How to Transfer a Credit Card Balance

A credit card balance transfer involves moving outstanding debt from one or more credit cards to a new or existing credit card, typically one offering more favorable terms. This strategy can be a tool for managing credit card debt more efficiently.

Understanding the Purpose of a Balance Transfer

A balance transfer fundamentally shifts debt from one credit card account to another. This process is commonly undertaken to consolidate multiple credit card balances into a single payment, simplifying the repayment process. It also often aims to reduce the total interest paid on existing high-interest debt.

By transferring a balance to a card with a lower Annual Percentage Rate (APR), particularly a promotional 0% introductory APR, individuals can save a significant amount on interest charges. This allows more of each payment to be applied directly to the principal balance. The goal is to leverage a temporary period of reduced or no interest to accelerate debt repayment.

Key Considerations Before Applying

Before initiating a balance transfer, evaluate several factors influencing its overall benefit and cost. A balance transfer typically involves a fee, which is usually a percentage of the amount transferred. These fees commonly range from 3% to 5% of the transferred balance, often with a minimum charge of $5 or $10. This fee is generally added to the new card’s balance.

Many balance transfer offers include a promotional 0% APR for a specific period, typically 6 to 21 months. Understand the duration of this promotional rate and what the standard APR will be once the introductory period expires. After the promotional period ends, any remaining balance will accrue interest at the card’s standard variable APR, which is based on the cardholder’s creditworthiness.

Applying for a new credit card involves a hard inquiry on your credit report, which can temporarily affect your credit score. However, managing the new balance by making timely payments and reducing overall debt can positively impact your credit score over time. Lenders look for applicants with good to excellent credit, often a FICO Score of 670 or higher, for favorable balance transfer offers. Lenders also consider eligibility requirements such as debt-to-income (DTI) ratio. Balance transfers cannot be made between credit cards issued by the same financial institution.

The Application and Transfer Process

Applying for a balance transfer begins by identifying a credit card with suitable terms and a manageable balance transfer fee. The application process involves providing personal details, income information, and the account numbers and balances of the credit cards you intend to transfer. This can be completed online or over the phone.

Once approved, the new card issuer processes the transfer, paying off the specified balances on your old credit card accounts. The timeline for a balance transfer varies, typically taking five to seven business days, although some transfers may complete within a few days or, in some cases, take up to six weeks. Continue making minimum payments on your old credit card accounts until you receive confirmation that the balance transfer is complete.

After the transfer is finalized, the transferred amount, along with any balance transfer fees, will appear on your new credit card statement. Your old credit card statements should reflect a reduced or zero balance. Monitor both old and new accounts to ensure the transfer was processed correctly and that no unexpected charges or interest accrue on the original cards.

Managing Your New Balance

After a balance transfer is complete, effective management of the new balance is important to maximize benefits. The primary strategy involves making consistent, on-time payments larger than the minimum required. The goal is to pay off the transferred balance entirely before the promotional APR period expires. Dividing the total transferred amount by the number of months in the promotional period helps determine the monthly payment needed to achieve this.

Avoid incurring new charges on the balance transfer card during the promotional period, as new purchases may not be subject to the same introductory APR. Do not use the old credit cards from which balances were transferred to prevent accumulating new debt. Monitor your new credit card statements for accuracy and to track payment progress. If multiple types of balances exist on the new card, payments are allocated to the portion with the highest APR first, which helps reduce interest accrual.