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Overdrawn credit card? Consider a balance transfer

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Save on interest charges and pay off your original debt sooner.

Expenses can pile up sometimes, and reaching your credit limit can become a common occurrence if you don’t carefully watch your account balance. It’s not a good situation to be in and can lead to debt and negative marks on your credit report.

If you’ve overdrawn on your credit card and are struggling to repay your debt, a balance transfer with an introductory 0% interest rate could help you pay off your debt faster. Read this guide to find out what happens when you overdraw on your credit card and how a balance transfer could help you get your finances under control.

What happens when I overdraw on my credit card?

Going over your credit limit can have unpleasant consequences. This can vary between cards and providers, but some of the common outcomes include:

  • Overlimit fees.
    Typically, your card provider may charge you an overlimit fee when you go beyond your credit card limit. This is often a flat fee for the statement period, although some lenders may impose the same fee for each transaction exceeding your limit. Following the 2009 credit card reforms, banks must disclose this fee in your contract and you have the right to opt out of the option to exceed your credit limit whenever you like. Opting out, however, will result in your transactions being declined.
  • Declined transactions.
    If you choose to not have the option to exceed your credit limit, your card will be declined once its credit limit is exceeded. Any direct debits or automatic payments that come through during this time will also be declined, which may result in late payment fees by your service provider or cancellation of services, like if your electric bill’s payment is denied.
  • Interest charges.
    There is no direct interest penalty for exceeding your credit limit, but some cards deem you ineligible for interest-free days on purchases if you don’t repay your balance in full for two consecutive periods. This means your interest fees can be retroactively charged for the period and can mount up very quickly in the next period if you don’t repay your full balance for the current statement cycle.
  • Ongoing debt.
    Inadvertently, regularly maxing out your credit card spells ongoing debt if you’re not able to repay the full amount each month. Carrying an outstanding balance on your credit card can lead to heavy interest payments and create even greater debt.

What is a balance transfer?

A balance transfer is when you take the balance of your debt on one or more credit cards and move the amount to another credit card. The purpose of doing this is to move your debt to a credit card that offers a 0% intro APR period on balance transfers. This means you can work on paying off your debt during the promotional period without having to worry about heavy interest. Conducting a balance transfer can help you pay off your debt faster and more cheaply.

When could a balance transfer help?

If you have overdrawn on your credit card account because of ongoing debt issues, it may be worthwhile to consider moving your balance to a balance transfer credit card with a low or 0% introductory interest rate. This will help you save on interest charges so that you can pay off your original debt sooner. If this sounds like a good idea, consider these possible balance transfer offers:

  • Short-term balance transfers.
    If you have a small debt which you can confidently repay in a short time, a short-term balance transfer should suffice. Short-term balance transfer offers typically come with a 0% intro APR on balance transfers for six months.
  • Long-term balance transfers.
    If your debt is going to take longer to chip away, consider balance transfers for a longer term. You can find long-term balance transfer offers with a 0% intro APR for 12, 15, 18 and even 21 months from many providers.
  • Balance transfer and purchase rate offers.
    If you plan to keep using the card for new purchases while paying off the balance transfer, consider getting a credit card with both a promotional balance transfer and purchase rate offer to help you effectively save on all interest. However, if you’re concentrating on paying down your debt, a card with a low purchase rate might not be a wise option.

How much could a balance transfer save?

Your current credit cards:

Amount Owing

APR

Card 1

Card 2

Card 3

Card 4

Card 5

Card that you are transferring to:

Intro APR

Intro Term (months)

Ongoing APR

Balance Transfer Fee

Annual Fee

Your monthly repayment
$500

 
 
Critical
At this rate, you will not pay off your debt.
 
Recommended
At this rate you will pay off your debt during the card's intro period

At that rate you will not pay off your debt. You will need to make higher repayments.

Months that it will take you to pay off your debt:

With a balance transfer
12 months

Without a balance transfer
15 months

Money saved transferring debt to a balance transfer card:

Savings = $1,000

By moving forward with a balance transfer credit card and transferring the maximum amount, you could be saving $1,000 on fees and interest charges.
You will save an infinite amount of money as you will not pay off your debt on your current cards at that rate.
In this case, a balance transfer card is not the best option. You might want to consider a personal loan to help consolidate your debt. You can find out more here.
Disclaimer: Whilst every effort has been made to ensure the accuracy of this calculator, the results should be used as indication only. Certain assumptions have been made around the repayments made. This calculator is neither a quote nor a pre-qualification for a credit card

Choosing the right balance transfer credit card

If you’ve decided that a balance transfer can help with your maxed-out credit card and get you on the path to becoming debt-free, your next step is choosing the right credit card. Here are some things to consider when comparing the different balance transfer credit card offers out there:

  • Standard interest rate.
    This is the APR that your new credit card will revert to once the 0% introductory period for balance transfers is over. Make sure you understand and can live with this rate in the event that you’re unable to clear your balance in full before the introductory period ends.
  • Your new credit limit.
    You don’t want to face the same problem of maxing out your new credit card. It would be preferable if your new credit limit is higher than the current one so that it can accommodate your full balance transfer request. Some balance transfer credit cards only allow you to transfer amounts up to a fixed percentage of your new card limit, such as up to 70% or 90%, so it’s important that you ensure that the new credit limit is larger than your existing debt.
  • Annual fee.
    Make sure your new card’s annual fee doesn’t outweigh its benefits. After all, you want to be saving more on interest than you’re paying in fees.
  • Penalty APR.
    Some cards come with a penalty APR that is applied after your first late or returned payment, which means you’ll lose out on that 0% intro APR — the whole reason you applied for the card in the first place.
  • Balance transfer fees.
    Many issuers charge between 3% and 5% of each balance transfer amount. A balance transfer may not be worthwhile if you have to pay a high annual fee and balance transfer fee for it, in which case you might be better off sticking to your current card and paying it off.
  • Eligibility requirements.
    Some credit providers will require that your credit score be very good or excellent before approving your balance transfer application. Look to see what the issuer of the credit card you’re interested in requires before applying.

Will I be able to conduct a balance transfer if my credit card’s in default?

Probably not. Some credit providers consider a card to be in default once you’ve exceeded your credit limit and may restrict its facilities until you have paid the amount to return it to within its limit.

On the other side of things, this will also likely cause your balance transfer credit card application to be denied because the account you’re trying to transfer a balance from is “not in good standing.” While some card providers do not explicitly state this, it is advisable that you pay your account down to within its credit limit before applying for a balance transfer credit card.

Pros and cons of a balance transfer credit card

Pros

  • Higher credit limit.
    If you open a new card, you’ll likely have a higher credit limit, which means you’re less likely to go over it again.
  • 0% intro APR.
    The interest-free promotional period might motivate you to pay down your debt faster.
  • Can simplify your debt.
    If you have multiple maxed-out credit cards, moving all of your debt to one card with one monthly payment can make managing your debt easier.

Cons

  • It’s easier to rack up more debt.
    Now that your balance is paid off on your old credit card, you have more credit available to you.
  • Your interest rate could be higher.
    If you don’t pay off your debt before the 0% intro APR period is over, you could be stuck with an interest rate that’s higher than the one you originally had.
  • It can get expensive.
    If your credit score limits your balance transfer credit card options, you could wind up with a not-so-great card that comes with a high annual fee, balance transfer fee and penalty APR.

Alternative ways to deal with overdrawn accounts

There are other options available apart from a balance transfer, including:

  • Making additional repayments.
    This can be an effective way of staying within your credit limit. By making repayments twice a month instead of monthly, or more often if necessary, you can successfully avoid maxing out your card.
  • Requesting a credit limit increase.
    You may be eligible for a credit limit raise if your credit score is good and you’ve had a healthy history of making regular repayments with this card provider. You can usually request an increase in your credit limit online or by contacting your provider over the phone.
  • Contacting your provider.
    It’s often a good move to call your credit card provider for a chat. If you explain your circumstances, they’re usually more than willing to discuss your options and offer possible solutions in order to retain your business.

Compare balance transfer credit cards

Name Product Annual Fee Credit Score Min. Intro Balance Transfer APR Reward Value per Dollar Secured or Unsecured Introductory Balance Transfer APR APR (Annual Percentage Rate) for Purchases Annual Fee Minimum Credit Score
680
0%
1
Unsecured
0% for the first 15 months (then 14.99% to 25.99% variable)
14.99% to 25.99% variable
$0
Fair (660-699)
Earn a $150 bonus statement credit after you spend $1,000 on purchases in the first 3 months. Rates & Fees
680
0%
1.5
Unsecured
0% for the first 15 months (then 14.99% to 25.99% variable)
14.99% to 25.99% variable
$0
Fair (660-699)
Earn up to $250 back. Earn $150 back after you spend $1,000 or more in purchases with your new Card within the first 3 months of Card Membership. Plus, earn an additional $100 back after you spend an additional $6,500 in purchases within your first 12 months. You will receive the cash back in the form of a statement credit. Rates & Fees
720
0%
Unsecured
0% for the first 15 months (then to variable)
13.99% variable
$0
Good (700-739)
A low, variable APR on purchases, balance transfers and cash advances.
95
680
0%
1
Unsecured
0% for the first 12 months (then 14.99% to 25.99% variable)
14.99% to 25.99% variable
$95
Fair (660-699)
Earn $200 bonus cash back after you spend $1,000 on purchases in the first 3 months. Rates & Fees
680
0%
1.5
Unsecured
0% for the first 15 months (then 14.74%, 18.74% or 24.74% variable)
14.74%, 18.74% or 24.74% variable
$0
Fair (660-699)
Earn unlimited 1.5% cash rewards on purchases. See Rates and Fees.
680
0%
Unsecured
0% for the first 18 months (then 12.74%, 16.74% or 20.74% variable)
12.74%, 16.74% or 20.74% variable
$0
Fair (660-699)
An 18-month 0% Intro APR period on both purchases and balance transfers, plus zero foreign transaction fees, makes this is a strong well-rounded card. See Rates and Fees
195
0%
1
Unsecured
0% for the first 15 billing cycles (then to variable)
16.99% variable
$195
Enjoy unique excursions, privileged access to exclusive events and insider opportunities.
495
715
0%
1
Unsecured
0% for the first 15 billing cycles (then to variable)
16.99% variable
$495
Good (700-739)
Mastercard Black Card members receive an annual $100 air travel credit toward flight-related purchases including airline tickets, baggage fees, upgrades and more.
680
0%
1
Unsecured
0% for the first 15 months (then 14.99% to 25.99% variable)
14.99% to 25.99% variable
$0
Fair (660-699)
Earn 10,000 Membership Rewards® Points after you use your new Card to make $1,000 in purchases in your first 3 months.
680
0%
Unsecured
0% for the first 15 months (then 16.74% to 25.49% variable)
16.74% to 25.49% variable
$0
Fair (660-699)
Jumpstart your financial fitness! 60 day introductory balance transfer offer, save on interest, and get your free monthly credit score.
680
0%
Unsecured
0% for the first 15 statement closing dates (then 14.99% to 24.99% variable)
14.99% to 24.99% variable
$0
Fair (660-699)
Transfer high rate balances and save on interest with an Introductory $0 balance transfer fee for the first 60 days your account is open. After that, the fee for future balance transfers is 3% (min. $10).
690
0%
1.5
Unsecured
0% for the first 15 months (then 16.74% to 25.49% variable)
16.74% to 25.49% variable
$0
Fair (660-699)
Earn unlimited 1.5% cash back on every purchase - it's automatic. No minimum to redeem for cash back.
720
0%
1
Unsecured
0% for the first 12 statement closing dates (then 15.24% to 25.24% variable)
15.24% to 25.24% variable
$0
Good (700-739)
Earn more cash back for the things you buy most.
NASA Federal Platinum Advantage Rewards Credit Card
NASA Federal Platinum Advantage Rewards Credit Card
680
17.99%
1
Unsecured
17.99% for the first 90 days (then 11.65% to 17.99% variable)
11.65% to 17.99% variable
$0
Fair (660-699)
Enjoy perks and save money while gaining points that never expire with every purchase.
620
Secured
13.25% variable
$0
Poor (Below 660)
A great way to establish or improve your credit history.
300
10.99%
1
Secured
10.99% for the first 6 months (then to variable)
24.99% variable
$0
Poor (Below 660)
2% Cashback at restaurants or gas stations on up to $1,000 in combined purchases each quarter. Plus 1% cash back on all other credit card purchases.
24
300
Secured
25.74% variable
$24
Poor (Below 660)
Build, or rebuild, your credit with each purchase.
35
350
Secured
11.65% to 21.65% variable
$35
Poor (Below 660)
Get a card that can help you build credit. Determine your own credit limit. When you apply, you'll open a two-year certificate of deposit (CD) with $250 to $5,000. The balance of your CD is your credit limit.
35
350
Secured
11.65% to 21.65% variable
$35
Poor (Below 660)
You can get travel benefits (no foreign transaction fees), retail benefits and collision damage waiver coverage on your rental car.
650
Unsecured
26.99% variable
$0
Poor (Below 660)
Enjoy no annual fee, plus access to valuable benefits.

Compare up to 4 providers

Complete guide and comparison for balance transfer credit cards

Bottom line

Overdrawing on an account is never fun, but there are several ways to prevent this. If you’re struggling with debt, a balance transfer may help provide the breathing room you need. Scoring a card with a 0% intro APR that has a high enough credit limit for you to transfer all of your credit card debt over to could be just what you need to get your finances under control. However, a long-term solution may involve seeking help for debt management.

Frequently asked questions

Jennifer Gimbel

Jennifer Gimbel is an editor at finder.com and works with their team on producing the most informative and transparent comparisons on the Internet today. In her spare time, she loves to sketch, knit and take an obnoxious number of pictures of her puppy, Olive.

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