How to Do a Balance Transfer on Credit Cards

A balance transfer involves moving debt from existing credit cards to a new credit card, often from a different bank. This strategy consolidates high-interest debt onto an account with a lower, introductory annual percentage rate (APR). The primary goal is to reduce interest paid on outstanding balances, allowing cardholders to pay down principal more efficiently. Taking advantage of a temporary low or zero-interest period can save a significant amount of money.

Gathering Information and Assessing Eligibility

Before initiating a balance transfer, gather financial information and assess your eligibility for new credit offers. Reviewing your credit score is a good starting point, as it directly influences the offers you may receive. Lenders typically reserve their most favorable terms, such as longer introductory APR periods and lower regular APRs, for applicants with strong credit profiles, generally a FICO score of 670 or higher.

Compile detailed information about your existing credit card debt. This includes current creditor names, account numbers, precise balances, and existing interest rates. Having these details readily available streamlines the application process.

As you research potential balance transfer cards, focus on understanding the key terms. These include the introductory APR (often 0% for six to 21 months) and the balance transfer fee (commonly 3% to 5% of the transferred amount). For example, transferring $10,000 with a 3% fee incurs a $300 charge. Note the regular APR that will apply to any remaining balance after the introductory period, which can range from 15% to 25% or higher.

Applying for the Balance Transfer

Once you have gathered all necessary information and identified a suitable balance transfer offer, submit your application. Most credit card issuers provide convenient application methods, primarily through secure online portals or phone applications. Both methods require personal identifying information, financial details, and specific information about the debt you wish to transfer.

When completing the application, you will enter details of your existing credit card accounts. This typically includes the name of the current creditor, the account number of the card, and the specific amount you wish to transfer. Accurately input this information to ensure the transfer is processed correctly. Some applications may also ask for employment status and income verification, standard practices for assessing creditworthiness.

After submitting your application, the approval timeline can vary, from instant decisions to several business days. Once approved, the new credit card issuer initiates the balance transfer process, paying off your specified balances on the old cards and adding those amounts to your new balance transfer card. This process typically takes one to three weeks to complete and reflect on both the old and new accounts. Continue making at least minimum payments on your old credit card accounts until you confirm the balance transfer has been fully posted and the old account shows a zero balance or the reduced amount.

Managing the Transferred Balance

After your balance transfer is approved and the funds have been moved to your new credit card, diligent management of the transferred balance is crucial. Make at least the minimum required payment on your new balance transfer card each month, ensuring timely payments to avoid late fees and potential forfeiture of the introductory APR. Missing payments can result in the immediate application of the higher regular APR to your entire balance, negating the benefits of the transfer.

Pay off the entire amount before the introductory APR period expires. If any portion of the transferred balance remains when the promotional period ends, that remaining amount will then be subject to the card’s regular, higher APR, which can significantly increase your total interest charges. For example, if your introductory 0% APR period lasts 12 months, you must pay off the full balance within those 12 months to avoid higher interest.

Avoid making new purchases on your balance transfer card, especially during the introductory APR period. Many balance transfer cards apply the introductory rate only to the transferred balance, while new purchases may accrue interest immediately at the regular APR. Making new purchases can complicate your repayment strategy and undermine the card’s purpose of helping you reduce existing debt. The goal of a balance transfer is to eliminate existing debt efficiently, and new spending can hinder this objective.