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Moving debt to a low-interest credit card or balance transfer card seems like a good solution for those trying to climb out of the debt hole. The Nerds are often asked what debts people can transfer. Auto loans? Student loans? Other credit cards? Because the answer varies by issuer, it's an important piece of information for those trying to choose among balance transfer cards.
We checked with the eight largest credit card issuers for their policies on what debts cardholders can transfer to their cards. Here's what they say:
The long reach of affiliates
No credit card issuer lets you transfer debts among its own products. You can't transfer a balance from one Citi card to another, for example, or from a Wells Fargo personal loan to a Wells Fargo credit card. Additionally, many banks issue credit cards on behalf of other brands, such as airlines, hotels and stores, and the same restrictions apply to accounts with issuers' affiliates. For example, Chase is the issuing bank for the United℠ Explorer Card. If you had a balance on that card, you couldn't transfer it to a different Chase card.
Before choosing a card for balance transfers, make sure you know the affiliate relationships involved. For example, Citi, through its Department Store National Bank subsidiary, issues cards for scores of retailers. (Click the link in the table above to see just how extensive that reach is.) If you want to transfer a balance from, say, a high-interest Macy's card, you shouldn't bother looking at a Citibank credit card.
About those student loans ...
If you're facing a mountain of student loan debt — or any type of installment debt — getting a lower interest rate sounds awfully tempting. However, you need to be realistic about whether you can actually pay off that debt while the low or 0% interest period lasts. If you can't pay off the entire balance, you may wind up paying retroactive interest on the whole thing. And the ongoing interest rate you pay on a credit card will almost invariably be much higher than what you're paying on a student loan, auto loan or mortgage. Also take into account the balance transfer fee. Most credit cards charge 3% to 5% of the balance you're transferring, so a $5,000 student loan would cost you $150 right off the bat.
Issuers won't let you transfer a balance above your credit limit on the card, and some may have a ceiling on how much you can transfer, which could be lower than your credit limit. If you're new to credit, most likely your credit limit isn't going to be high enough to cover your student loans, or they might exceed the issuer's limit.
To help manage your student loan debt, consider consolidating and refinancing or negotiating an income-based repayment plan. For other debts that may exceed the credit line on a new credit card, consider bundling your credit card debt into a personal loan. A personal loan won't have a 0% interest rate, but its rate will be lower than the high interest you're probably paying on your credit cards now. Consolidating your credit card debt in a personal loan will also create a timetable for you to get out of debt.