How to Transfer a Credit Card Balance
Navigate the complexities of credit card balance transfers to optimize your debt management and reduce interest costs.
A credit card balance transfer involves moving debt from one or more credit card accounts to a new or existing card, typically one offering a lower interest rate. This strategy aims to consolidate high-interest debt and take advantage of promotional interest rates, often 0% annual percentage rate (APR) periods. Balance transfers can benefit individuals with multiple credit card debts or those seeking to accelerate debt repayment by reducing interest paid, allowing more of each payment to go directly towards the principal balance.
Preparing for a Transfer
Before initiating a balance transfer, it is important to assess eligibility and research available offers. Credit card issuers generally seek applicants with good to excellent credit, typically a FICO Score of 670 or higher, for their most favorable balance transfer promotions. A strong credit score signals financial reliability, increasing the likelihood of approval for cards with attractive introductory APRs and higher credit limits.
When researching balance transfer credit cards, examine several factors. Most cards offering introductory 0% or low APR periods will eventually revert to a standard APR; understand both rates and the promotional period’s duration, commonly 6 to 21 months.
A balance transfer fee, usually 3% to 5% of the transferred amount, is common and impacts overall savings. Some cards may carry annual fees or other costs to consider. Note the maximum transfer limit, as it might not cover all existing debt.
Calculate potential savings by comparing interest paid on current high-interest debt against the balance transfer fee and any interest during the new card’s introductory period. Online calculators can estimate savings by inputting current balances, APRs, and proposed monthly payments. This helps determine if the balance transfer is financially sound. Before applying, have specific information ready, including existing credit card account details (card numbers, current balances, creditor names) and personal financial information (income, employment status).
Applying for the Transfer
Once research and preparation are complete, initiate the balance transfer application. Applications for balance transfer credit cards can be submitted online, over the phone, or in person. The process is for a new credit card account, or an offer on an existing one.
The application form requires specific personal and financial data. This includes full legal name, current address, date of birth, and Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) for identity and credit checks. Applicants also provide gross annual income and employment status to help the issuer assess repayment capacity and determine credit limits. Information for accounts from which balances will be transferred, such as creditor name, account number, and transfer amount, will be requested.
Approval for a balance transfer is not guaranteed, depending on the credit issuer’s assessment of creditworthiness. Approval decisions typically take a few days to a few weeks. Once approved or denied, the process moves to the transfer and management of the new balance.
Completing the Transfer and Managing the New Balance
After an application is approved, the new credit card issuer proceeds with directly paying the old creditor the specified amount. Transfers can take a few days to several weeks, sometimes up to six weeks. Continue making payments on the old credit card account until the transfer is confirmed and the balance is zero or reduced.
Once the old credit card account balance is zeroed out, cardholders decide what to do with the old account. It does not automatically close. Keeping it open can benefit credit history by maintaining a longer average account age and improving credit utilization if the balance remains zero. However, it also risks new debt or annual fees. Closing the account reduces spending temptation but may slightly lower the credit score due to decreased available credit and average account age.
Strategic payment on the new card is important, especially during the introductory APR period. Aim to pay down as much of the transferred balance as possible before the promotional rate expires. Make timely payments, ideally more than the minimum.
If the balance is not fully paid off by the end of the introductory period, the remaining balance will accrue interest at the card’s standard APR. Setting up automatic payments for at least the minimum amount, or even higher, ensures timely payments and consistent debt reduction. Avoid accruing new debt on the new card or any old cards, as this could undermine the transfer’s purpose and increase financial burden.