How to Transfer a Balance on Credit Cards

A credit card balance transfer offers an opportunity to manage existing debt by moving it from one or more credit cards to a new or existing card. The primary purpose of this financial maneuver is to consolidate multiple balances and potentially reduce the amount of interest paid. This is often achieved by transferring debt to a card that features a lower, or even 0%, introductory Annual Percentage Rate (APR) for a specific period. By leveraging a balance transfer, individuals can streamline their payments and dedicate more of their monthly contributions to reducing the principal debt rather than accruing interest charges.

Preparing for a Balance Transfer

Before initiating a balance transfer, preparation ensures the process is beneficial. Researching available balance transfer offers is a first step, done through online comparison websites, direct mail offers, or current banking institutions. These sources provide details on various cards, helping identify options that align with financial goals.

Understanding the terms and conditions of each offer is important. The introductory APR is a reduced interest rate applied to the transferred balance for a set period, commonly ranging from 6 to 21 months. After this promotional period concludes, any remaining balance will revert to the card’s standard, higher regular APR.

Balance transfer fees are another consideration. These fees are calculated as a percentage of the amount being transferred, with a common range between 3% and 5%. For example, transferring a $5,000 balance with a 3% fee would add $150 to the new card’s balance, making the total $5,150. While some credit unions might waive this fee, it is added to the transferred amount and paid off over time.

Applicants must consider the credit limit offered on the new card. The new credit limit needs to be sufficient to cover the entire desired transfer amount, including any associated balance transfer fees. If the requested transfer amount plus fees exceeds the new card’s credit limit, the issuer may approve a lower transfer amount or decline the transfer entirely.

Eligibility requirements for balance transfer cards include a good credit score, a FICO score of 670 or higher, with some issuers preferring scores closer to 690. A reasonable debt-to-income ratio is a factor in an issuer’s approval decision. It is not possible to transfer a balance between two credit cards from the same issuer. Most financial institutions do not permit internal balance transfers, as these offers are primarily designed to attract new customers.

Gathering information from the credit cards you intend to transfer balances from is necessary. This includes the full account numbers for each card and the exact outstanding balances. Some applications may request the payment billing address for the original creditors. Having these details readily accessible will streamline the application process.

Initiating a Balance Transfer

Once preparation is complete and a suitable offer selected, the next phase involves initiating the balance transfer. Several common methods exist for applying. Many issuers provide online application through secure portals, where applicants input personal and financial details.

Applying over the phone is another approach, where a representative guides the applicant through the process, requesting necessary information verbally. Some financial institutions may offer in-branch application support.

Regardless of the application method, applicants provide the previously gathered transfer details. This involves specifying the credit card account numbers from which balances will be moved and the exact amounts to be transferred from each. The new card issuer then facilitates payment to the original credit card accounts.

After submitting the application, the approval process begins. This can result in instant approval, or it may require a pending review, which includes a credit check. Once approved, the transfer process involves the new card issuer directly paying off the specified balances on the old credit card accounts.

The time it takes for a balance transfer to complete can vary, ranging from a few days to several weeks. While many transfers are finalized within 5 to 7 business days, some financial institutions can take up to 14 days or even longer, potentially up to 6 weeks. Continue making at least the minimum payments on the original credit cards until confirmation is received that the transfer has fully posted and the old balances are zeroed out, to avoid late fees or other penalties.

Managing Your Transferred Balance

After a balance transfer, managing the new account maximizes benefits. Timely payments on the new credit card are necessary, especially during the introductory APR period. Missing a payment can result in forfeiture of the promotional rate, causing the remaining balance to immediately incur interest at the standard, higher APR.

Understanding how payments are allocated on a credit card with multiple balances is important. The Credit CARD Act of 2009 established rules for payment allocation. If only the minimum payment is made, card issuers have discretion to apply it to the balance with the lowest interest rate. However, any payment exceeding the minimum must be applied to the balance with the highest interest rate first, then to the next highest. Paying more than the minimum can accelerate debt reduction by targeting the most expensive interest first.

Avoid making new purchases on the balance transfer card during the promotional period. If new purchases are made, payments are allocated to the lowest APR balance first, meaning new purchases accrue interest at the higher standard APR even while the transferred balance enjoys the introductory rate. This can negate the savings intended by the balance transfer.

Regularly monitoring both the new and old credit card statements is practical. This ensures the balance transfer was processed correctly and original credit card balances have been reduced to zero or the intended transferred amount. Any discrepancies should be addressed with card issuers promptly.

Deciding what to do with old credit cards requires thought. Closing an old credit card account can negatively impact one’s credit score by increasing the credit utilization ratio, which is the amount of credit used compared to total available credit. Credit utilization is a factor in credit scoring models, ideally remaining below 30%. Keeping the old account open, even with a zero balance, can help maintain a lower overall credit utilization ratio and contribute positively to the length of credit history.