This Credit Card Debt Payoff Strategy May Sound ‘Too Good to Be True,' But It Could Save You Thousands

If you don't know what a credit card balance transfer is, you're not alone.

About 61% of Gen Zers and nearly 50% of millennials with credit card debt may be unfamiliar with balance transfer cards, according to Bankrate data provided to CNBC Make It.

They're worth knowing about: Costly interest charges can cause credit card debt to skyrocket quickly, but a balance transfer can help you tackle it by transfering your balance from a credit card with a high interest rate to one that charges 0% interest for a limited time.

"They do sound too good to be true in some respects," Ted Rossman, senior industry analyst for and, tells CNBC Make It. "The idea that you can avoid a 20%-plus interest rate for nearly two years is pretty astonishing. But they're certainly real."

How balance transfers work

Balance transfer cards allow you to move your debt from a credit card with a high annual percentage rate (APR) to one with a 0% APR introductory period that typically lasts up to 21 months. This allows you to pay down your debt without incurring interest.

Say you have $5,805 in credit card debt, the average amount Americans hold, according to TransUnion. If your card has a 20.04% APR, the average interest rate, and you only make minimum payments, you'll be in debt for a little over 17 years and pay a grand total of $8,253 in interest, Rossman says.

Had you transferred your $5,805 in unpaid debt to a card with a 0% APR and paid it off within the introductory period, you would've saved thousands of dollars.

However, balance transfer cards aren't available to everyone. If you want to qualify for one, you need a good to excellent credit score. The likelihood that you'll be approved generally decreases if your score is below 670.

If you're not approved to transfer your full balance to another card, don't panic.

"It's natural for balance transfers to be capped," Melinda Opperman, chief external affairs officer at, tells CNBC Make It. "Even if your credit is good, the card you're transferring to might only let you transfer a fixed amount."

In this case, you could transfer part of your balance, pay that off and then do a second transfer later, she says.

And always be sure to review the balance transfer fee, which can range from 3% to 5% of the amount you've transferred, as well as payment deadlines to avoid late charges.

Pitfalls of credit card balance transfers to avoid

There are a few downsides to balance transfers. First, keep in mind that opening a new account for a balance transfer may negatively impact your credit score because it shortens the average length of your credit history and adds new credit with new inquiries, Opperman says.

However, over time, a balance transfer can result in a higher credit score as long as you pay down existing debt, make on-time payments in full and don't rack up more debt, she says.

Anyone who completes a balance transfer should be careful to avoid ending up in more debt than they started with.

"Avoid the temptation to add to your debt," says Rossman. "Adding new purchases, even if they're interest-free for a while, forces you to hit a moving target. That's much more difficult."

Additionally, make sure you complete the transfer within a certain timeframe to get the 0% introductory rate. "Usually, you have to complete the balance transfer soon after (within 60 days or so) opening the account to qualify for the 0% rate," Opperman says.

Commit to paying off credit card debt

The right candidate for a balance transfer is someone who can save by transferring their balance and is ready to commit to reducing their credit card debt month after month, Opperman says.

The commitment part is important: "A balance transfer can reduce the cost of repaying one's debt, but it doesn't automatically lead to debt repayment," she says.

If you're ready to buckle down, here's one strategy that may help: Divide what you owe by the number of months in your 0% introductory period to figure out what you'll need to pay each month to eliminate your debt, Rossman says. Then, try to be diligent about sticking to that payment plan.

"That gives you the best odds of success," he adds.

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