How to Transfer a Credit Card Balance
Learn to strategically transfer credit card debt to lower interest and gain control of your finances.
Understanding a Credit Card Balance Transfer
A credit card balance transfer involves moving existing credit card debt from one or more accounts to a new credit card account. This process aims to consolidate debt and reduce interest, making repayment more manageable.
Understanding Balance Transfer Basics
A promotional Annual Percentage Rate (APR) is a temporary, reduced interest rate applied to the transferred balance. This promotional period typically ranges from 6 to 21 months, during which time the interest rate on the transferred amount can be as low as 0%. After this introductory period concludes, the interest rate reverts to a standard APR, which is usually a variable rate based on market conditions and your creditworthiness.
Most balance transfers involve a one-time fee, calculated as a percentage of the transferred amount. This fee commonly falls within a range of 3% to 5% of the total balance being moved.
Eligibility often hinges on your credit standing, as lenders prefer applicants with good to excellent credit scores, generally above 670. Lenders may also impose restrictions, such as prohibiting transfers between accounts held with the same financial institution.
Selecting a Balance Transfer Card
When choosing a balance transfer card, a primary consideration is the duration of the 0% or low APR introductory period. A longer promotional period, such as 18 or 21 months, provides more time to pay down the transferred debt without incurring interest. Carefully review the balance transfer fee percentage, as a lower fee can significantly reduce the overall cost of the transfer.
It is also important to understand the standard APR that will apply after the promotional period ends. While the immediate focus is on the introductory rate, the post-promotional APR determines the interest rate on any remaining balance. Compare this rate across different card offers to understand the potential future cost of carrying a balance.
Consider the total amount of debt you intend to transfer in relation to the credit limit offered by the new card. A new card’s credit limit might not be sufficient to cover all your existing debt, requiring you to prioritize which balances to transfer. Some issuers may offer a credit limit that is only a portion of your requested transfer amount, so it is beneficial to assess if the new card can accommodate your consolidation goals.
The Application and Transfer Process
Initiating a balance transfer typically begins by applying for a new credit card that offers balance transfer promotions. This application can usually be completed online, though some financial institutions also offer in-person or phone application options. During the application process, you will need to provide personal details, such as your full name, address, Social Security number, and income information, to allow the issuer to assess your creditworthiness.
Once your application is approved, you will typically be prompted to provide the details of the credit card accounts from which you wish to transfer balances. This involves supplying the account number for each old credit card and specifying the exact amount you wish to transfer from each. It is possible to transfer balances from multiple credit cards onto a single new balance transfer card, consolidating several debts into one payment.
The actual transfer of funds usually takes several business days to a few weeks to complete. During this period, it is important to continue making minimum payments on your old credit card accounts until you confirm that the balance has been successfully transferred and reflected on your new card statement. Neglecting to make these payments could result in late fees or negative impacts on your credit score.
Some credit card issuers allow you to schedule the balance transfer at the time of application, while others require you to activate the card and then initiate the transfer through your online account or by phone. Always confirm the specific instructions provided by the new card issuer to ensure a smooth transition.
Post-Transfer Management
After a balance transfer is complete, consistently making timely payments is crucial to maximize the benefits of the promotional APR. Aim to pay more than the minimum required payment whenever possible, with the goal of eliminating the transferred debt before the promotional period concludes.
It is advisable to avoid making new purchases on the balance transfer card during the promotional period. Many balance transfer cards apply payments to the lowest APR balance first, which means new purchases accruing interest at the standard rate might not be paid down while the 0% APR balance remains. This can lead to unexpected interest charges on new spending, counteracting the benefits of the transfer.
Continuously monitor your old credit card accounts to confirm that the transferred balances have been successfully removed or reduced as expected. This step helps prevent any discrepancies or continued billing on accounts that should now have a zero or reduced balance. Regularly checking your statements from both the old and new cards helps ensure accuracy and prevents potential financial issues.