Making Money Work For You

How to do a balance transfer when you have bad credit

Balance transfer offers can make paying off credit card debt less expensive if you’re able to lock in a lower APR for an extended period of time.

There’s just one little wrinkle: The best balance transfer cards are often reserved for people with good to excellent credit. That doesn’t mean you’re shut out of transferring a balance if you have bad credit. But you may have to work a little harder to find the right card option. These tips can help you find the best terms for transferring a balance if you have less than perfect credit.

Discover it® Secured Credit Card

  • Secured Mastercard® from Capital One
  • BankAmericard Secured Credit Card
  • Citi® Secured Mastercard®
  • Can you get approved for a balance transfer with bad credit?

    Credit card companies take a close look at credit scores for balance transfer approvals. There may be minimum score thresholds you need to meet to qualify for a transfer offer.

    The bar may be raised even higher during periods of economic uncertainty. In response to the coronavirus pandemic, for example, many banks have taken a more cautious approach when issuing new credit.

    These types of underwriting measures help credit card companies manage risk when lending. But you aren’t automatically counted out for a balance transfer if your score puts you in “fair” credit or “poor” credit territory.

    “Getting a balance transfer with bad credit is difficult but not impossible,” says Leslie H. Tayne, a consumer debt attorney and founder of Tayne Law Group. “However, it will be incredibly difficult to qualify for the most competitive 0% APR options.”

    If you’re interested in a balance transfer offer with bad credit, it’s important to understand that you may not be approved for the typical promotional terms.

    Instead of a 0% APR, for instance, you may still pay interest on balance transfers. The time period for paying balances off at the promotional rate may be shorter compared to balance transfer offers for good or excellent credit. You should also be prepared to have fewer card options to choose from.

    “If you have bad credit, you likely won’t be approved for an unsecured credit card,” says Jared Weitz, CEO of United Capital Source.

    That means turning your focus to secured cards instead, which typically require a cash security deposit.

    secured credit card that offers a high limit is a great credit-building strategy. Not only can a high limit make it easier to keep your credit utilization low (potentially boosting your credit score), but it can also be part of your larger savings plan.

    Should you get a balance transfer card with bad credit?

    Balance transfer offers can potentially save you money. But it’s important to understand how much you stand to benefit from one if you have bad credit.

    First, consider checking your credit report and credit scores through a free credit monitoring service. This can give you an idea of which balance transfer offers you have the best chance of qualifying for. And as a guideline, poor credit is generally a score below 580, according to myFICO.

    Next, do the math on potential interest savings. That includes comparing balance transfer cards for bad credit to see how the APR adds up and how long you’ll have to enjoy that rate before the regular APR kicks in.

    Even the very lowest rates for bad credit balance transfer cards can still be around 10%. And again, you may have only six months versus 12, 15 or 18 months to pay the balance off at that rate. If you can’t pay off your balance within that time frame, you may end up with a higher rate than you had before the transfer.

    Then there are the balance transfer fees to consider. These fees can run from 3% to 5% of the transfer amount, leaving you with more debt to pay back.

    “Balance transfers may not be the best way to handle debt with a bad credit score, because you would have to pay a balance transfer fee and would be still paying interest on your debt,” says Tayne.

    Using secured credit cards to complete a balance transfer can add another wrinkle.

    To transfer a balance to a secured credit card, you’ll need to offer a cash deposit to open the account. Both Weitz and Tayne agree that if you have the money for the deposit, it might make more sense to use it to pay down the debt and forgo a balance transfer.

    There can also be a trade-off of sorts if you’re transferring debt from an unsecured card to a secured one, says Tyler Martin, a certified public accountant and founder of Financial You. If you put up a large deposit to open a secured credit card for a balance transfer, then default on the account, you wouldn’t get that cash back.

    And even if you’re able to find a balance transfer offer for bad credit at a favorable rate, it’s possible that your new credit limit might be too low to transfer the full balance. In that case, you could ask for a higher credit limit but you may need to shop around for a second card to cover the remaining amount you want to transfer.

    See related: How to increase your credit limit

    Best balance transfer cards for bad credit

    If you’ve looked at the pros and cons and decided that a balance transfer is still a good option for managing debt, it pays to choose the right card. That means considering whether the card is secured or unsecured, the promotional balance transfer APR, regular APR and the balance transfer fee.

    To make your search easier, here are some of the best balance transfer cards for bad credit.

    Discover it Secured Credit Card

    • Balance transfer offer: 10.99% intro APR for six months from date of first transfer, for transfers that post to your account by May 10, 2021 (variable APR of 22.99% thereafter).
    • Balance transfer fee: Intro fee of 3% of the amount of each transfer for transfers that post to your account by May 10, 2021, with the 10.99% intro APR balance transfer offer described above. After that, 5% of the amount of each transfer.

    The Discover it Secured Card can be opened with a deposit ranging from $200 to $2,500. Your deposit serves as your credit limit. In addition to transferring balances, you can also use this card to earn rewards on purchases. You’ll earn 2% cash back at gas stations and restaurants, on up to $1,000 in purchases each quarter, and 1% back thereafter. Earn unlimited 1% cash back on all other purchases.

    Secured Mastercard from Capital One

    • Balance transfer offer: 26.99% variable APR applies to all balance transfers.
    • Balance transfer fee: $0 balance transfer and $0 annual fee.

    The Secured Mastercard from Capital One requires a minimum deposit of $49, $99 or $200 to open. But it’s possible to get a credit limit as high as $1,000. This card doesn’t have a rewards program, and the balance transfer APR is on the higher side. But, you can avoid paying a balance transfer fee.

    BankAmericard Secured Credit Card

    • Balance transfer offer: 22.99% variable APR applies to all balance transfers.
    • Balance transfer fee: Either $10 or 3% of the balance transfer amount, whichever is greater.

    The BankAmericard Secured Credit Card could be a good option if you need a higher balance transfer limit. The minimum deposit for the card is $300, while the maximum deposit is $4,900. The deposit is refundable. There’s no rewards program, but you can use this card to build positive credit history without paying an annual fee.

    Citi Secured Mastercard

    • Balance transfer offer: 22.49% for transfers completed within two months from date of account opening.
    • Balance transfer fee: Either $5 or 3% of the balance transfer amount, whichever is greater.

    The Citi Secured Mastercard is primarily designed to be a credit-building card, but you can also use it to complete balance transfers. The minimum credit limit and deposit is $200, while the maximum for both is $2,500. If you had a bankruptcy filing in the past two years, you won’t be able to get this card.

    See related: How long does it take to recover from a bankruptcy?

    Alternatives to a balance transfer card

    Balance transfer offers aren’t the only way to manage debt. If you have bad credit and can’t find a balance transfer card with attractive terms, here are a few options to consider instead.

    Personal loan

    Weitz says balance transfer cards are really only advisable if the amount is low and you can pay it off within three to six months. He suggests a debt consolidation loan as a way to streamline and pay off debt.

    Personal loans for debt consolidation give you a lump sum of money to pay off credit cards. You’d then make one payment to the loan going forward.

    Ideally, you’re able to get a loan with a lower APR than you’re currently paying, without having to offer a deposit or collateral. Comparing personal loans for bad credit online can help you find the best loan offers.

    Piggyback on your spouse’s credit

    If you’re married, you might also talk to your spouse about allowing you to transfer a balance to one of their cards. They may qualify for more favorable balance transfer terms if they have a good or excellent credit rating.

    Credit card companies can allow for balance transfers between spouses. But keep in mind that shifting the debt to your spouse’s card makes them legally responsible for it.

    Make extra money to pay off debt

    The coronavirus pandemic and its resulting layoffs lead many people to find creative ways to make extra money. That’s something you might consider as well if you want to pay off high-interest debt faster.

    You could start by selling things around the house you no longer need, for example. From there, you can look into branching out to other types of side jobs, including ones you can do online or offline.

    Even something like downloading a cash back app could help you make a dent in your debt. Apps like Rakuten and Ibotta pay you cash back when you shop, which you could then apply to your credit card balances.

    Work on improving credit scores

    If you can’t find a great balance transfer offer because of your credit, raising your credit score could open up more options. The best ways to improve credit are the tried-and-true methods like:

    • Paying bills on time
    • Keeping credit card balances low relative to your credit limits
    • Keeping older credit accounts open
    • Using a mix of different credit types
    • Limiting how often you apply for new credit

    It can take time to see results in your credit score. But it may be worth it to improve your score so you can qualify for the best balance transfer offers.

    See related: How long does it take to go from bad to good credit?

    Bottom line

    If you have poor credit because of past mistakes, a balance transfer could give you a fresh start. But it’s important to keep your credit history in perspective.

    “If someone hasn’t changed their money habits, usually they compound the problem,” says Martin.

    So don’t just focus on getting a better deal on your debt. Also, look at what led to bad credit issues to begin with. Addressing those issues as you restructure your debt can help you avoid repeating past credit mistakes, says Martin.