Balance Transfer vs HELOC: Which Is Better for Debt Consolidation?

Two of the most popular debt consolidation tools. Both can save you thousands. But they work very differently—and the wrong choice can backfire.

Let's compare balance transfer cards and HELOCs head-to-head.

Quick Comparison

How Balance Transfers Work

You open a new credit card with a 0% intro APR offer. You transfer existing card balances to it. For 12-21 months, you pay 0% interest.

The catch: You pay a transfer fee (typically 3-5%), and when the promo ends, the rate jumps to 20%+.

Example:

• Debt: $15,000
• Transfer fee (3%): $450
• Promo period: 18 months
• Monthly payment to clear debt: $858
• Interest paid: $0

Compare to keeping debt on a 22% card:

• Same $858 payment: 21 months to payoff
• Interest paid: $2,900

Balance transfer savings: $2,450

How HELOCs Work

You open a line of credit secured by your home equity. You draw from it to pay off credit cards. You repay the HELOC at a much lower rate than the cards charged.

The benefits: Lower rate than cards (8-10% vs 20%+), larger amounts available, flexible repayment.

The risk: Your home is collateral.

Example:

• Debt: $15,000
• HELOC rate: 9%
• Monthly payment (5-year payoff): $311
• Interest paid: $3,660

Compare to keeping debt on a 22% card:

• Same $311 payment: 8+ years to payoff
• Interest paid: $14,700

HELOC savings: $11,040

When Balance Transfer Wins

✅ You can pay it off during the promo period

The 0% rate is unbeatable—but only if you actually clear the balance before it expires.

Do the math: $15,000 ÷ 18 months = $833/month required

Can you do that? If yes, balance transfer wins hands down.

✅ Your debt is relatively small

Balance transfer limits typically cap around $15,000-$25,000 for excellent credit. If your debt fits, great. If you have $50,000+ in cards, you probably can't transfer it all.

✅ You have excellent credit

The best 0% offers (18-21 months, low fees) require 720+ credit scores. Below that, offers shrink to 12-15 months with higher fees.

✅ You don't own a home

No equity = no HELOC option. Balance transfer is your best tool.

✅ You're uncomfortable using home equity

Some people philosophically oppose putting their home at risk for credit card debt. That's valid. Balance transfer keeps things separate.

When HELOC Wins

✅ You can't pay off during the promo period

This is the critical distinction.

If you have $30,000 in debt and can afford $700/month, the math changes:

Balance transfer:

• Promo period: 18 months
• Paid off in 18 months: Only $12,600
• Remaining $17,400+ at 22%: Back to high interest
• You barely made progress

HELOC:

• $700/month at 9%
• Paid off in: 48 months
• Total interest: $3,600

HELOC wins because it maintains a low rate throughout the entire payoff period.

✅ Your debt is large

$40,000, $60,000, $100,000 in cards? Balance transfer cards can't handle it. A HELOC can—as long as you have the equity.

✅ You need lower monthly payments

Balance transfer requires aggressive payoff to work. HELOC offers flexibility.

$30,000 comparison:

If $1,700/month isn't realistic, the balance transfer doesn't work for you.

✅ You want interest-only flexibility

During the HELOC draw period (typically 10 years), you can often make interest-only payments. On $30,000 at 9%, that's $225/month.

This gives breathing room during tight months. (Just don't make it a habit—you want to pay principal.)

✅ You might need to consolidate more later

HELOC is revolving. Pay it down, borrow again if needed. Found another card you want to consolidate? Draw from the same HELOC.

Balance transfer is one-shot. After the transfer, that's your balance. Adding more means opening another card.

The Numbers: Three Real Scenarios

Scenario 1: $10,000, Fast Payoff Possible

Situation: $10,000 credit card debt. Can afford $600/month.

Balance transfer:

• 18-month 0% offer, 3% fee
• Transfer fee: $300
• Monthly payment: $572 (clears in 18 months)
• Total interest: $0
• Total paid: $10,300

HELOC:

• 9% rate
• $600/month payment
• Paid off in: 18 months
• Total interest: $730
• Total paid: $10,730

Winner: Balance transfer saves $430

Scenario 2: $25,000, Moderate Payoff Speed

Situation: $25,000 credit card debt. Can afford $700/month.

Balance transfer:

• 18-month 0% offer, 3% fee
• Transfer fee: $750
• Paid off in 18 months: $12,600
• Remaining balance: $13,150 (at 22%)
• Time to payoff remaining: 23 more months
• Total interest: $3,800 (on remaining balance)
• Total paid: $29,550

HELOC:

• 9% rate, $700/month
• Paid off in: 41 months
• Total interest: $3,600
• Total paid: $28,600

Winner: HELOC saves $950

(And you didn't have to worry about a rate time bomb)

Scenario 3: $50,000, Longer Timeline

Situation: $50,000 credit card debt. Can afford $1,000/month.

Balance transfer:

• Most balance transfer limits: $15,000-$25,000
• Can only transfer part of debt
• Remaining debt stays at high interest
• Difficult to calculate—probably messy

HELOC:

• 9% rate, $1,000/month
• Paid off in: 62 months (5+ years)
• Total interest: $12,000
• Total paid: $62,000

Compare to keeping on cards at 22%:

• $1,000/month = 109 months to payoff
• Total interest: $59,000
• Total paid: $109,000

Winner: HELOC saves $47,000

Balance transfer can't even compete at this level.

The Hidden Risks

Balance Transfer Risks

1. The rate bomb Miss paying it off before promo ends? That 0% becomes 22-26%. Instantly.

2. New purchases aren't at 0% If you use the new card for anything else, those charges accrue interest immediately while your payments go to the transferred balance first.

3. Temptation Old cards now have zero balance. Easy to run them up again. Now you have two problems.

4. Credit impact Opening new card = hard inquiry. High utilization on new card until paid down. May hurt score temporarily.

HELOC Risks

1. Your home is on the line This is the big one. Default on a HELOC, and foreclosure is possible. Never use a HELOC if your income is unstable.

2. Variable rate Most HELOCs are variable (tied to Prime). Rates can increase. Current 9% could become 11% if rates rise.

3. Same temptation as balance transfer Cards are paid off. Tempting to charge them again. Resist.

4. Closing costs Some HELOCs have $500-$2,000 in closing costs. Many lenders offer no-cost options—shop around.

Decision Framework

Choose balance transfer if:

• Debt under $15,000
• You can pay it ALL off in 18 months or less
• Credit score 720+
• You don't own a home OR don't want to use equity
• You trust yourself not to use old cards

Choose HELOC if:

• Debt over $20,000
• Payoff will take longer than 18-21 months
• You own a home with equity
• You want flexibility in payments
• You want the option to consolidate more later
• Your income is stable

The Hybrid Strategy

Some people use both:

1. Transfer what you can to 0% card (maybe $15,000)
2. Put the rest on HELOC
3. Aggressively pay balance transfer during promo
4. Then focus on HELOC

This maximizes 0% savings while handling larger amounts.

Example: $40,000 debt

• Transfer $15,000 to 0% card
• Put $25,000 on HELOC at 9%
• Pay $1,000/month: $800 to balance transfer, $200 to HELOC
• Clear balance transfer in 19 months
• Redirect full $1,000 to HELOC
• Total payoff: 48 months
• Total interest: ~$5,000

Compare to all on HELOC: ~$8,000 interest Compare to all on cards: ~$35,000 interest

The hybrid saves $3,000 vs HELOC alone and $30,000 vs doing nothing.

The Bottom Line

Balance transfer is a sprint. You get 0% for a limited time, then rates explode. It only works if you cross the finish line before time runs out.

HELOC is a marathon. Steady, lower rate for as long as you need. No time bomb. Just consistent progress.

For small debt with fast payoff ability: balance transfer wins. For larger debt or longer timelines: HELOC wins. For some situations: use both strategically.

The worst choice? Doing nothing and letting high-interest debt compound indefinitely.

Ready to see what your equity could do? Check your HELOC options →