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When you buy with credit, it’s easy to forget that you’re paying for that item with money that doesn’t belong to you. It’s like taking out a short-term loan to make a purchase. If you’re putting charges on your credit card throughout the month, the value of that loan — your “current balance” — fluctuates.

You may notice there are other numbers on your credit card statement, such as your statement balance. Wait a minute, you may ask, What’s the difference? Here we’ll discuss the meaning of statement balance and current balance, along with a few tips for paying down your credit cards.

Statement Balance vs Current Balance

Each credit card issuer may have a slightly different method of presenting and even calculating the numbers on your monthly statement and online portal. Still, you will likely see one number called the statement balance and another called the current balance.

The statement balance means all transactions during a designated period, called a billing cycle. If a billing cycle covers one month and starts on the 15th of each month, this statement balance will include all of the activity on an account between, say, January 15 and February 15, in addition to any previously unpaid balances. Until the close of the next billing cycle, the statement balance will remain unchanged.

Your current balance means the running total of all transactions on your account. It changes every time you swipe your card to pick up Chinese takeout or return a T-shirt that didn’t fit right.

To understand the interplay between the statement balance vs. the current balance, consider this. On February 15, the statement balance is $1,000, meaning that the total charges between January 15 and February 15 add up to $1,000. Two days later, you make a $50 charge to the card. Your current balance will reflect $1,050 while the statement balance remains the same.

In this case, the current balance is higher than the statement balance. The reverse can also be true, and the current balance can potentially reflect a smaller number than the statement balance.

Recommended: Personal Loan vs. Credit Cards

What to Know About Paying Off Your Credit Card

As each billing cycle closes, you will be provided with a statement balance. You will also likely be provided with a due date. At the time you make a payment, you may decide to pay off the statement balance, the current balance, the minimum payment, or some other amount of your choosing.

Recommended: Credit Card Closing Date vs Due Date

Paying the Statement Balance

If you regularly pay your statement balance in full, by its due date, you likely won’t be subject to any interest charges. Most credit card companies charge interest only on any amount of the statement balance that is not paid off in full.

The period between your statement date and the due date is called the grace period. During this period, you may not accumulate interest on any balances. It’s worth mentioning that not every credit card has a grace period. It’s also possible to lose a grace period by missing payments or making them late. If you have any questions about whether your card has a grace period, contact your credit card company.

Paying the Current Balance

If you’re using your credit card regularly, it is possible that you will use your card during the grace period. This will increase your current balance. At the time you make your payment, you will likely have the option to pay the full current balance.

If you have a grace period, paying the current balance is not necessary in order to avoid interest payments. But paying your current balance in full by the due date can have other benefits. For example, this move could improve your credit utilization ratio, which is factored into credit scores.

Paying the Minimum Monthly Payment

Next, you can pay just the minimum monthly payment. Generally, this is the lowest possible amount that you can pay each month while remaining in good standing with your credit card company — it is also the most expensive. Typically, the minimum payment will be an amount that covers the interest accrued during the billing cycle and some of the principal balance.

Making only the minimum payments is a slow and expensive way to pay down credit card debt. To understand how much you’re paying in interest, you can use a credit card interest calculator. Although minimum monthly payments are not a fast way to get rid of credit card debt, making them is important. Otherwise, you risk being dinged with late fees.

Missing or making a payment late can also have a negative impact on your credit score.
So, if the minimum payment is all you can swing right now, it’s okay. Just avoid additional charges on your card.

Making a Payment of Your Choice

Your last option is to make payments that are larger than the minimum monthly payment but are not equal to the statement balance or the current balance. That’s okay, too. You’ll potentially be charged interest on remaining balances, but you’re likely getting closer to paying them off. Keep working on getting those balances lowered. A good goal is to pay off your balance in full each month.

Your Credit Utilization Ratio

The balance you currently carry on your credit card can impact your credit utilization ratio. Credit utilization measures how much of your available credit you’re using at any given time. Credit utilization is one of a handful of measures that are used to determine your credit score — and it has a big impact. Credit utilization can make up 30% of your overall score, according to FICO® Score.

Not every credit card reports account balances to the consumer credit bureaus in the same way or on the same day. Also, the reported number is not necessarily the statement balance. It could be the current balance on your card, pulled at any time throughout the billing cycle. Again, it may be worth checking with your credit card issuer to find out more. If your issuer reports current balances instead of statement balances, asking them which day of the month they report on could be helpful.

Sometimes, the lower your credit card utilization is, the better your credit score. While you may feel in more control to know which day of the month that your credit balance is reported to the credit bureaus, it may be an even better move for your general financial health to practice maintaining low credit utilization all or most of the time.

If you are worried about your credit utilization rate being too high during any point throughout the month, you can make an additional payment. You don’t have to wait until your billing cycle due date to reduce the current balance on your card.

According to Experian, one of the credit reporting agencies, keeping your current balance below 30% of your total credit limit is ideal. For example, if you have two credit cards, each with a $5,000 limit, you have a total credit limit of $10,000. To keep your utilization below 30%, you’ll want to maintain a balance of less than $3,000.

Recommended: When Credit Card Companies Report to Credit Bureaus

3 Tips for Managing Your Credit Card Balance

If you’re struggling to juggle multiple credit cards and make all of your payments, here are some tips that may help.

1. Organizing Your Debt

A great first step to getting a handle on your debt is to organize it. Try listing each source of debt, along with the monthly payments, interest rates, and due dates. It may be helpful to keep this list readily available and updated. Another option is to use software that aggregates all of your finances, such as your credit card balances and payments, bank balances, and other monthly bills. Check out SoFi Relay if you haven’t already.

Whether you use existing software or your own calendar system, keep in mind that staying on top of your due dates and making all of your minimum payments on time is one of the best ways to stay on track.

You can also ask your credit card providers to change your due dates so that they’re all due on the same day. Pick something easy to remember, such as the first of the month.

2. Making All Minimum Payments, But Picking One Card to Focus On

While you’re making at least the minimum payments on all your cards, pick one to focus on first. There are two versions of this debt repayment plan: the Debt Avalanche and the Debt Snowball.

With the Avalanche method, you attack the card with the highest interest rate first. With the Snowball method, you go after the card with the lowest balance. The former strategy makes the most sense from a mathematical standpoint, but the latter may give you a better psychological boost.

If and when you can, apply extra payments to the card’s balance that you’re hoping to eliminate. Once you’ve paid off one card, you can move to the next. Ultimately, you’re trying to get to a place where you’re paying off your balance in full each month.

3. Cutting up Your Cards

Whether you do this literally or not, a moratorium on your credit card spending can be a great strategy. If you are consistently running a balance that you cannot pay off in full, you may want to consider ways to avoid adding on more debt.

A word of warning: Don’t be tempted to cancel all your cards. This can negatively affect your credit score. However, if you feel you really have too many credit cards to manage — say, more than three or four — cancel the newest credit card first. This will ensure your credit history length is unaffected.

The Takeaway

Your credit card statement balance is the sum of all your charges and refunds during a billing cycle (usually a month), plus any previous remaining balance. It changes monthly with each statement. Your current balance is updated almost immediately every time you make a purchase. It is the sum of all charges to date during a billing cycle, any previous remaining balance, and any charges during the grace period. Whenever you can, pay off the full statement balance to avoid interest charges.

Trying to pay off credit card debt? Taking out a personal loan can consolidate all of your credit card balances. You’ll have only one monthly payment to make, a low interest rate, and no fee options. Plus, there is an easy online application and access to live customer support seven days a week.

See if a SoFi Personal Loan can help you get on top of your credit card debt.

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SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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 .

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.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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Credit card debt can go from zero to thousands with one quick swipe. Or it can build slowly like rising water — a nice dinner here, some retail therapy there. Before you know it, your balance is uncomfortably high. You’re not alone. Almost half of American households carry credit card debt. Of those consumers, the average balance is $5,315.

If you’ve vowed to pay off your credit card balance, you’re making a smart financial move. You’ll save money on interest, boost your credit history, and position yourself to achieve other financial goals. Here, we reveal the top tips and strategies for getting it done, from the Snowball strategy to hardship plans to the boring-but-effective debt-focused budget.

What Is a Realistic Payoff Schedule?

If you’ve been carrying a balance on one or more cards, it may take longer than you’d like to pay off the debt. Determine how long you need to become debt-free while still covering your monthly bills comfortably. A longer payoff term will allow you to continue to save and invest while paying down debt. But a shorter payoff term can save you a considerable amount in interest.

If there’s no scenario where you can cover your living expenses and pay off your credit card debt in five years, these strategies may not be enough. In that case, it may be time to consider applying for credit card debt forgiveness.

7 Credit Card Payoff Strategies and Tips

There are numerous ways to tackle debt and pay off credit cards. The approaches below will work best when you mix and match several to create your own custom debt-payoff plan.

1. Create a Debt-Focused Budget

Achieving financial goals always starts with a budget. This exercise is designed to help you discover extra cash you can put toward your credit card bill.

First, make a list of your monthly bills. Along with your rent payment, phone, gas, and other required living expenses, include your credit card payment. You can leave the amount blank for now. This is your “Needs” column.

Now look at your “Wants.” These are things that you can survive without — restaurants, new clothes, gym membership — but that often make life better. Which items can you do without temporarily so you can put their cost toward your credit card bill?

It’s OK if your budget isn’t the same from month to month — flexibility is good. While you’re at it, look ahead for unavoidable big purchases (that upcoming destination wedding) and leave room for unexpected expenses. Your credit card payment may be lower some months to accommodate these other costs. Just always pay at least the minimum payment.

Your new budget should prioritize your credit card payment on par with other bills, and above nonessential treats. One way to make budgeting easier on yourself is to download an app like SoFi Relay, which pulls all of your financial information into one place.

2. Zero Interest Credit Card

The frustrating thing about credit cards is how interest can take up more and more of your balance. Zero-interest credit cards, also known as 0% APR cards, allow card holders to make payments with no interest on transfers and purchases for a set period of time. The promotional period on a new credit card can last as long as 18 billing cycles, long enough to make a large dent in the card’s principal balance.

Consolidating your credit card debt on one zero-interest card serves to simplify your monthly bills while also saving you money on interest payments. The key here, of course, is to avoid racking up even more credit card debt.

One drawback to these cards is that you often need a FICO Score of 690 or above to qualify. And once the promo period expires, the interest rate can climb to 27% or higher. In an ideal world, you’ll want to achieve your payoff goal before the rate rises.

A credit card interest calculator can give you an idea of how much your current interest rate affects your total balance.

3. The Snowball, The Avalanche, and The Snowflake

The Snowball and Avalanche debt repayment strategies take slightly different approaches to paying down debt. Both involve maintaining the minimum payment on all but one card.

The Debt Snowball method focuses on the debt with the lowest balance first, regardless of interest rate, putting extra toward that payment each month until it’s paid off.

Then, that entire monthly payment is added to the next payment — on top of the minimum you were already paying. Rinse and repeat with the next card. It’s easy to see how this method can quickly get the snowball rolling.

The Debt Avalanche is based on the same philosophy but targets the highest-interest payment first. Getting out from under the highest debt can save a lot of money in the long run. Just like the Snowball method, applying that entire payment to the next-highest-interest debt can lead to quick results.

The third snow-related strategy, the Debt Snowflake, emphasizes putting every extra scrap of cash toward debt repayment. If you have extra money to throw at your debt, even $20, that can still make a difference in your overall amount owed.

4. Make More Money

Sure, increasing your income is easier said than done. But if you have the time to spare, it can make paying down debt a whole lot easier. Here are the top ways that people can bring in more cash:

•   Start a side hustle (or monetize and existing hobby)

•   Get a part-time job (on top of your current job). Two shifts a week can help you bring in another $500 to $1,000 per month.

•   Sell your stuff. It’s easier than ever to resell clothes, books, old electronics, and jewelry.

•   Negotiate a raise. Labor shortages have given workers extra leverage to ask for more.

5. Negotiate with Your Credit Card Company

If your large credit card balance is the result of unemployment, medical bills (yours or a loved one’s), or another financial setback, inform your credit card company. You may be able to negotiate a lower interest rate, lower fees and penalties, or a fixed payment schedule.

Hardship plans have no direct effect on your credit rating. However the credit card company may send a note to the credit bureaus informing them that you’re participating in the program. They may also close or suspend your credit card while you’re paying off the balance, which can ding your credit score.

6. Change Your Spending Habits

Changing how you spend your money is key to paying down debt — and to avoid racking up more in the future. You can approach this in two ways: as a temporary measure while you pay off your cards, or a permanent downsizing of your lifestyle.

The advantage of the temporary approach is that people are generally more willing to give things up when it’s for a limited time. For instance, can you suspend your gym membership during the warmer months when you can work out outdoors? Perhaps you can challenge yourself to cook at home for 30 days to save on restaurants. Imagine going without paid streaming services for six months.

String enough of those small sacrifices together to cover a year or two, and see how quickly your credit card payments grow. And your payoff term shrinks!

Downsizing your lifestyle has its own appeal, even for people who aren’t paying down debt. Living below your means is key to accumulating wealth. How exactly you accomplish that isn’t important. For instance, you can frequent cheaper restaurants, reduce the number of times you go out each month, or merely avoid ordering alcohol and dessert. The bottom line is to save money, avoid debt, and enjoy the financial freedom that results.

7. Personal Loan

Similar to a zero-interest credit card, a personal loan is a form of debt consolidation. Personal loans tend to have lower interest rates than credit cards, saving you money. And if you’re carrying a balance on multiple credit cards, a personal loan allows you to simplify your debt with one fixed monthly payment.

Personal loans are a great option for people with good to excellent credit. That’s because your interest rate is determined largely by your credit score and history. You can typically borrow between $1,000 and $100,000, and use the money for just about anything.

The Takeaway

Credit card debt can sneak up on you. If you’re carrying a balance on one or more cards, there are numerous ways to approach paying down your debt. Start with a new budget that prioritizes your credit card payment along with your other monthly bills, and trim your spending accordingly. Then combine a broad payoff strategy (the Snowball, the Avalanche) with other tips and tactics (zero-interest credit cards) to minimize your interest payments and shorten your payoff term. And remember: You’re not alone, and you can do this!

If you’re thinking about consolidating credit card or other debt, a SoFi Personal Loan is a strong option to consider. SoFi’s Personal Loan was named NerdWallet’s 2022 winner for Best Personal Loan for Good and Excellent Credit, and Best Online Personal Loan overall.

Compared with high-interest credit cards, a SoFi Personal Loan is simply better debt.

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SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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 .

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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One of the best things to do for your anxiety and your credit score is to pay off credit card debt. People who commit to a payoff strategy (like Snowball or Avalanche) will make quick progress while building their credit history. People in financial crisis may benefit from negotiating with creditors to freeze their account or lower their interest rate, though their credit rating may suffer. Simplifying payments with a debt consolidation loan is also an increasingly popular tactic.

We’ve compiled several strategies that can help you consolidate credit card debt without hurting your credit score. Find the one that best suits your circumstances.

What Not to Do: Ignoring Credit Card Debt

When it comes to credit card debt, the consequences of avoidance and procrastination are steep. If you miss payments, your creditor will likely reach out and notify you of your delinquency.

Miss enough payments and your account might be closed. Your credit card issuer will report your missed payments to credit reporting agencies, which can negatively impact your score. Remain delinquent long enough and your account might be sent to collections (either in-house or third-party). Needless to say, this is not good for your credit score and history.

What You Should Consider: Paying off Credit Card Debt Using a Planned Approach

We mentioned anxiety earlier. Well, trying to pay down a large credit card balance without a debt payoff strategy is a recipe for more anxiety. Sure, making a plan may require taking a close look at your bad habits, which is stressful. But trust us when we say, a good plan is the best way to set yourself up for smooth sailing. Two common approaches to getting out of credit card debt without ruining your credit rating are the Snowball and the Avalanche.

With the Snowball method, you work to pay off your debts from smallest balance to largest, regardless of the interest rate. As you pay off each card, you roll that monthly payment over to the next smallest balance. Meanwhile, it’s important to make minimum payments on your other cards. (Take a deep dive into the Snowball method here.)

The Avalanche method advises focusing on the debt with the highest interest rate. Let’s say you have two credit cards, one with an interest rate of 8% and the other of 15%. Start with the balance accruing 15% interest. When you pay off that card, turn your attention to the debt with the next highest interest rate. And of course, be mindful that you’re making credit card minimum payments on all your debts.

Both strategies serve to build a positive credit history as you get out of debt. Not only will they not ruin your credit, you may even end up with a higher FICO Score.

Negotiating and Settling Credit Card Debt

If you have been struggling to make payments on your credit cards, there is a good chance your credit score has dropped. Before the debt is sent to collections, you may be able to negotiate with the credit card company.

Like any business, the primary goal of a credit card company is to make a profit. When it becomes apparent that a cardholder is unable to pay their bills, companies are sometimes willing to find an arrangement that will enable the customer to make payments based on their situation. Three possible options are a debt settlement, a hardship repayment plan, and temporary forbearance.

In a debt settlement, the credit card company agrees to reduce the balance owed in exchange for a lump sum payment. If your balance is $15,000, the company may agree to a payment of $8,000 and “forgive” the rest. There are two disadvantages with this scenario: The card holder has to come up with $8,000, and their credit score can be negatively affected.

With hardship repayment, the company freezes the current debt and works with you to create a repayment plan based on your current income and circumstances. The company may lower your interest rate and waive fees during the repayment period. You may qualify for a hardship program if your debt is the result of unemployment, serious illness, family emergency, or a natural disaster. In hardship cases, your credit rating is usually not affected, though your participation in the program may be reported to the credit bureaus.

Finally, in a temporary forbearance, the credit card company freezes any combination of the current debt and interest rate, and eliminates late fees and penalties for an agreed upon period of time. This is usually reserved for card holders who are currently in financial crisis. One drawback is that your debt isn’t resolved but merely put on hold while you sort out your finances.

You should know that most forgiven debt is considered income by the IRS. So if you had $15,000 in debt but settled for $8,000, the IRS may consider that extra $7,000 to be taxable income.

Recommended: What Is Credit Card Debt Forgiveness?

What Is the Statute of Limitations on Credit Card Debt?

The statute of limitations governs how long a creditor can sue you for nonpayment of a debt. The statute of limitations on credit card debt varies from state to state, but is typically between three and 10 years.

You can find out yours by requesting a debt verification or validation letter from your creditor. The statute of limitations clock starts from the last moment the debt was active. When you contact your creditor, don’t agree to any payment plan until you confirm the statute of limitations on your debt. Otherwise, you may inadvertently restart the clock.

Even if your debt is past the statute of limitations, it may still be within the credit reporting time limit. This is the amount of time delinquent account information can appear on your credit report. In most cases, the credit reporting time limit for negative information is seven years.

If your debt is sold to a third-party collections agency, try to negotiate a payoff amount to close the collections attempt. Debt collectors buy debt from the company you owed for a fraction of the original unpaid balance. Because of this, collectors might take less than what you owe if you have strong negotiation skills.

Say Goodbye to Credit Card Debt with a Personal Loan

Personal loans are a type of unsecured loan. There are a number of uses of personal loans, but paying off credit card debt is one of the most common. Loan amounts vary by lender from $1,000 to $100,000, and are paid out as soon as the loan is approved. The borrower then pays back the loan — with interest — in monthly installments.

Many unsecured personal loans come with a fixed interest rate. An applicant’s interest rate is determined by several factors, including credit score, income, and debt-to-income ratio, among other factors. Typically, the higher an applicant’s credit score, the better their interest rate will be, as the lender may view them as a less risky borrower.

When using a personal loan for credit card debt, the loan proceeds are used to pay off the cards’ outstanding balances, consolidating the debts into one loan. This is why it’s also sometimes referred to as a debt consolidation loan. Ideally, the new loan will have a much lower interest rate than the credit cards. By consolidating credit card debt into a personal loan, a borrower’s monthly payments can be more manageable and cost considerably less in interest.

In the long run, the borrower’s credit history and rating is strengthened by paying off the personal loan.

The Takeaway

To pay down a large credit card balance, it’s essential to have a strategy. Two of the most popular are the Snowball and the Avalanche. The Snowball entails working to pay off the lowest balance card first, while making minimum payments on the others. The Avalanche advises paying off the highest-interest card first, while making minimum payments on the others. Neither method will hurt your credit rating, and may help it. It’s also fairly common to take out a debt consolidation loan to pay off cards.

If you are considering consolidating your credit card with a personal loan, check out SoFi. SoFi Personal Loans offer low fixed rates and no fees required. And if you lose your job, SoFi will temporarily pause your payments and even provide career coaching. SoFi’s Personal Loan was even named NerdWallet’s 2022 winner for Best Online Personal Loan.

If you’re ready to get your credit card debt under control, see how a SoFi personal loan can help.

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SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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 .

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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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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Closing a credit card with a balance remaining is possible to do. However, keep in mind that even if your credit card account is closed, you’ll still have to pay off the remaining balance. Additionally, you’ll need to cover interest that’s accrued as well as any fees, and you could face other consequences, including losing out on rewards and seeing potential impacts to your credit score.

Still, there are instances when closing a credit card can be the right move. If you’re thinking about closing a credit card account with an outstanding balance, you’ll want to weigh these considerations — and also ensure you have a plan for paying off your remaining balance.

Recommended: How to Avoid Interest On a Credit Card

What Happens If You Close a Credit Card Account With a Balance?

Once you’ve closed a credit card account with a balance, you’ll no longer be able to use that card to make purchases. Beyond that, here’s what else you can expect after your account closure.

Payment of Balance and Interest

Perhaps the most important thing to keep in mind when a credit card is closed with balance is that you’re still liable for the credit card balance you’ve racked up. You’ll also owe any interest charges that have accrued on your outstanding balance.

As such, expect to continue receiving monthly statements from your credit card issuer detailing your balance, accrued interest, and minimum payment due. And until you’re absolutely positive your debt is paid off, keep on checking your credit card balance regularly.

Recommended: What is a Charge Card

Loss of Promotional APR

If the card you closed offered a promotional interest rate, this offer will likely come to an end. If you’ve been carrying a balance on a credit card, your balance could start to accrue interest. Plus, you may have to pay the standard APR on the remaining balance rather than the lower promotional rate.

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Loss of Rewards

Before you move forward with canceling a credit card that offers rewards like points or airline miles, make sure you’ve redeemed any rewards you’ve earned. That’s because you may forfeit those rewards if you close your account.

Policies on this can vary from issuer to issuer though, so just make sure to check with your credit card company to be safe rather than sorry.

How Closing Credit Cards With Balances Can Impact Your Credit

There are a number of ways that closing credit card accounts with a balance can adversely affect your credit score given how credit cards work. Closed accounts in good standing will remain on your credit report for 10 years, whereas those with derogatory marks may fall off after seven years.

For starters, closing your account could drive up your credit utilization ratio, one of the factors that goes into calculating your score. This ratio is determined by dividing your total credit balances by the total of all of your credit limits. Losing the available credit on your closed account can drive up this ratio.

Further, closing your account can impact your credit mix, as you’ll have one fewer line of credit in the mix. It also could decrease your length of credit history if the card you closed was an old one.

That being said, the impacts can vary depending on your credit profile and the credit scoring model that’s being used. If, after closing your account, you pay off your account balance in a timely manner and uphold good credit behavior across other accounts, your score can likely bounce back.

Recommended: What is the Average Credit Card Limit

Is Keeping the Credit Card Account Open a Better Option?

In some scenarios, it may make sense to keep your credit card active, even if you don’t plan on spending on the card. Here’s when opting against closing your credit card account might be the right move:

•   When you can switch credit cards: If your card carrier allows it, you might be able to switch to a different credit card it offers rather than closing out your account entirely. This might make sense if you’re worried about your card’s annual fee, for instance. You’ll still owe any outstanding debt on the old credit card, which will get moved over to the new card (the same goes if you happen to have a negative balance on a credit card).

•   When you have unused credit card rewards: With a rewards credit card, closing the account may jeopardize the use of earned rewards. Avoid that scenario by keeping the credit card active until you’ve used up all the rewards earned on your current credit card, or at least until you’ve transferred them to a new credit card, if that’s an option.

•   When you don’t use the credit card: Even if you don’t use your credit card, or use it sparingly, keeping the card open can help your credit score. This is because creditors and lenders usually look more favorably on credit card users who don’t rack up significant credit card debt, which is why maintaining a low credit utilization ratio is one of the key credit card rules to follow.

That being said, there are certainly some scenarios when it can make sense to say goodbye to your credit card account. Here’s when to cancel your credit card, or at least consider it:

•   You want to avoid the temptation to spend.

•   You want to stop paying your card’s annual fee.

•   The card’s interest rate is rising.

•   You’d like to have fewer credit card accounts to manage.

Guide to Paying Off a Credit Card Balance

No matter what you do with your credit card account, you’re going to have to pay down your credit card debt. That scenario grows more important with a closed card account, which can easily be forgotten — along with the debt you owe.

To avoid making that mistake, here are some options you can explore to pay off your closed credit account with a balance as soon as possible.

Recommended: Tips for Using a Credit Card Responsibly

Debt Consolidation Loans

A personal loan at a decent interest rate can make it easier to curb and eliminate your card debt. Once the funds from the loan hit your bank account, you can use the cash to pay off all your credit card debts. Then, you’ll only have to keep track of paying off that one loan with fixed monthly payments, making it easier to manage.

Keep in mind that you’ll generally need good credit to secure a personal loan with competitive terms though.

Recommended: When Are Credit Card Payments Due

Balance Transfer Credit Cards

A balance transfer card with a 0% introductory interest rate can buy you some time when paying down debt. You can transfer your existing debt to the new card, allowing you to pay down credit card debt at a lower interest rate, without racking up any additional interest payments during the promotional period.

Just make sure to pay off the entire balance before the card’s introductory interest rate period ends, and the interest rate rises significantly. Otherwise, you may be right back where you started — with high credit card debt and a high interest rate. Also note that a ​​ balance transfer fee will likely apply.

Debt Avalanche or Snowball

For credit card debt repayment, consider the debt avalanche or snowball approach.

With the avalanche debt repayment method, you prioritize paying off your credit card with the highest interest rate first. Meanwhile, you’ll maintain minimum payments on all of your other debts. Once your highest-rate debt is paid off, you’ll roll those funds over to tackle your balance with the next highest interest rate.

The snowball method, on the other hand, is all about building up momentum toward debt payoff. Here, you pay as much as possible each month toward your credit card with the lowest outstanding balance, while making minimum payments on all of your other outstanding debts. When the smallest debt is paid off completely, repeat the process with the next smallest balance.

Debt Management Plan

If you’re still having trouble paying down your credit card either before or after you close the account, that could be a red flag signaling that you need help. In this case, consider reaching out to an accredited debt management counselor who can set you on the right path to credit debt insolvency.

In addition to helping you create a debt management plan, a credit counselor can help by negotiating a better deal on interest rates and lower monthly payments. That could result in paying down your credit card debt more quickly, which not only saves you money, but also helps protect your credit score.

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

The Takeaway

If you decide to close your credit card account with a balance, it’s critical to do so in a way where your debt obligations are covered and your credit score is well-protected. The key to doing the job right is to work with your card company, keep a close eye on outstanding balances and payment deadlines, and work aggressively to pay your card debt down as quickly as possible.

Since closing a credit card can have consequences, it’s especially important to consider a credit card carefully before you apply.

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.¹

Take advantage of this offer by applying for a SoFi credit card today.

FAQ

Can you close a credit card with a balance?

Closing a credit card with a balance is possible. However, you’ll still be responsible for the outstanding balance on the card, as well as any interest charges and fees.

Does it hurt your credit to close a credit card with a balance?

Closing your credit card with a balance remaining has the potential to impact your credit score. However, the exact implications for your score can vary depending on your overall credit profile and which credit scoring model is being used.

Is it better to close a credit card or leave it open with a zero balance?

That depends on your personal situation. Closing a card for good may impact your credit score, but you also won’t be able to use the card again and risk racking up unwanted debt in the process.

What happens if you close a credit card with a negative balance?

If you close a credit card with a negative balance, that means the card issuer owes you money instead of vice versa. In this situation, the card issuer will typically refund you that money before closing out the account.

How do I close a credit card without hurting my credit score?

You can mitigate the impacts of closing your account by paying off the balance on that account and all other credit card accounts you have. If you have $0 balances, then closing your account and losing that available credit won’t affect your credit utilization rate.

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Photo credit: iStock/staticnak1983

¹Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

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 .

The SoFi Credit Card is issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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