transfer might sound like a shady, money-saving “hack” that the credit card companies deplore—similar to how the airlines can’t stand skiplagging.

But in truth, the banks openly encourage the practice – and many have even come up with dedicated balance transfer cards of their own. 

Source: Citi Diamond Preferred, via Citi.com (captured 12/14/23)

But why would the banks take on your credit card debt for free? What’s the catch? 

What’s the catch to balance transfers? 

There are two. 

The first is that balance transfers always have fees attached. Typically it’s the greater of $5 or 3%…