It is always a bad time to carry credit card debt, but a recession is the worst time.

If there is a chance anyone in your household could be laid off or face reduced hours in a recession, paying credit card debt will become harder.

Plenty of households are at risk. The Federal Reserve Bank of New York reported card balances at a collective $870 billion as of June 30.

Now, one of the most cost-effective ways to tackle credit card debt could soon be harder to come by.

Adios balance-transfer deals

When the economy is humming along, credit card issuers hungry to attract more clients — and money — dangle balance-transfer deals. If you agree to move your existing card balance to a new card, you will not owe any interest for a set period. Right now, there are deals that offer zero-percent interest for more than 12 months. One Citibank deal waives interest for 21 months. That is a long time to skip interest and pay down your actual balance.

No deals in a recession

That makes now a smart time to see if you can qualify for a balance transfer deal and use it to get your household finances in shape. Consumer-finance websites such as Nerd Wallet and keep updated tables of the best deals. Fine print to be aware of:

The best deals go to the credit score champs. To qualify for a zero-rate deal you will likely need a credit score of at least 700.

Zero is not free. When you move debt to your new card, you typically pay an upfront fee of 3% of the transfer amount, sometimes 5%. The fee can be worth it, if you leave a card where you are paying a high rate and then get your balance paid off — or greatly reduced — during the zero-rate period.

The average rate charged on cards with balances has gone from about 13% in 2014 to more than 17%.

The zero rate isn’t for new charges. If you make new charges that you don’t pay off immediately, you will likely get charged interest. But now that you are in pay-down mode, you’re not going to run up new unpaid balances, right?

One misstep and you can lose the zero rate. Read the fine print. Many cards reserve the right to rescind the zero rate if you are late on a payment. Paying a transfer fee of 3% only to see your zero rate readjusted to 15%, 20% or more is one costly mistake. Tip: Sign up for automatic bill pay.

Check with your current card before you make a move

Once you have a balance-transfer deal approved, call your current card issuer and see if they will improve your terms. Then, weigh the offers.

Don’t cancel the card you leave behind. Canceling a credit card can cause the credit-scoring gods to ding you. One of the calculations used to compute credit scores is the credit-utilization ratio, which is the amount of your card balances as a percentage of the combined credit limits on all your cards. Canceling a card with a high limit can cause your utilization ratio to go up.

Keeping the card will only make sense if it doesn’t charge a hefty annual fee. If you do keep it, put a few small charges on it each month that you can easily pay off in full. Inactive accounts are sometimes closed when a recession hits.


Fried writes for