Can You Balance Transfer From Another Person?

A balance transfer involves moving debt from one credit card or loan to another credit card. This financial strategy is often employed to consolidate multiple debts into a single payment or to take advantage of a lower interest rate, particularly introductory 0% Annual Percentage Rate (APR) offers. By transferring a balance to a card with a more favorable APR, individuals can potentially save money on interest charges, making it easier to pay down the principal balance. This process helps streamline debt management and can accelerate the repayment process.

Eligibility for Transferring Balances Between Individuals

Credit card balance transfers are designed for an individual to move debt between their own accounts, not from one person’s account to another. The new credit card account must be in the name of the person applying for the balance transfer. For example, a direct transfer of debt from a parent’s credit card to a child’s credit card is generally not permissible under standard credit card terms.

When applying for a balance transfer, the credit card issuer requires specific details about the original account, including the account number and the amount to be transferred. While scenarios like authorized user accounts or joint accounts might seem to blur this line, the primary account holder always bears the ultimate responsibility for the debt. An authorized user can make purchases, but they are not legally responsible for the debt and cannot initiate a balance transfer to their own separate account. With joint accounts, both parties are equally responsible, but the transfer still occurs within the established legal ownership framework.

Mechanics of a Balance Transfer Application

The process for a standard balance transfer begins with applying for a new credit card that offers a balance transfer promotion. These promotions often feature a low or 0% introductory APR for a set period. Once approved, the applicant provides details of the existing debt they wish to transfer, such as the account number and amount.

Most credit card issuers allow balance transfer requests online or via mail. The review process involves the new card issuer assessing the applicant’s creditworthiness and the total debt to be transferred against the new card’s credit limit. If approved, the new card issuer typically pays off the specified balance on the old account directly. This process, from application to the debt appearing on the new statement, typically takes 7 to 21 business days. A balance transfer fee, usually 3% to 5% of the transferred amount, is charged and added to the new balance.

Implications of Assuming Another’s Debt

Assuming another person’s debt, regardless of the method, carries financial and credit implications for the individual taking on the obligation. The added debt increases the individual’s overall debt burden, which can negatively impact their debt-to-income ratio. A higher debt-to-income ratio can make it more challenging to qualify for new loans or lines of credit, such as mortgages or auto loans.

Taking on additional debt also affects an individual’s credit utilization, which is the amount of credit used compared to the total available credit. High credit utilization can lower credit scores, as it signals a greater reliance on borrowed funds. Once the debt is formally assumed, the individual becomes legally responsible for its repayment. Any missed payments or defaults will be reported on their credit history, potentially leading to a drop in their credit score and making future borrowing more expensive.

Alternative Approaches to Assisting with Debt

Since directly transferring debt from another person’s credit card is not an option, several alternative financial strategies exist to assist someone with their debt. One approach involves an individual taking out a personal loan in their own name and using the proceeds to pay off the other person’s debt. This provides the indebted individual with a lump sum to clear their high-interest obligations, but the new loan and its repayment responsibility fall entirely on the person who took it out.

Another alternative is to offer a financial gift to help reduce the debt. While gifts are not taxable to the recipient, the giver may need to consider gift tax implications if the amount exceeds the annual exclusion limit, which is $19,000 per recipient for 2024. Amounts above this exclusion may require the filing of a gift tax return. Alternatively, becoming a co-signer on a loan for the person in debt can help them qualify for better terms or a lower interest rate. However, co-signing makes the individual equally responsible for the debt; if the primary borrower fails to make payments, the co-signer is legally obligated to repay the entire amount, which can impact their own credit.