Racking up credit card debt is often a piece of cake, but paying it off is a whole different story. The high interest rates credit cards charge can make servicing your debt expensive, and paying more than the minimum payment each month may not be easy when you have other bills to pay.
A balance transfer credit card can help you consolidate debt, and many even come with a zero percent introductory APR. Unfortunately, consumers with poor credit—those with a credit score of 579 or below—can’t always qualify for the best zero percent APR credit cards, which creates quite the quandary.
Can you get a balance transfer card with bad credit?
You may be able to qualify for a balance transfer card if you have poor credit, although you need to adjust your expectations. You won’t receive an interest-free window, but you might get access to a lower APR than you’re paying now. Ultimately, this can still help you save money on interest, albeit at a slower rate.
With that being said, it’s crucial to point out there’s a good chance you’ll only be able to qualify for a secured credit card if your credit score is truly poor. Since secured credit cards require a cash deposit as collateral, and since your credit limit is typically equal or close to your deposit amount, secured credit cards aren’t exactly ideal for balance transfers. If you have the cash to use as collateral for a secured credit card, then you would be better off using it to pay off the debt you’re trying to consolidate instead.
Either way, you should really know where you stand before you move forward and start comparing card options. Before you apply for a balance transfer credit card, it can help to check your credit score to see where you stand. FICO scores of 579 or below are considered poor, in which case you will need to look for a credit card for bad credit. But if your credit score is in the fair range (580 to 679) or the good range (670 to 739) or higher, you can check out the best zero percent APR credit cards instead.
What you should know before doing a balance transfer with bad credit
Transferring a balance to a new card may seem like the answer to your problems, but there are plenty of pitfalls to watch out for. Here’s everything you should know before you facilitate a balance transfer.
Secured credit cards require a cash deposit as collateral, which can make them unreasonable for balance transfers. If you can only qualify for a secured credit card, then you may want to focus on paying off your debt the old-fashioned way instead. Secured credit cards require you to put down a cash deposit as collateral, so they don’t make a lot of sense if you’re short on cash and struggling with debt.
Moving debt around is not a long-term solution. Transferring a balance may make your initial debt disappear, but don’t forget that you’re moving it and not paying it off. To solve your issues with debt, you’ll need to pay off the amounts you owe and steer clear of running up more balances in the meantime.
Your credit card’s introductory offer won’t last forever. Remember, balance transfer cards only offer a lower rate for a short amount of time and you’ll pay the regular variable APR after that. Ongoing interest rates charged by credit cards are often high, so you should do what you can to avoid carrying long-term debt.
Check for balance transfer fees. Also check whether the card you’re considering charges balance transfer fees, which it likely does. Paying a balance transfer fee can be worth it, but you should factor this fee into your calculations when figuring out how much you’ll save.
Transferring a balance can impact your credit score. Keep in mind how transferring a balance could impact your credit. Applying for a new credit card will result in a new hard inquiry on your credit report, and transferring balances around can affect your credit utilization negatively (at least initially).
Steps for doing a balance transfer if you have bad credit
As you get ready to transfer your debts to a new credit card with better terms, here are some steps you should take to make sure your transfer goes off without a hitch.
Step 1: Compare balance transfer credit cards for bad credit
First, you’ll want to spend some time comparing credit cards for bad credit. Some cards with balance transfer perks may offer a more attractive interest rate or a longer introductory offer. You should also compare cards based on their fees and any benefits you receive.
If you can only qualify for a secured credit card, find out the amount of the cash deposit you need to put down and ask yourself if you would be better off using that cash to pay off your debt instead.
Step 2: Create a plan to pay your debt off
Once you have looked over some balance transfer credit cards for bad credit, you’ll want to come up with a general plan to pay off the high interest debts you owe. If your new credit card offers a lower interest rate for several months, for example, you should consider how much you would need to pay each month for your transferred debt balance to be paid off completely during that time.
Remember that balance transfer credit cards only offer a lower interest rate for a limited time, and that your card’s rate will reset to a higher variable rate after that. To make the most of your balance transfer offer, you’ll need to pay off as much debt as you possibly can.
Step 3: Apply and transfer your balance
Once you find a balance transfer credit card you like and you have a general plan in mind for debt repayment, you can fill out a credit card application form online. You may be asked for information on the debt balances you want to transfer during your initial application, or you may also be able to call your credit card company to provide information on your balance transfer over the phone.
Either way, make sure your new credit card company is provided with the balance amount you want to transfer, your old account number and any other details they request.
Step 4: Begin your repayment plan and keep an eye on your old account
With your new balance transfer credit card in hand and your balances transferred over, you can begin the repayment process using the plan you laid out previously. Make sure to pay as much as you can toward your credit card while the APR is lower than normal, and strive to pay your entire balance off during the card’s introductory offer period.
During this time, you’ll also want to check on your old credit card to make sure the entire balance transferred over. If you leave a small balance to linger on your old card and you don’t pay it off, you could start building more debt with piling interest charges and cause damage to your credit score by missing payments.
Best balance transfer credit cards for bad credit
Balance transfer credit cards for bad credit can help you save money, but not all cards are created equal. Bankrate compared all the top cards that offer balance transfers to consumers with imperfect credit, and here are the ones we consider the best:
Discover it® Secured
The Discover it® Secured lets you transfer balances and pay an intro APR of 10.99 percent for six months (followed by a variable interest rate (APR) of 22.99 percent). You won’t pay an annual fee, and you’ll even earn rewards on your purchases. Specifically, you’ll rack up 2 percent cash back on up to $1,000 in combined spending at gas stations and restaurants each quarter (then 1 percent) and 1 percent on everything else. Discover will also match the cash back rewards you earn at the end of the first year.
A security deposit is required to receive the card (with the amount of your deposit equal to the credit line you’re approved for, up to $2,500), but it’s refundable provided you close your account in good standing. Also note that you’ll pay a 3 percent introductory balance transfer fee and up to 5 percent fee for future balance transfers (see terms).
UNITY Visa® Secured Card
OneUnited Bank’s UNITY Visa® Secured Credit Card lets you save money with an introductory interest rate of 9.95 percent on balance transfers for six months, followed by a fixed APR of 17.99 percent. You won’t earn rewards, but this card’s rates are considerably lower than those of some competitors, both during the introductory period and even after that.
You will have to pay a 3 percent balance transfer fee (minimum $10) to get started, and a $39 annual fee applies as well. You’ll also have to put down a deposit to secure your line of credit (up to $10,000), but this deposit is refundable when you eventually close your account in good standing.
Alternatives to a balance transfer if you have bad credit
If you are less than thrilled with the credit card options available to you, you have some alternatives to consider as well. These options may not be perfect either, but the ultimate goal should be figuring out a way to pay off debt faster so you can move on with your life.
Other options to help you get out of debt include:
Debt consolidation loans: A personal loan can help you consolidate high interest debt with a fixed interest rate, a fixed monthly payment and a fixed repayment period. Having a set payment each month can make your debt repayment plan easier, and personal loans for bad credit often come with much lower rates than credit cards.
Get a co-signer: If you can’t qualify for a personal loan on your own, you can also consider applying with a co-signer. In this case, a family member or friend would lend you their good credit to help you qualify, although there is risk involved with this option since co-signers are jointly responsible for repaying the debts they sign for.
Improve your credit score: If you’re willing to wait for a while, it may be in your best interest to try and improve your credit score as quickly as you can. Improving your credit score until it’s in an acceptable range could help you qualify for better credit cards with lower rates, and potentially even one of the best zero percent APR credit cards.