Paying down balances: your options, including balance transfers

Whatever you choose, keep paying at least the minimum on every card. Then put any extra money toward one card at a time:

• Avalanche: extra money goes to the card with the highest interest rate first. You'll usually pay the least interest overall.
• Snowball: extra money goes to the smallest balance first. You get quick wins, which helps some people stay motivated.
• Utilization-first: extra money goes to the card closest to its limit, to bring down the highest per-card utilization.

Two tools some people use:

• Balance transfer card: moves your balance to a new card with a low or 0% promotional rate for a set time. There's usually a transfer fee, often around 3% to 5%. You need to be approved, which means a hard inquiry and a new account. When the promo ends, the regular rate applies to whatever's left.
• Debt consolidation loan: a personal loan that pays off your cards, leaving you one fixed monthly payment. It moves card debt into an installment loan. Look at the rate, fees and term carefully.

A nonprofit credit counseling agency can also help you set up a repayment plan.

• APR: the yearly interest rate on a card or loan.
• Promotional (intro) rate: a temporary low rate that ends on a set date.
• Balance transfer fee: a one-time fee, usually a percentage of the amount you move.
• Installment loan: a loan with fixed payments over a set time.

Nia owes $3,000 on a card at 24% APR and can pay $250 a month.

• Staying put: it takes her about 14 months, and she pays roughly $465 in interest.
• Balance transfer: she moves it to a card with 0% for 12 months and a 3% fee ($90). At $250 a month, it's paid off in 12 months, and she pays $90 instead of about $465.

The transfer only wins if she gets approved, pays it off before the promo ends, and doesn't run the old card back up. (Made-up example with simplified math.)

• Read the fine print: promo end date, transfer fee and the rate after the promo.
• New applications add hard inquiries and lower the average age of your accounts, at least for a while.
• Paying a card to zero and then closing it lowers your available credit.
• Be careful with "debt relief" companies that promise to wipe out debt for an upfront fee. Charging fees before settling any debt is illegal for most telemarketed debt relief services.

List every card with its balance, APR, minimum payment and limit. Decide how much extra you can realistically pay each month. Then pick one approach (avalanche, snowball or utilization-first) and write down which card gets the extra money first.

Educational information only. Not legal, financial, investment or tax advice. Results vary, and no one can guarantee credit outcomes.