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Parents pay an average of $177 more monthly when they put a teen driver on their auto insurance policy, according to data from Quadrant Information Services. Insurance companies bump up teen driver rates because they represent significantly more risk for claims compared to older drivers. However, parents can help defray insurance costs by practicing safe driving with their teen and looking into the many available discounts.

We’ll do a deep dive into how much car insurance is a month once your teen starts driving. Keep reading to find a breakdown of costs by state and the factors that affect insurance pricing.

Why Auto Insurance Rates Are So High for Young Drivers

Many teens are highly responsible and conscientious behind the wheel. Unfortunately, statistics support the stereotype of young drivers being less safe: Beginner drivers ages 16 to 19 are almost three times more likely to get into a fatal crash than drivers 20 and older. Whether it’s due to recklessness or just lack of confidence and comfort on the road, youth often leads to more insurance claims.

As a result, auto insurance companies charge higher rates for inexperienced drivers. Parents who are doing some personal insurance planning should expect much higher premiums for several years.

Recommended: Does Auto Insurance Roadside Assistance Cover Keys Locked in a Car

Age at Which Car Insurance Rates Drop Significantly

As teens mature and gain experience on the road, rates drop. So, how much is monthly car insurance for a 16-year-old versus a 20-year-old? That depends on many factors, including their city, state, gender, and vehicle type.

On average, monthly coverage for a 16-year-old costs $534 for female drivers and $599 for male drivers on their own policy. When a driver reaches 20 years old, the rate drops to $258 for female drivers and $295 for male drivers. Once a driver turns 25, their rate will continue to decrease as long as they have few to no claims.

The cost will go on dropping until age 60, at which point prices may start increasing again. Just as younger drivers generate more insurance claims, the oldest drivers do as well.

Recommended: How to Get Car Insurance

Factors Besides Age That Impact Car Insurance Costs

Insurance companies use age as a primary factor in determining risk, but there are additional considerations. Keep these in mind if you’re wondering how to lower car insurance costs for your family:

•   Insurance types and limits. How much coverage you want or need will affect the cost. For example, collision, medical expenses, and gap coverages cost more than the barebones liability coverage required in many states. (If you’re unfamiliar with insurance terminology, this list of car insurance terms can help.)

•   Deductible amount. All types of deductibles in insurance have an inverse relationship with premiums. In other words, if you want a lower rate, you can opt for a higher deductible.

•   Past issues with insurers. For example, if you missed payments with other insurance companies or have gone without car insurance for months at a time, your current auto insurer will assess you as a higher-risk customer.

•   Insured vehicle. The costs to fix luxury and economy cars vary widely. In addition, some cars suffer theft more often. Your insurer will take your vehicle type into account when assigning an insurance rate.

•   Location. Your zip code affects factors such as weather, crime, and repair costs.

•   Personal characteristics. If you’re married and own a home, your insurer will likely charge you a lower rate. In addition, your education level, career, and gender can impact insurance rates.

Recommended: How to Lower Car Insurance

Is Age the Biggest Factor for Car Insurance Rates?

Typically, age will be the most significant factor for car insurance rates, regardless of driving record. Still, age is only one part of the calculation: A driver with a history of accidents and traffic violations will see their rates skyrocket, no matter their age.

Age influences rates more than other considerations partly because of teenage driving habits: Driving at night and on weekends, forgoing seatbelts, texting while driving, and drunk driving all correlate with younger drivers.

Another factor affecting car insurance rates is gender. Although several states have outlawed using gender to set auto insurance rates, insurers in the remaining states base rates on how often men and women get into accidents. For example, recent statistics show women are half as likely as men to die in auto accidents, so they often receive lower rates.

State Insurance Coverage Requirements

Each state has its own laws setting minimum insurance coverage for drivers. That’s one reason why car insurance rates vary significantly from state to state. Idaho, Maine, and Ohio lead the country in least expensive car insurance. At the other end of the spectrum, the most expensive states for car insurance are Delaware, Florida, and Louisiana.

One of the key insurance tips for first time drivers is to only pay for what you need.

Non-Owner State Minimum Liability Only

Not owning a car usually means you don’t need car insurance. But if you regularly rent or borrow vehicles, non-owner liability insurance can cover you in case you inflict property damage or bodily injury through an accident. Average non-owner premiums range from $14 per month in South Dakota to $83 in New Jersey.

State Minimum Liability Only

Every state varies in its stipulations, but usually, you will have to purchase an auto policy covering bodily harm and property damage. The level of coverage is indicated by three numbers.

California’s minimum required coverage, for example, is 15/30/5. That represents $15,000 of bodily injury coverage per person, with a maximum of $30,000 per accident, and another $5,000 for property damage per accident. That’s on the low side. Maine and Alaska have the highest minimum requirements, with 50/100/25.

Drivers in California will pay an average of $49 a month for minimum liability, while in Maine they’ll pay just $35 — despite the better coverage.

Recommended: How Much Does Insurance Go Up After an Accident?

50/100/50 Liability Only

This form of liability insurance covers up to $50,000 of bodily injury for others, with a maximum payout of $100,000 per accident. An additional $50,000 of coverage goes toward property damage for others involved in the accident.

100/300/100 Liability with $500 Comp/Coll Deductible

Also known as full coverage, this policy grants $100,000 for bodily injury with a maximum of $300,000 per accident. Plus, the policy will pay up to $100,000 for damage to other people’s property. Lastly, you’ll receive comprehensive and collision coverage with a $500 deductible.

How Much Is Car Insurance by the Month?

On average, car insurance costs $144 per month for full coverage and $53 per month for minimum liability coverage across the country. However, as noted above, your monthly car insurance premium will depend on a host of factors, including age, driving record, and state.

Average Car Insurance Rates for Young Drivers

When adding a young driver to a family policy, parents should brace themselves for a substantial increase. To give you an idea of what to expect, the table below shows the monthly insurance premiums for a 16-year-old girl in every state (boys pay a bit more). The first figure shows how much she’d pay on her own policy, and the second is the upcharge to add her to the family policy.

State	Teen Policy	Add-on to Parents’ Policy
Alaska	$428	$135
Alabama	$527	$134
Arkansas	$597	$164
Arizona	$618	$190
California	$521	$240
Colorado	$624	$167
Connecticut	$806	$129
Washington, D.C.	$576	$139
Delaware	$873	$128
Florida	$906	$264
Georgia	$554	$147
Hawaii	$126	$5
Iowa	$380	$93
Idaho	$443	$104
Illinois	$635	$162
Indiana	$440	$128
Kansas	$464	$124
Kentucky	$715	$206
Louisiana	$1,086	$343
Massachusetts	$589	$164
Maryland	$478	$181
Maine	$363	$125
Michigan	$683	$320
Minnesota	$408	$139
Missouri	$700	$235
Mississippi	$523	$153
Montana	$577	$147
North Carolina	$325	$166
North Dakota	$551	$100
Nebraska	$577	$135
New Hampshire	$452	$107
New Jersey	$750	$200
New Mexico	$499	$143
Nevada	$767	$202
New York	$512	$168
Ohio	$395	$107
Oklahoma	$597	$165
Oregon	$465	$139
Pennsylvania	$657	$164
Rhode Island	$843	$210
South Carolina	$544	$184
South Dakota	$479	$93
Tennessee	$533	$142
Texas	$670	$204
Utah	$622	$202
Virginia	$450	$160
Vermont	$331	$113
Washington	$476	$165
Wisconsin	$543	$209
West Virginia	$547	$166
Wyoming	$475	$135

Data courtesy of Quadrant Information Services.

Recommended: The Cheapest Way to Rent A Car

Is it Possible to Lower Car Insurance Rates for Young Drivers?

While putting your teen on your auto policy will inevitably raise your premiums, you can mitigate the rate hike in a few ways:

•   Maintain one family policy. Although adding a young driver to your policy is costly, opening up a separate policy for your teenager costs even more. Generally, having multiple drivers on one policy is cheaper than multiple policies. Ask your insurer for quotes for both scenarios to ensure you’re getting the best deal.

•   Rack up the discounts. Many insurers provide discounts to students who maintain at least a B average. College students can qualify for an additional discount, especially if they don’t have a car and their school is at least 100 miles away from home.

•   Compare policies. Shopping around for a better deal can save you hundreds, if not thousands of dollars.

Are There Discount Insurance Providers?

While there is no dollar store version of an auto insurance company (no, not even online insurance companies) most companies offer discounts to teen drivers:

•   Incident-free driving. Incident-free means no accidents or tickets.

•   Driver tracking. Many insurers have implemented programs that track driving habits through a device installed in your car. Teens who avoid speeding or braking hard can receive a discount.

•   Driver education. Teens who take courses in safe driving can earn money off their parents’ policy.

•   Student discounts. High school and college students can earn discounts for receiving good grades, or for going to school 100 miles away with no car.

The Takeaway

Younger drivers pay considerably more for car insurance than older drivers. For example, the nationwide average cost of insurance for a 16-year-old girl, when added to her parents’ policy, is $345 per month. That isn’t bad compared to what the same girl would pay for her own policy: $565 per month. Car insurance premiums tend to drop at ages 20 and 25, assuming drivers have a clean record. By the way, men generally pay more than women until age 35.

SoFi’s online tool makes looking for the best deal on auto insurance easy. Compare rates among the top insurers in your area, and see quotes in a matter of minutes.

See real rates, with no bait and switch.

FAQ

Does car insurance vary by age?

Yes. Car insurance costs vary by age because younger drivers present more risk for insurance companies. Statistics show that the older the driver, the less chance they have of getting into an accident or filing a claim.

At what age is car insurance cheapest?

Car insurance is cheapest for drivers in their 50s. Insurance costs typically decrease with age. However, upon turning 60, insurance costs start to creep up again.

Is male or female car insurance higher?

Typically, men are charged higher car insurance prices than women. Statistics show that younger men get into more accidents, speed more often, and drive under the influence of alcohol more frequently than women. However, starting at age 35, men and women receive almost identical rates.

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Photo credit: iStock/RyanJLane

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Making on-time payments is not only financially responsible, but it can help you with building and maintaining a high credit score. But what about paying your credit card early? Far from being bad, paying your credit card before the due date, or even making extra payments each month, might offer some benefits — including a positive impact on your credit score.

To decide if you should pay your credit card early, consider the benefits and weigh whether it’s financially worth it for you to pay your credit card bill before the statement closing date.

What It Means to Pay Your Credit Card Early

In a nutshell, paying your credit card early means you’re making your monthly payment before your due date. Or, it could mean putting extra payments toward your credit card before the billing cycle ends.

For instance, let’s say you check your credit card transactions online a few days before your billing cycle ends. You decide you want to pay about half of the balance right then, so you make a bank transfer through your online account, constituting an early credit card payment. Then, once you received your credit card bill after the grace period, you’d pay off the remaining balance.

Recommended: Tips for Using a Credit Card Responsibly

Understanding Your Credit Card Billing Cycle

Your credit card due date falls on the same date every month. Once you reach the end of your billing cycle, your credit card issuer will send you a statement letting you know the total amount that’s due, the minimum amount you’ll need to pay, and the credit card payment due date.

From the point your billing cycle ends up until your payment due date, you’re in what’s known as a grace period. During the grace period, you won’t be charged interest, assuming you’re paying off your balance in full by the due date of each billing cycle. This is a big perk, given how credit card debt is hard to pay off.

To determine the length of your credit card’s billing cycle, you can check your cardholder agreement or contact your issuer. You can also calculate the number of days between the start and end dates of the billing cycle — you should be able to find that on your credit card statement. In general, however, billing cycles last around 28 to 30 days.

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Potential Benefits of Paying Your Credit Card Early

If you’re wondering, ‘Is it bad to pay your credit card early?,’ there’s no need to worry.

In most cases, the decision to pay off your credit card bill early is beneficial to your credit.

Reduce Interest Charges

Credit card companies tend to charge their cardholders interest when they carry a balance from month to month. If you pay off your credit card early — especially if you pay off the balance in full before the end of the billing cycle — that means you could pay less in interest (or even no interest at all).

Every little bit can help, because the higher your credit card balance, the more interest you could end up paying. If you’re unsure of how much paying off your credit card early can help, consider using a credit card payoff calculator to help you determine your potential savings.

Recommended: How to Avoid Interest On a Credit Card

Reduce Credit Utilization

Credit utilization is the percentage of your total available revolving credit you’re using. A lower credit utilization means that you’re not using as much credit, which could signal to creditors that you’re financially stable enough that you don’t need to rely on credit. In other words, your credit score could go up when your credit utilization is low, and the opposite could happen when it’s high — it’s generally recommended to keep it below 30%.

By making an extra credit card payment earlier than when your current billing cycle ends, you may be able to lower your credit utilization ratio. Even if you’re making a payment before the due date, you could still lower your credit utilization which can positively impact your credit scores.

To calculate your current credit utilization, add up all of your current credit card balances and divide that amount by your total credit limit. For example, if you have three credit cards each with a limit of $5,000 — $15,000 in total — and respective balances of $1,500, $800, and $2,000 from using your credit cards. In this example, your credit utilization would be around 28%.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score

Avoid Late Fees

Paying your credit card early — even if you’re not paying off your balance in full — means you’ll reduce your chances of getting charged a late payment fee. However, if you have a balance remaining from the previous billing cycle, note that early payments could go toward those previous charges first.

To be clear, you need to pay at least the credit card minimum payment stated on your credit card balance to avoid late fees. For instance, if you make extra payments but still have a balance leftover by the end of the billing cycle, your credit card could mail a credit card statement with the remaining balance due, plus a minimum amount you’re required to pay. In this case, you’d need to pay that amount before the due date to avoid paying late fees.

To make sure you’re still making on-time payments, consider scheduling payments, setting up autopay, or putting reminders on your calendar to help yourself remember to pay your credit card bill.

Recommended: When Are Credit Card Payments Due

When Is the Best Time to Pay a Credit Card Bill?

There isn’t a best time to pay a credit card bill, but it’s not a good idea to pay your credit card bill late — meaning after your due date has already come and gone.

There are a number of consequences of credit card late payment. Paying late means that you’ll get hit with late charges, and it could have a negative impact on your credit score. Depending on how late you are with paying your bill, your credit card issuer could also enact a penalty APR, which is higher than your regular one.

The Takeaway

Paying your credit card early can offer plenty of benefits. This includes potentially lowering your credit utilization, avoiding late charges, and reducing your interest charges.

To help you save more money when using your credit card, consider using a credit card that offers a competitive interest rate and allows you to earn rewards.

FAQ

Will paying my credit card bill early affect my credit?

Paying your credit card bill early can help to boost your credit score because on-time payments are one of the major factors that affect your FICO score. Plus, it could lower your credit utilization ratio, another major factor that goes into calculating credit scores.

Is it ever bad to pay my credit card early?

It’s not bad to pay your credit card early since it shows that you’re a responsible cardholder. As long as you make at least the minimum payment, you won’t get hit with late fees or other types of consequences, such as a negative mark on your credit report.

What happens if I pay the credit card bill before it is billed?

If you pay your credit card bill before the end of your billing cycle, the payment will either go toward the previous month’s statement — if you carry a balance — or toward the current balance. In any case, paying a credit card early will lower your statement total and could boost your credit by lowering your credit utilization ratio.

Can I pay my credit card the same day I use it?

Yes, you can. However, you may want to wait until the payment has been posted to make sure the amount you’re putting toward your bill is correct.

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Photo credit: iStock/andresr

¹See Rewards Details at SoFi.com/card/rewards.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .


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Typically, to qualify for a new credit card, you need to meet the card issuer’s underwriting requirements — including the minimum credit criteria. If you don’t have a long credit history or a strong credit score, asking if someone can cosign for a credit card for you can help you get approved.

However, this type of arrangement should be approached cautiously for various reasons. Before getting a credit card with a cosigner, here’s what you need to know.

What Is a Credit Card Cosigner?

A credit card cosigner is an individual who agrees to be responsible for a primary cardholder’s debt. If the primary cardholder fails to make payments or defaults on their debt, the cosigner is expected to assume their financial burden by repaying the outstanding debt, regardless of the circumstances that led to the account’s status.

Because of how a credit card works, a cosigner should ideally have a strong credit score and a solid credit history.

Why Might Someone Need a Cosigner to Open a Credit Card Account?

A person might decide to secure a cosigner for credit card applications if they have less than a “good” credit score (meaning below 670). This is because applicants who don’t have strong credit might find it harder to get approved for a new credit card at a low APR.

Additionally, credit card applicants must meet age requirements to get a credit card. Applicants who are under 21 years old are required to secure a cosigner if they can’t prove their ability to repay the card using their own income. This credit card rule from the Credit Card Accountability Responsibility and Disclosure Act of 2009 — also known as the Credit CARD Act — was designed to avoid predatory lending practices toward young cardholders.

Even if an applicant is 21 or older, they might need a credit card cosigner if they don’t have sufficient income. Keep in mind, however, that many credit card companies don’t allow for cosigners, so searching for one that does could increase the amount of time to get a credit card.

Parties Involved in Cosigning a Credit Card Account

Aside from the credit card issuer, there are two parties involved when opening a new credit card with a cosigner: the cardholder and the cosigner.

The Credit Card Holder

The individual who is the primary cardholder is the person whose income, age, or credit doesn’t meet the card issuer’s minimum requirements. If they successfully acquire a willing cosigner for a credit card application, the account is under the cardholder’s name. The cardholder is also the individual who will receive the physical credit card to use toward purchases.

As the primary cardholder, they’re still considered the first party that’s responsible for making on-time monthly payments for at least the minimum balance due.

Recommended: When Are Credit Card Payments Due

The Cosigner

A cosigner is an individual who meets the card issuer’s underwriting requirements. They provide a financial guarantee that vouches for the cardholder. This financial responsibility is taken on by the cosigner as soon as the credit card application is approved.

Typically, cosigners don’t enjoy the perks of using the physical credit card. They don’t have access to the credit line, nor do they have ownership of the goods that were paid for using the credit card.

However, if the cardholder fails to pay back their credit card debt, the card issuer will immediately seek payment from the cosigner. Credit card companies can also report late payments and default notices to the credit bureaus, and those updates will adversely impact a cosigner’s credit score and appear on their credit report.

Pros and Cons of Credit Card Cosigning

As mentioned previously, there are reasons to approach becoming a credit card cosigner with caution. However, there are positives to cosigning as well.

Pros of Credit Card Cosigning	Cons of Credit Card Cosigning
Helps the primary cardholder access a credit line they otherwise may not qualify for	Cosigner is responsible for unpaid credit card debt they did not accumulate
Allows someone under the age of 21 without regular income to access a credit card	Might affect a cosigner’s access to new loans or lines of credit since a cosigned credit card impacts their debt-to-income ratio
Positive credit card activity is reported to credit bureaus for both the primary cardholder and cosigner	Late payment activity and default is reported to credit bureaus for both parties
Helps secure a lower credit card APR for the primary cardholder	Card issuers can send unpaid debt to collections, sue cosigners, or request wage garnishment or property liens against the cosigner to collect on the debt
	Poor borrowing and repayment habits can negatively affect the relationship between the cardholder and cosigner

Credit Card Cosigner vs. Authorized User

Getting a credit card with a cosigner is different from being added as an authorized user on a credit card under someone else’s account. A cardholder can choose to add an authorized user to either their new or existing credit card account.

Authorized users can get their own physical credit card with their name on it. They can use the card to pay for goods and services, in the same way a primary cardholder uses the card.

However, unlike a cosigned credit card, the authorized user doesn’t have any legal responsibility to repay the debt they’ve put on the card. In this arrangement, the primary cardholder still bears that responsibility. Still, any account activity — whether positive or negative — impacts the primary cardholder’s credit as well as that of the authorized user.

This option is often used to help someone build their credit or simply access borrowing power. For example, parents may add their child as an authorized user on a credit card.

Recommended: Tips for Using a Credit Card Responsibly

Credit Card Cosigning vs. Joint Accounts

Cosigners don’t have access to the line of credit. Through a joint account, however, both parties have equal borrowing power through the credit card, as well as equal financial responsibility for the debt incurred. In other words, both parties are responsible for paying outstanding balances on the credit card — even if the purchase was made by only one person.

Joint accounts are commonly used by individuals who share other financial responsibilities together, such as spouses, family members, or business partners. Since the account is shared and both parties are liable for the account, both of their credit scores and credit reports are impacted by the card’s activity.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score

Alternatives to Cosigning a Credit Card

Outside of the above options, there are a couple of alternatives to applying for a credit card with cosigner support.

•   Secured credit cards: Secured credit cards are a useful credit-building tool for primary cardholders who would otherwise not qualify for an unsecured card. Credit card requirements for a secured credit differ a bit, as a deposit is needed that acts as collateral and usually becomes the card’s credit limit. The deposit is returned when the account is closed.

•   Guarantor loans: Unlike a cosigned credit card that holds the cosigner responsible for the debt from the start, a guarantor loan only puts legal responsibility on the cosigner if the lender has exhausted all other options through the primary borrower. This marks a major difference between a guarantor and cosigner. Plus, a fixed loan is a known quantity of debt, rather than a revolving line like a credit card is.

Recommended: What is the Average Credit Card Limit

The Takeaway

Becoming a credit card cosigner or asking someone to cosign a credit card is a huge responsibility that poses significant risk for the cosigner. Only consider this route if both parties — the primary cardholder and cosigner — understand the implications and can financially handle the debt that’s put on the card.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

What is the minimum credit score for a cosigner?

Cosigners typically need a minimum credit score of 670, which is considered “good” based on the FICO credit scoring model. Credit requirements, however, vary by card issuer. Before securing a cosigner for a credit card, ask the issuer about its cosigner criteria.

Can I cosign for a credit card with my child?

Some credit card issuers allow parents to cosign on a credit card for their child. However, not all issuers provide this option. If the desired card issuer doesn’t permit cosigners, another option is adding your child as an authorized user on your personal credit card.

Is it possible to get a credit card with a cosigner?

Technically, yes, it is possible to get a credit card with a cosigner. However, this option isn’t always offered by major credit card companies.

Whose credit score is impacted with a cosigned credit card?

If the primary cardholder is late on their payments or defaults on the credit card debt, the cosigner’s credit is adversely affected. Additionally, the cosigned card is considered another open account on the cosigner’s credit record so it can impact their ability to secure their own loans, if needed.

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Photo credit: iStock/PeopleImages

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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When debt accumulates on a high-interest card, interest starts to add up as well, making it harder to pay off the total debt — which, in turn, can become a credit card debt spiral. If you end up with mounting debt on a high-interest credit card, a balance transfer is one possible way to get out from under the interest payments.

A balance transfer credit card allows you to transfer your existing credit card debt to a card that temporarily offers a lower interest rate, or even no interest. This can provide an opportunity to start paying down your debt and get out of the red zone. But before you make a balance transfer, it’s important that you fully understand what a balance transfer credit card is and have carefully read the fine print.

How Balance Transfers Work


The basics of balance transfer credit cards are fairly straightforward: First, you must open a new lower-interest or no-interest credit card. Then, you’ll transfer your credit card balance from the high-interest card to the new card. Once the transfer goes through, you’ll start paying down the balance on your new card.

Generally, when selecting to do a balance transfer to a new credit card, consumers will apply for a card that offers a lower interest rate than they currently have, or a card with an introductory 0% annual percentage rate (APR). Generally, you need a solid credit history to qualify for a balance transfer credit card.

This introductory period on a balance transfer credit card can last anywhere from six to 21 months, with the exact length varying by lender. By opening a new card that temporarily charges no interest, and then transferring your high-interest credit card debt to that card, you can save money because your balance temporarily will not accrue interest charges as you pay it down.

But you need to hear one crucial warning: After the introductory interest-free or low-APR period ends, the interest rate generally jumps up. That means if you don’t pay your balance off during the introductory period, it will start to accrue interest charges again, and your balance will grow.

Recommended: How to Avoid Interest On a Credit Card

What to Look For in a Balance Transfer Card


There are a number of different balance transfer credit cards out there. They vary in terms of the length of no-interest introductory periods, credit limits, rewards, transfer fees, and APRs after the introductory period. You’ll want to shop around to see which card makes sense for you.

When researching balance transfer credit cards, try to find a card that offers a 0% introductory APR for balance transfers. Ideally, the promotional period will be on the longer side to give you more breathing room to pay off your debts before the standard APR kicks in — one of the key credit card rules to follow with a balance transfer card.

You’ll also want to keep in mind fees when comparing your options. Balance transfer fees can seriously eat into your savings, so see if you qualify for any cards with $0 balance transfer fees. If that’s not available, at least do the math to ensure your savings on interest will offset the fees you pay. Also watch out for annual fees.

Last but certainly not least, you’ll want to take the time to read the fine print and fully understand how a credit card works before moving forward. Sometimes, the 0% clause only applies when you’re purchasing something new, not when transferring balances. Plus, if you make a late payment, your promotional rate could get instantly revoked — perhaps raising your rate to a higher penalty APR.

Should I Do a Balance Transfer?

Sometimes, transferring your outstanding credit card balances to a no-interest or low-interest card makes good sense. For example, let’s say that you know you’re getting a bonus or tax refund soon, so you feel confident that you can pay off that debt within the introductory period on a balance transfer credit card.

Or, maybe you know that you need to use a credit card to cover a larger purchase or repair, but you’ve included those payments in your budget in a way that should ensure you can pay off that debt within the no-interest period on your balance transfer card. Again, depending upon the card terms and your personal goals, this move could prove to be logical and budget-savvy.

Having said that, plans don’t always work out as anticipated. Bonuses and refund checks can get delayed, and unexpected expenses can throw off your budget. If that happens, and you don’t pay off your outstanding balance on the balance transfer card within the introductory period, the credit card will shift to its regular interest rate, which could be even higher than the credit card you transferred from in the first place.

Plus, most balance transfer credit cards charge a balance transfer fee, typically around 3% — and sometimes as high as 5%. This can add up if you’re transferring a large amount of debt. Be sure to do the math on how much you’d be saving in interest payments compared to how much the balance transfer fee will cost.

Recommended: When Are Credit Card Payments Due

Balance Transfer Card vs Debt Consolidation Loan

Both a personal loan and a balance transfer credit card essentially help you pay off existing credit card debt by consolidating what you owe into one place — ideally at a better interest rate. The difference comes in how each works and how much you’ll ultimately end up paying (and saving).

A debt consolidation loan is an unsecured personal loan that allows you to consolidate a wider range of existing personal debt, including credit card debt and other types of debt. Basically, you use the personal loan to pay off your credit cards, and then you just have to pay back your personal loan in monthly installments.

Personal loans will have one monthly payment. Plus, they offer fixed interest rates and fixed terms (usually anywhere from one to seven years depending on the lender), which means they have a predetermined payoff date. Credit cards, on the other hand, typically come with variable rates, which can fluctuate based on a variety of factors.

Just like balance transfer fees with a credit card, you’ll want to look out for fees with personal loans, too. Personal loans can come with origination fees and prepayment penalties, so it’s a good idea to do your research.

How to Make a Balance Transfer

If, after weighing the pros and cons and considering your other options, you decide a balance transfer credit card is the right approach for you, here’s how you can go about initiating a balance transfer. Keep in mind that you’ll need to have applied for and gotten approved for the card before taking this step.

Balance-Transfer Checks


In some cases, your new card issuer will provide you with balance-transfer checks in order to request a transfer. You’ll need to make the check out to the credit card company you’d like to pay (i.e., your old card). Information that you’ll need to provide includes your account information and the amount of the debt, which you can determine by checking your credit card balance.

Online or Phone Transfers

Another way to initiate a balance transfer is to contact the new credit card company to which you’re transferring the balance either online or over the phone. You’ll need to provide your account information and specify the amount you’d like to transfer to the card. The credit card company will then handle transferring the funds to pay off the old account.

The Takeaway

Whether you should consider a balance transfer credit card largely depends on whether the math checks out. If you can secure a better interest rate, feel confident you can pay off the balance before the promotional period ends, and have checked that the balance transfer fees won’t cancel out your savings, then it may be worth it to make a balance transfer.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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