How to Do a Balance Transfer From One Credit Card to Another

A balance transfer involves moving debt from one credit card to another to consolidate outstanding balances, often from high-interest accounts, onto a new credit card with a lower interest rate. The primary purpose is to reduce the total interest paid over time, allowing more of your payments to go directly towards the principal debt. This approach can simplify debt management by combining multiple balances into a single, more manageable payment.

Evaluating Balance Transfer Offers

Before initiating a balance transfer, evaluate offers to ensure the chosen card aligns with your financial goals. An important aspect is the introductory APR, a temporarily reduced interest rate, often as low as 0%, applied to the transferred balance. These promotional periods typically last between 6 and 21 months, providing a window to pay down debt without accruing interest charges. Understanding this duration is important, as any remaining balance after it expires will be subject to the card’s standard APR.

The standard APR applies once the introductory period concludes and varies based on the card and an applicant’s creditworthiness. It is important to know this rate, as it determines the cost of carrying any remaining balance. The balance transfer fee is a charge imposed by the new card issuer, typically ranging from 3% to 5% of the transferred amount, often with a minimum of $5 or $10. This fee is usually added to the transferred balance, increasing the total amount owed.

Your credit score plays an important role in determining eligibility for balance transfer offers. A good credit score, generally 670 or higher, can increase the likelihood of approval for cards with 0% introductory APRs and potentially higher credit limits. While applying for a new card may result in a temporary dip due to a hard inquiry, the long-term benefits of debt reduction can outweigh this initial impact. Avoiding multiple applications within a short timeframe can help mitigate negative effects on your credit score.

The credit limit of the new card is an important factor, as it must cover the entire amount you intend to transfer, plus any associated fees. Card issuers may approve a lower credit limit than requested, or cap the transfer at a percentage of the credit limit, such as 75% to 95%. If the approved limit is insufficient, you may only transfer a portion of your debt, leaving a residual balance on your old card. Compare offers from different issuers, carefully reviewing all terms and conditions, before making a selection.

Applying for the Balance Transfer

Once an optimal balance transfer offer has been selected, the next step involves submitting the application. Applications can typically be completed online, over the phone, or occasionally via mail-in forms. Many credit card issuers allow applicants to request the balance transfer directly within the initial card application, streamlining the process. Alternatively, some may require you to wait for approval and account activation before proceeding with the transfer request.

During the application, personal identification details are required, such as your full name, address, and Social Security Number. You will also need to provide income information to help the issuer assess your repayment capacity. For the balance transfer, you must furnish details of the old credit card account(s). This includes the name of the original creditor, the account number, and the precise balance amount you wish to transfer from each.

It is important to clearly specify the amount for each transfer, especially if you are consolidating balances from multiple cards. The new card issuer will then process this request, either by directly paying off the specified amounts to your old creditors or, in some cases, by sending you a check to do so yourself. After submission, you can expect confirmation of receipt, and the application status may show as pending approval. Processing times for the actual transfer can vary, typically taking anywhere from a few days to several weeks. It is important to continue making at least minimum payments on your old accounts until the transfer is fully confirmed to avoid late fees or negative credit impacts.

Post-Transfer Management

After the balance transfer is complete, it is important to confirm the balance has successfully moved from your old account(s) to the new card. Verify this by checking the balance on both the new balance transfer card and the original credit card accounts. The balance on your old card should reflect the transferred amount, ideally showing a zero balance if the entire debt was moved.

Making timely payments on the new balance transfer card is important, especially during the introductory APR period. A single late payment can sometimes result in the forfeiture of the promotional rate, leading to a much higher interest rate being applied to your remaining balance. To effectively pay down the transferred balance before the promotional period expires, consider dividing the total transferred amount by the number of months in the introductory period. This calculation provides a target monthly payment that ensures the debt is cleared before higher interest rates apply.

It is important to avoid making new purchases on the balance transfer card, as they might accrue interest at a different, often higher, APR and complicate your repayment strategy. Keeping the card exclusively for the transferred debt helps maintain focus on repayment. Once the balance transfer is complete, you have options for old credit card accounts. Closing them might slightly impact your credit score by reducing overall available credit or shortening credit history. Keeping them open with a zero balance can positively affect your credit utilization ratio and average age of accounts, but requires discipline to avoid new debt.