A balance transfer moves existing credit card debt from a high-interest card to a new card with a 0% introductory APR — typically lasting 12 to 21 months. During this period, every dollar you pay goes directly to principal instead of interest. On a $10,000 balance at 22% APR, that saves you roughly $180 per month in interest charges.
Most balance transfer cards charge a one-time fee of 3-5% of the transferred amount. On a $10,000 transfer, that is $300-$500. Compare this to the $2,200+ you would pay in interest over a year at 22% APR. The fee pays for itself within the first month or two.
Divide your total balance by the number of months in your 0% period. If you transferred $10,000 to a card with 18 months at 0%, your target payment is $556 per month. Stick to this plan and you will be debt-free when the intro period ends. The biggest mistake people make is paying only the minimum during the 0% period and still owing most of the balance when interest kicks back in.