Meet Tom. Tom is a few years out college with a great job and a lot credit card debt. Tom wants to get out of debt, but isn’t quite sure how. Luckily for Tom, there exists a great solution to his problem: balance transfer cards. However, before we continue, if Tom doesn’t have a firm understanding of what a credit card or credit score is, or how to effectively use either, we highly recommend watching our three videos “Credit Cards 101,” “Credit Scores and Reports 101,” and “Credit Cards: Mistakes and Best Practices” before continuing further. But let’s get back to the matter at hand.

What is a balance transfer? Well, a balance transfer is simply the act of transferring an existing credit balance to another credit card. Most credit cards aren’t good this for: they’ll immediately start charging interest on the transferred balance, plus a fee, generally about 3-5% of the transferred balance. However, there is a specific subset of credit cards, called balance transfer cards, that won’t immediately start charging interest, instead giving Tom a 15-21 month window of 0% APR to pay off his balance interest-free. This is a great deal, but let’s still walk through the steps you’ll need to take to get one: Step 1: Before doing anything, make a debt repayment plan, ideally using our free recommended website, and rank your credit cards by interest rate, as no matter what you end up doing, you’ll always want to tackle the highest interest rate debt first.

Step 2: Once that’s done, call your credit card company and try to get them to lower your APR. Emphasize that if they don’t agree, you’ll move your balance to another company offering lower rates. Step 3: If the call fails and you still want to transfer, keep in four three things. One: You’ll need good credit to get a balance card. Two: You can’t transfer a balance to a card offered by your current bank. Three: Depending of the size of your debt, you may not be able to pay it off by the end of the promotional period, so have a plan for that. And Four: The credit line on your balance transfer card may be below your total debt load, meaning you’ll either have to: Apply for a second balance transfer card Keep the remaining debt on your current card and pay the high rate. Or use a personal loan, which is slightly more expensive than a balance transfer card, but comes with a lower credit score requirement. And don’t worry, we’ll cover this option in our next video.

However let’s assume for now that Tom has been approved for a balance transfer card with a high enough credit limit. This is an important first step, but they’re still a few more things to keep in mind: One: Don’t spend on the card, as the 0% APR period may not extend to purchases. Two: Complete the transfer as fast as possible or the 0% APR offer may expire. Three: Be careful about consolidate multiple balances onto one card, as that will lower your credit score. Four and Finally: Once you’ve completed the transfer, always pay on time and don’t close out your old accounts, as failing to follow either will lower your credit score. Hopefully you and Tom now better understand balance transfer cards. Be sure to check out our next video, where we’ll teach you how to get out of credit card debt without them, and be sure to website, where you can find more educational content, your free credit score, and great credit card recommendations.