Balance transfer credit cards can be a valuable tool if you need to pay down high-interest credit card debt. Once approved, you can transfer balances from other cards to your new one, which should have a lower interest rate than your current cards. The best balance transfer cards charge zero interest for 12 to 21 months.
But most balance transfer credit cards are only available to consumers with good or excellent credit, meaning a FICO score of 670 or above. People with FICO scores higher than 740 have the best shot at approval, according to FICO.
If you were rejected for a balance transfer credit card, consider these steps to help you pay down debt and turn your situation around.
Stop Using Credit Cards
As you hatch a plan to pay off your debts, do your best to avoid using credit cards for regular spending. No matter how much you pay toward your balance each month, using credit for purchases makes it harder to make a dent in your debt.
Create a plan to pay down debt, and stick to a debit card or cash for making new purchases. If you keep using credit for purchases, there’s a good chance you’ll undermine all your hard work.
Cut Your Discretionary Spending
Also, consider cutting your expenses so you can put more cash toward debt. Spend less money on entertainment, dining out, clothing, utilities, transportation, or any other budget-buster so that you can use that extra money to speed up the debt-payoff process.
If you’re unsure what to cut, look over your last few bank statements and credit card bills. Tally up your spending and identify which budget categories are draining you the most. You may be able to negotiate for a better deal on your cellphone plan, for instance, or cancel subscription services you don’t use.
Pay Down Debt Using the Debt Snowball or Debt Avalanche Methods
It may help to have a concrete plan to pay off debt. Consider trying one of two popular methods—the debt avalanche or the debt snowball—to get rid of debt without using a balance transfer card.
- Debt avalanche: To use this method, list your debts by interest rate, with the highest-rate balance at the top. Pay as much as you can toward your highest-rate debt each month while making the minimum payments on the rest. As you pay off the first debt, reallocate that monthly payment to the next-highest on the list until they’re all gone.
- Debt snowball: To use this approach, list debts by balance, smallest to largest. Make the minimum payment toward all your largest debts and throw as much as you can toward the smallest balance initially. As the months go by, you will pay off your smallest debts, freeing up those monthly payments to go toward other debts on the list. Those early wins will hopefully motivate you to keep going.
The debt avalanche method has an advantage since you’ll save money on interest when you pay off the highest-interest debts first. On the flip side, the debt snowball method provides a psychological boost, since you get to shed smaller debts sooner.
Work On Improving Your Credit Score
It’s also smart to focus on improving your credit score: A better score may help you qualify for a balance transfer card down the line. In fact, paying off debt is one of the best steps you can take to boost your score. When you pay down balances, you lower your credit utilization or the amount of debt you have relative to your credit limit—a factor that makes up 30% of your FICO score.
Other steps you can take to improve your credit score include paying all your bills early or on time, only opening new credit accounts when you absolutely need to, and keeping old accounts open in order to maximize the length of your credit history.
Consider a Debt Consolidation Loan
Finally, consider a personal loan for debt consolidation if you think you can get approved (use our calculator below to figure out potential monthly payments). You may struggle to qualify for one, especially at competitive interest rates, if your credit isn’t in the good-to-excellent range. But it may be possible.
Personal loans for debt consolidation come with a fixed monthly payment and a fixed repayment timeline. This means you’ll pay the same amount each month, and you’ll know exactly when you’ll be debt-free.
As you look for a debt consolidation loan, keep your eye out for options with no origination fee or other hidden fees. Opt for a loan with a lower interest rate than your credit cards have to ensure that consolidating saves you money. Also, consider choosing a fixed interest rate if you’re given the choice between fixed and variable. That way, your monthly payments will be more predictable, which may make them easier to budget for.