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Balance transfer credit cards can be an excellent tool for chipping away at debt because they offer breathing room from interest, sometimes for periods of a year or longer.
The catch? Those with bad credit aren't likely to qualify.
FICO scores under 630, which fit most definitions of bad credit, are generally too low for the best balance transfer credit cards.
That’s the bad news. The good news for those with bad credit is that there are other tools that can still help you pay off debt, including some that may even be a better fit than a balance transfer credit card. Similarly, there are ways to bump your credit scores up to the point where, eventually, you can qualify for a balance transfer offer if necessary.
Here’s what you need to know about balance transfer cards for bad credit as well as some debt payoff alternatives.
18 Months of 0% to Whittle Down Debt
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Are there balance transfer cards for bad credit?
Generally, no, and here's why.
The best credit cards for balance transfers usually have an introductory interest rate of 0%, and often that promotional period lasts for at least 12 months. Those are generous terms — but the issuer of the card will not grant them to applicants they deem risky. Most balance transfer credit cards require at least good credit, or a minimum FICO credit score of 690.
Of course, almost every rule has an exception, so you can find some credit cards for bad credit that do allow balance transfers — but there are usually big caveats. The Fortiva Credit Card, for example, is available to those with bad credit, and it will let you transfer a balance. But because it offers no promotional APR on such balances, it's a pointless exercise: As of this writing, you'd still face an APR of up to 36% on any balance you transferred to the card.
Meanwhile, the Discover it® Secured Credit Card — also designed for those with bad credit — does feature a promotional APR on transferred balances, but it's much shorter than you'll find on cards for those with good credit, and it's not at a 0% intro APR. It offers a 10.99% intro APR on Balance Transfers for 6 months, and then the ongoing APR of 26.49% Variable APR.
Should you do a balance transfer if you have bad credit?
Again, the answer is likely no, for three reasons: cost, credit limitations and the danger of accruing more debt.
Costs
Let’s say you have bad credit and $5,000 in credit card debt. You want to do a balance transfer, so you open the aforementioned Fortiva Credit Card. A 36% APR on a $5,000 balance results in more than $150 in interest for one billing period. (This number assumes that you don’t charge anything else to the credit card and don’t make any payments throughout the billing cycle.) Because there's no promotional APR offer, you're not saving any money. In fact, a 36% interest rate is much higher than the average credit card APR, so you'd likely be digging yourself deeper into debt with such a move.
The promotional balance transfer offer on the Discover it® Secured Credit Card could save you money — for a small window of time. In the example above, for instance, you'd be paying only about $45 in interest for a billing period. But if you can't pay off your full transferred balance by the end of the card's introductory APR window, the remaining amount will be subject to a much higher APR.
Remember, too, that with most balance transfer cards, you'll also owe a one-time balance transfer fee, usually 3% to 5% of the amount you're transferring. A balance transfer of $5,000 would cost an additional $150 in fees, which could be worth paying if you're getting a long enough break from interest. But in the examples above, you may not be.
» MORE: Credit card interest calculator
Credit limits
Credit cards for bad credit often have low credit limits, sometimes less than $1,000. That severely restricts the usefulness of a balance transfer if you’re trying to move a sum of money that exceeds the card’s credit limit.
Possibility of more debt
In theory, moving debt to take advantage of a lower interest rate makes financial sense. However, a balance transfer only becomes a debt payoff tool for those who are disciplined enough to handle a new line of credit. Say you have $500 in debt that you transfer to another card with a lower APR. Moving the money from one card to another gives you more spending room on the first card, which may tempt some people to use it for other expenses. Now, instead of having debt on one credit card, you have debt on two.
How can I pay off debt if I can’t get a balance transfer card?
A balance transfer credit card is just one tool for paying down debt. Don’t fret if you can’t get one; other tools and strategies can also be effective.
Find a credit counselor
Nonprofit credit counseling agencies offer free assistance to people struggling with debt. A credit counselor can draw up a personalized debt payoff plan that may include debt consolidation and friendlier repayment terms. Getting credit counseling would likely benefit those who want professional financial guidance as opposed to the more do-it-yourself approach with a balance transfer credit card.
Use a debt payoff strategy
Some people want to be coached through their debt payoff journey; others want to go it alone. For the latter group, it’s best to have a focused approach. Two popular debt payoff methods — the debt avalanche and debt snowball — provide a clear framework for tackling debt, one balance at a time. The avalanche and snowball are equally valid ways to pay off debt, especially because they both encourage paying more than the minimum due. Sure, paying only the minimum will get rid of debt, but it may take years and cost hundreds or thousands of dollars in interest.
Get a debt consolidation loan
A debt consolidation loan is a type of personal loan that combines multiple debts into one, often with a lower interest rate than what you’d find on many credit cards. Those with bad credit may not qualify for the best rates, of course. But if keeping track of multiple debts with multiple lenders results in missed payments and late fees, then even a debt consolidation loan with a relatively high APR may still end up saving you money.
Negotiate a lower APR
Some issuers may be willing to lower your APR, which would save you money in interest when you can’t pay off your credit card balance every month. You won’t know until you ask, so it’s worth a phone call. The issuer’s customer service number is usually printed on the back of the credit card.
Elevate your credit scores
If a balance transfer credit card is a tool you'd like to try — but you still have bad credit — the path forward is clear: Elevate your credit scores to elevate your chance of qualifying for such a card.
Some strategies for helping your credit scores include:
- Paying all bills on time.
- Becoming an authorized user on a credit card from someone with high credit scores.
- Getting your on-time rent and utility payments added to your credit report.
- Lowering your credit utilization to below 30%.
» MORE: How to improve credit fast
