Updated on November 30, 2021
If you have debt and you want to consolidate it, you may have wondered whether you can make a balance transfer from a loan to a credit card. If you have a favorable interest rate on your card and a less-favorable rate on other debts you owe, such as a car or student loan, then it may make sense to explore options that would allow you to pay less interest over time.
But is it possible to transfer that debt to a credit card? What if you want to take it a step further and transfer your credit card debt to someone else? We have answers to your most frequently asked questions about balance transfers.
Whether you’ve borrowed money through a student loan, auto loan, or personal loan, you want to find the best possible rate to pay it back. That’s understandable. Sometimes credit cards offer low interest rates on balance transfers for an initial time period, giving you a limited window to pay off the money you move over.
Some people assume this covers only credit card-to-credit card transfers — and that’s often the way they’re advertised — but you might be able to move other debt over to a credit card as well.
Still, you should understand all the terms and conditions of this type of move before you jump into a transfer since credit card terms can differ. In some cases, the special interest rate may be negated if:
There is often a balance transfer fee that is equal to a set percentage of the balance you are transferring. For example, on a credit card with a 3% balance transfer fee, if you transfer $5,000, you’ll pay $150 in fees. Make sure to take this into consideration when calculating whether it’s worth it to pursue the balance transfer and if it’ll save you money in the long run.
Most balance transfer offers give you a set number of months to pay off the balance at a special rate. For example, a credit card with a 3% balance transfer fee may give you an 18-month time period to pay off the balance at the 3% rate. After that period of time is up, interest will begin being charged at the card’s regular interest rate.
For very large loans, it may not be possible to pay off the remaining balance in a limited amount of time. This means you need to consider whether the regular interest rate of the credit card is higher or lower than the interest rate on the original loan to know if it’s a good decision for you to use the balance transfer offer to pay off the loan.
Another factor to be aware of if you’re considering paying off a large loan is the existence of early termination or early payoff penalties, which charge you a fee for paying off your loan sooner than the original terms of the loan state. It’s important to be aware of which of your loans are subject to an early payoff or termination fee before you consider transferring any balances.
Some credit cards limit the amount of debt you can transfer, too, which may limit what loans you’re able to pay off using a balance transfer offer.
Because the type of debt you carry can affect your credit score, you’ll want to make sure you consider what impact transferring debt between two types of credit can have on your score.
The options are almost unlimited, although again, keep in mind that it’s not always wise to consolidate your debt this way. You should take a candid look at your financial situation before going through with a balance transfer.
That said, you can transfer nearly anything to a credit card. You must check with your individual provider because every card is different, but possibilities range from personal loans to student loan debt to credit cards from a different provider. It’s important to note, however, what you usually cannot do is transfer debt between the same credit card provider.
It’s also important to understand what you could lose out on by transferring debt – for instance, federal student loan debt may have multiple repayment, deferment, and forgiveness options. If you transfer that debt to a credit card, you’ll lose those options and be subject to the terms of the card to which you transferred the debt.
Another person can authorize a balance transfer offer to pay off a debt in your name. This is unlikely, as most people aren’t willing to take on debt incurred by someone else. However, sometimes a personal circumstance arises where there is a need to do this, such as:
When you make a balance transfer, keep in mind it can take several weeks or more for the transaction to go through. Continue to make your regular payments on your debt until you have confirmed it has moved onto the credit card. That way, you’ll avoid late fees and won’t have missed payments impacting your credit report and credit score.
Are you looking to transfer debt to a credit card? PSECU offers two Visa® cards, the Classic and the Founder’s Card. You also receive a low annual percentage rate on balance transfers for both the Classic and Founder’s Cards. If you’re considering a PSECU credit card and don’t know which one to choose, learn more about both to determine the best fit for your needs.
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