Let's make a deal: Tips on using a balance transfer to become debt-free

If you're carrying a balance on your credit card, don't worry -- most Americans are, too. In fact, the average U.S. household carries just over $15,000 of credit card debt, which isn't a bad thing when managed properly. Let's look at the big picture.

You most likely have more than one credit card -- your first card is from your college days, and the second one you picked up because it had travel rewards. After years of properly budgeting your finances and making payments on time, you've improved your credit score quite a bit. That first card you got with the high interest rate no longer makes sense to have as a tool in your wallet. Sounds like it's time to consolidate your balances.

Balance transfers allow you to take the balances on your existing cards and transfer them to another credit card, usually at a lower rate. This new lower rate helps reduce your level of debt because more of your monthly payment will go toward paying off debt principal, rather than paying interest.

"A balance transfer at a low rate makes it easier to pay down your balance, improving your debt-to-credit ratio as your balance decreases," says Randy Hopper, vice president of credit cards at Navy Federal Credit Union.

Reducing your debt sounds great, but wouldn't it be awesome to be debt-free? To truly benefit from a balance transfer, follow these simple tips:

__* Know when a deal isn't actually a deal.__ Typically, credit card issuers charge a fee associated with a balance transfer. This could be a flat fee per number of transfers, or a percentage of the total balance you're bringing over to the new card.

"Keep an eye out for balance transfers with no fees, zero percent interest during the introductory period and a low rate after the intro period expires," Hopper says. This is where you can really make a difference to your credit score, but make sure you select a card that will give you enough time to pay down your balance in full.

Be sure to read the fine print on the zero percent offers, too. It could be in your best interest to choose a 2.99 percent APR that doesn't have a balance transfer fee, over a zero percent offer with a 3 percent fee. In the long run, it could cost you more than you're saving.

__* Consolidate from high to low.__ If you've got several credit cards and have trouble managing payments, consolidate to one card. You can save money on interest by moving your higher balances into this new account with a lower interest rate. Check the APR on all your credit cards to know which ones would be best for a balance transfer.

"This is a great option for store cards that usually have high interest rates, where credit unions never charge more than 18 percent," Hopper says.

Once you've consolidated your credit card debt, avoid making purchases until your debt is paid down. Remember, your goal is to become debt-free. Making any new purchases will start accruing interest immediately, which isn't ideal.

__* Always pay on time.__ Make your payments on time or you could be hit with a penalty APR. Not only do missed payments negatively affect your credit score, but you could risk losing the low introductory rate as well. Forgoing your intro period APR could mean missing your goal of becoming debt-free.

"If possible, set up automatic payments along with alerts on your mobile device to ensure payments are made on time," Hopper says. "Maintaining a healthy track record will boost your credit score."

__* You'll lose them if you don't use them.__ Finally, when your balance hits zero, keep the account open. Doing so indicates your track record of reliability. As a general rule, credit cards that are in good standing over a long period of time positively affect your credit score. The longer these accounts are open, the better it is for your profile.