What Happens if You Don’t Pay a Balance Transfer off in Time?

Transferring debt to a 0% balance transfer credit card can seem like a no-brainer. All the interest you were paying temporarily disappears. There are a lot of advantages.

But those interest-free payments don’t last forever. Ideally, you’ll have paid off your balance by the time that introductory rate disappears. And, if you’ve transferred your credit card debt to a zero-interest card, you should make every effort to do so.

If you don’t? It will cost you, but there are options. Some are good. They get worse the more you owe.

What Are Balance Transfer Credit Cards?

Credit card companies offer balance transfer cards with low to 0% introductory interest rates to bring in new customers. The rate is for a limited time, after which any remaining balance is charged a higher interest rate. The companies make money on an initial transfer fee and, of course, on the interest, you’ll be charged on what you owe after the introductory period expires.

These cards can help consumers more easily pay down the credit card debt they transferred because there is no interest charged during the introductory period. You can usually transfer balances from multiple cards, so consolidating credit card debt is the big attraction. Almost half (47%) of credit card holders carried a balance at least one month in 2023, so balance transfer cards are one way to solve that problem.

The cards may allow you to avoid interest on purchases you make using the card during this period, but that isn’t always the case. Make sure you know before deciding on a transfer card.

What Is a Balance Transfer Period?

Balance transfer credit cards set an introductory period from which you pay no interest on the amount you transferred to the card. A review of about a dozen popular balance transfer cards showed introductory periods ranging from 12 to 21 months.

You still must make regular monthly minimum payments on what you transferred and any purchases on the card, and failing to do so may cancel the low-interest period, and you’ll pay the card’s regular interest rate, often over 20% APR.

Not all transfer periods are alike. Some cards have 0% interest introductory periods for balance transfers but charge their regular interest rates for purchases, and that rate will vary based on your credit rating. Others have a shorter introductory period for purchases made with the card. For instance, Discover Chrome has 0% interest for 18 months on balance transfers, but the 0% offer lasts six months for purchases. It’s wise to compare, especially if you plan to use the card for purchases rather than only paying down debt.

Paying off Your Balance Before the Promotional Period Ends

The best reason to get a balance transfer credit card is to pay down or even eliminate your debt. It’s a form of debt consolidation – merging multiple debts into a single debt that is easier to pay off. So, that should be a priority.

A simple strategy to do this is to divide the amount you transferred by the number of months in the introductory period: That tells you the minimum you must pay each month to wipe out the balance before the interest rate increases. (That’s assuming you make no purchases with the balance transfer card.)

For example, you transfer $3,000 onto a card with a 15-month promotional period. You’ll be charged a transfer fee (probably 3%, or $90) that will be added to the balance. You need to pay $206 per month to pay off the balance before the period ends.

It’s a good idea to do that. Even if you can significantly pay down the balance, you’ll save a lot of money when the new interest rate kicks in.

Pay at Least the Minimum Amount Due

Even if you can’t pay enough to eliminate the balance you transferred to your card, it’s essential to pay at least the minimum amount due each month. Failure to do so will not only result in being charged a late fee, but some cards revoke the 0% offer if you don’t pay the minimum regularly or on time.

If you are struggling to make minimum payments, it’s a sign of bigger financial problems. Miss enough payments and you’ll get to know debt collectors, which isn’t a pleasant experience.

Be Smart During the Balance Transfer Introductory Period

Focus. Since the big reason to use a balance transfer is to eliminate or at least pay down existing debt, make that your priority. Using the card for new purchases or cash advances adds to what you owe. That’s counterproductive, particularly if these purchases and advances come with fees and interest payments.

If you need a card for an unplanned expense, it may be better to get a different card and focus your efforts on paying off the balance transfer card.

Keep an Eye on Your Credit Score

Just like paying off your transfer card balance, knowing and improving your credit score is a worthy financial goal. It’s a reflection of your financial well-being. The better your credit score, the easier it is to get a loan and the less you’ll be charged in interest.

Sometimes, however, you must accept short-term pain for long-term gain.

When you open or even apply for a new credit card or loan, your credit score will fall a little. That’s because whenever you increase your borrowing limit, credit rating services – Experian, Equifax and Transunion – consider that the risk of your being able to pay your bills goes up. After you make your payments on time for a few months, your credit score should bounce back. So, don’t be alarmed. This is a normal credit score fluctuation.

What Happens if You Don’t Pay off a Balance Transfer Credit Card in Time?

Once the introductory period ends on a balance transfer card, any remaining balance will be charged a higher interest rate each month. Clearly, if you can’t eliminate that balance in time, the more you’re able to pay off, the less it will cost you. That way, you take the fullest advantage of the balance transfer card.

What Should I Do if I Don’t Clear My Debt Before the Balance Transfer Period?

If you’re reaching the end of your card’s introductory period and you still have a balance, it’s time to consider your next step. You have several options.

Pay in a Lump Sum

The simplest and best option is to pay off the remaining balance in a single payment before the 0% interest period ends. It saves money by avoiding future interest payments. If you have a savings account, extra cash or can scrape up the money you need with a side hustle or selling items you no longer need, it’s a smart move.

Move Balance to Another Balance Transfer Card

What’s the old saying? If at first you don’t succeed, try, try again. You might be able to transfer your existing balance to another 0% interest card. That gives you a second chance to pay off what you owe without paying interest.

However, this strategy is not without costs.

You will have to pay a transfer fee, typically 3% to 5% of the amount being transferred. Also, applying for new cards can temporarily lower your credit score. If the introductory period on your first card was short, your credit score might not have fully bounced back from the dip it took when that card was issued.

Also, you’re not guaranteed to qualify for another 0% card. Credit card companies are hesitant to approve 0% transfer cards to those with high debt levels. If you haven’t significantly paid down your first transfer card, it may be hard to get a second one.

Move Balance to a Low-Interest Credit Card

Even if another 0% balance transfer card isn’t available, you may be able to move your balance to a card that offers much lower interest than the rate your card will charge after the introductory period expires. This will likely be cheaper than leaving your balance on the existing card, especially if you want to make purchases on the new card, too. Research to find a card that maximizes your savings. You likely will have to pay a transfer fee, so factor that into your calculations.

You also can consider negotiating with your credit card company to seek a lower interest rate.

Join a Debt Management Program

A debt management program is a form of debt relief offered by nonprofit credit counseling agencies. It’s a way of reducing your interest rates and paying off credit card debt without having to take out a bank loan.

A certified credit counselor will analyze your income and expenses to create a budget. Then they work with creditors to reduce interest rates and create an affordable, fixed monthly payment that fits your budget. You make one payment to the credit counseling agency each month, and they distribute the funds to your creditors on your behalf.

Consider a Debt Consolidation Loan

A debt consolidation loan is often used by consumers who need to get their credit card debt under control. Usually, this involves rolling multiple high-interest card debts into a single loan that allows you to pay these debts off with fixed monthly payments over a predetermined time. It simplifies payments for those who are dealing with more than one credit card, and it’s especially effective if the consolidation loan interest is less than that charged by the cards. Debt consolidation loans usually have terms of two to five years.

A debt consolidation loan could also help someone whose balance transfer card promotional period is about to expire. You can expect to pay fees, but since that is true of other options, it’s worth exploring the benefits of debt consolidation vs. balance transfer cards.

Keep Balance on the Balance Transfer Card

If none of the previous options work, your last resort is to keep the money on the balance transfer card. This is undesirable because it is the most expensive option due to the high interest rate that will now apply to what you owe. Did you think the card company was just being nice when it offered the 0% introductory rate? The card companies hope customers won’t be able to pay off the balance and won’t remember to move the money elsewhere.

The Bottom Line

As you’ve seen, there are a number of strategies to use if you can’t pay off your balance transfer card before the introductory period expires. That lingering debt, however, may be a signal that you ought to take a big-picture view of your finances.

Credit counseling from a nonprofit credit counseling agency helps you look at more than your current debt problem. It goes deeper to see what may be causing your debt. Maybe it’s your spending habits. Maybe you need budgeting advice. Credit counselors can help you understand why you’re in your situation and develop strategies to get out and stay out of the problem.

If your debt problems seem too big for you, expert help just might be the answer.