How credit cards can save you money on car loans – and other debt

Credit-card balance transfers can get you no- or low-interest money. Just be sure to save enough to pay back the credit-card balance transfer.

Shannon Stapleton/Reuters/File
Car dealerships are seen along Northern Blvd in New York in 2010. By taking advantage of credit-card balance transfers, you may be able to lower the interest rate on your auto loan.

With the average consumer thousands of dollars in debt, it's easy to assume that very little short of a turbo-charged economic recovery will significantly improve someone's financial situation. But help could be available from an unlikely source:  a credit card.

Eight of the largest credit card issuers allow you to transfer your auto loan balance to a credit card in order to score a lower interest rate. Seven of them enable transfers from mortgages, student loans, small business loans, home equity lines of credit, and more, according to a recent study. We’re not just talking about a marginally lower rate.

 A number of cards offer interest-free introductory periods that last a year or more. If used strategically, these zero-percent balance transfer promotions?? could save you as much as $1,000 while expediting debt freedom. (Compare balance transfer credit cards at Card Hub.)

The first step is to identify your costliest debt.

Odds are your credit card will have the highest interest rate, in which case the best offer for you is clear:  the Slate Card from Chase. The Slate Card comes with what’s known as a free balance-transfer offer. It gives you a zero percent introductory interest rate for 15 months without charging either an annual fee or a balance transfer fee. You can use a credit card calculator to gauge the Slate Card’s potential savings for you. For the average household with a roughly $6,700 balance, it could eliminate up to $1,250 in unnecessary fees and finance charges.

Unfortunately, Chase only accepts transfers of credit card debt. You’ll need a different card if, for example, an auto loan is your most expensive debt. Click on the chart above to see what types of balance transfers each major issuer will facilitate.

If it's an auto loan that's weighing you down, Card Hub identified PenFed’s Platinum Rewards Card and Discover’s it Card as offering the highest potential savings.

While you might be hesitant to transfer noncard debt to a credit card, there are important benefits to doing so. Besides snagging a lower interest rate and paying off what you owe months faster, you’re also effectively converting secured debt into unsecured debt. In other words, while your car secures your auto loan and can be repossessed as the result of a lack of payment, a bump in the road with a credit card won’t cost you your vehicle. You’ll also get the title to your car upon transferring your balance.

Still, exercise caution when contemplating a such a transfer – or any type of balance transfer, for that matter. It’s extremely important that you first create a debt payoff plan in order to determine that you will indeed save money with all costs considered. That includes the balance transfer fee and whatever interest you’d accrue if a portion of your balance remains when regular rates take effect. 

You can’t count on zero-percent balance transfer cards always being around either. Many people learned that lesson the hard way during the recession, and you certainly don’t want to repeat their costly mistakes. Otherwise, your savings opportunity will quickly become an expensive endeavor. 

Finally, you might have guessed that not everyone qualifies for one of these lucrative balance transfer credit card offers. They're available only to the roughly 50 percent of consumers who have excellent credit. But don’t feel left out if you don’t meet that standard. While trends show that zero-percent offers have peaked, they don’t indicate any sort of reversal. You therefore have time to focus on improving your credit standing in order to save with a balance transfer down the road.


– Odysseas Papadimitriou is chief executive of financial services start-ups and

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