How to Do a Balance Transfer Between Credit Cards

A credit card balance transfer involves moving outstanding debt from one or more credit card accounts to a different credit card, typically one with a lower or introductory 0% annual percentage rate (APR). This process allows individuals to consolidate multiple balances into a single account, potentially reducing the total interest paid over time. This financial maneuver can simplify debt repayment by consolidating monthly payments into one, making it easier to track and manage.

Key Preparations Before Transferring

Eligibility Criteria

Before initiating a balance transfer, understanding eligibility criteria is important, as credit card issuers assess an applicant’s financial health. A strong credit score (e.g., FICO scores above 670) increases the likelihood of approval for cards with attractive balance transfer offers. Lenders also review an applicant’s debt-to-income (DTI) ratio, which compares monthly debt payments to gross monthly income, to determine their capacity for taking on new credit. Some card issuers may restrict transfers from cards issued by the same financial institution.

Researching Offers

Researching balance transfer offers is important, as terms and conditions vary significantly. Compare introductory APR periods, which can range from 6 to 21 months, noting when the promotional rate expires and the standard APR takes effect. Balance transfer fees, commonly ranging from 3% to 5% of the transferred amount, are charged upfront and should be factored into the overall cost. Understanding the standard APR that will apply after the introductory period concludes is also necessary, as this rate will dictate future interest charges if the balance is not paid off in time.

Identifying Accounts

Identifying the specific credit card accounts from which debt will be transferred involves reviewing current statements to determine precise balances and account numbers. This ensures the correct amounts are targeted for transfer, preventing errors or delays. Have a clear understanding of the total debt intended for transfer, as this will influence the credit limit needed on the new card.

Calculating Savings

Calculating potential savings provides a clear financial picture of the benefit a balance transfer could offer. This calculation involves estimating the total interest paid on existing debt at its current APR, then comparing it to the balance transfer fee plus any interest accruing on the new card during and after the promotional period. This helps determine if the savings outweigh the transfer fees. For instance, transferring a $5,000 balance with a 19% APR to a card with a 0% introductory APR for 15 months and a 3% fee ($150) could save hundreds in interest if paid off within the promotional period.

Gathering Information

Gathering all required personal and financial information before starting the application saves time and reduces frustration. This includes personal identification details, such as a Social Security number and date of birth, along with current income and employment information. Details regarding existing debt, including account numbers and current balances of the cards from which debt will be transferred, are also necessary.

The Application Process

Submission Methods

Once preparatory steps are complete, applicants can choose a method for submitting their balance transfer request. Online applications are the most common and quickest option. Many financial institutions also offer applications by phone or in-person at a branch. Applying by mail is another alternative, though it involves a longer processing time. Each method requires the same fundamental information, but convenience and speed vary.

Completing the Form

Completing the application form accurately is straightforward when all necessary information has been gathered beforehand. The form will request personal details such as name, address, and contact information, as well as financial data including income and employment status. This provides the necessary background for the card issuer to assess creditworthiness and determine an appropriate credit limit. The form also includes specific fields for balance transfer details.

Specifying Transfers

Applicants will specify the credit card accounts and the exact amounts they wish to transfer. This involves inputting the account numbers of the original credit cards and the precise dollar amounts to be moved to the new balance transfer card. Ensure these details are correct, as inaccuracies could delay or prevent the transfer from processing successfully. Some applications allow for partial transfers, giving the applicant control over how much debt is moved.

Review and Submission

Before final submission, a thorough review of all entered information is important to confirm accuracy and completeness. This includes double-checking personal details, income figures, and especially the account numbers and transfer amounts for the target cards. Any discrepancies could lead to complications or rejection. Once verified, the application can be submitted, with a digital signature for online submissions or a physical signature for paper applications.

Initial Response

Immediately following submission, applicants will receive an initial response regarding their application status. This could be an instant approval, an instant denial, or a notification that the application is pending further review. If approved, the notification may include details about the new credit limit and an estimated timeframe for the balance transfer to be completed. Confirmation messages will provide further instructions or confirm receipt of the application.

Post-Transfer Management

Monitoring Transfer

After the balance transfer application has been approved, monitoring the transfer’s progress is important to ensure the debt successfully moves to the new account. This involves regularly checking statements from both the old and new credit card accounts to confirm the transferred balance has been deducted from the original card and credited to the new one. Most transfers complete within 7 to 21 business days, but this timeframe can vary. Confirming completion helps prevent unexpected charges or issues.

Payments on Old Card

Continue making payments on the old credit card account until the transfer is fully reflected and confirmed on both statements. Failing to do so could result in late fees, additional interest charges, or a negative impact on a credit score, even if the transfer is in progress. Payments should be continued according to the original card’s terms until the balance shows as zero or the transferred amount is clearly removed.

New Card Terms

Understanding the new card’s specific terms is important, particularly how the promotional APR applies solely to the transferred balance. Any new purchases made on the balance transfer card do not fall under the introductory 0% APR and may begin accruing interest immediately at the standard purchase APR, which is higher. This distinction is important for avoiding unexpected interest charges on new spending, ensuring the benefit of the balance transfer is maximized.

Old Account Management

Managing the old account after the balance is transferred requires a deliberate decision regarding its future status. One option is to keep the old account open with a zero balance, which can positively influence credit utilization ratio and overall credit history length. Another option is to close the account, though this might reduce overall available credit and shorten the average age of credit accounts, potentially impacting a credit score. The choice depends on individual financial strategy and credit goals.

Payment Strategy

Developing a clear payment strategy for the new balance is important to capitalize on the introductory offer and pay down the debt effectively. The primary goal is to pay off the entire transferred balance before the promotional period expires to avoid accruing interest at the standard, higher APR. This involves making timely payments, often exceeding the minimum required payment, to reduce the principal balance. Consistent, strategic payments during the promotional window maximize the financial benefits of the balance transfer.