How to Transfer a Credit Card Balance to Another Card
Master the credit card balance transfer. Learn to consolidate debt, lower interest, and manage your finances effectively with our comprehensive guide.
A credit card balance transfer involves moving debt from one or more existing credit cards to a new credit card, typically with a different issuer. This financial strategy can help manage outstanding balances by consolidating debt into a single payment. It often allows individuals to take advantage of a lower interest rate, which can be an introductory promotional offer. The primary goal of a balance transfer is to reduce the overall cost of debt by minimizing interest accrual, making it easier to pay down the principal balance.
Key Considerations Before Transferring
Before initiating a balance transfer, evaluate several factors to ensure it aligns with your financial goals. Balance transfer offers feature an introductory Annual Percentage Rate (APR), often as low as 0%, for a specific period, typically 6 to 21 months. This allows payments to go directly toward the principal balance without accruing interest. Understanding the duration of this introductory period is important, as the interest rate will revert to a higher standard APR once it concludes.
A balance transfer involves a fee, typically a percentage of the transferred amount, ranging from 3% to 5% of the total balance. A minimum charge often applies, usually between $5 and $10. This fee is added to the transferred balance, increasing the total amount owed on the new card.
Your credit score plays a role in qualifying for a balance transfer, as issuers require a good or excellent credit history, such as a FICO Score of 670 or higher. A new credit card application results in a hard inquiry on your credit report, which can temporarily lower your score. Balance transfer offers come with transfer limits, meaning the amount you can transfer may not exceed your new card’s credit limit.
You cannot transfer a balance between two credit cards issued by the same bank or banking group. This means you need to apply for a balance transfer card from a different financial institution than your existing high-interest card.
Information Needed for a Balance Transfer
Gathering specific details before starting a balance transfer can streamline the process. You will need information from the existing credit card(s) from which you plan to transfer a balance. This includes the full account number, the current balance you intend to transfer, and the exact name of the card issuer. Ensure all payments have cleared on the old account before initiating the transfer.
If you do not already have a new credit card with a balance transfer offer, first apply for and be approved for one. This new card should offer terms that benefit your debt consolidation. Once approved, you will need its account number and assigned credit limit. The credit limit is important because the total amount you can transfer, including any fees, cannot exceed this limit.
Identify which balances to transfer and their precise amounts, especially if you have multiple high-interest debts. Prioritizing balances with the highest interest rates can maximize the benefit of the transfer.
Completing the Balance Transfer
Once you have gathered information and been approved for a balance transfer card, submit the transfer request. Card issuers provide several methods for initiating a balance transfer. You can complete the request through their online application portal, secure online banking platform, or by calling customer service.
During submission, you will enter details about the old credit card account(s) from which the balance will be moved. This includes the account number and the amount you wish to transfer from each card. You will also confirm the balance transfer terms, including the promotional APR period and any associated fees.
After submitting your request, the card issuer will provide a confirmation message. Processing time can vary, from a few days up to two to six weeks. The new card issuer will pay off the specified amount on your old account(s), and that amount, along with any transfer fees, will appear as a balance on your new card. Continue making minimum payments on your old card(s) until the transfer is fully reflected and the balance is reduced or zeroed out.
Post-Transfer Management
After a balance transfer is completed, manage both your old and new credit card accounts. Continue making at least the minimum payments on your old credit card until the balance is confirmed zero. This prevents late fees and ensures the account remains in good standing during the transition.
On your new balance transfer card, consistently make at least the minimum payment on time to maintain the promotional APR. Missing a payment can result in the loss of the introductory rate, causing the interest rate to revert immediately to a higher standard APR. Understand the end date of the promotional period, as any remaining balance will begin accruing interest at the card’s standard variable APR after this date.
To maximize the benefits of the balance transfer, develop a repayment plan to pay off the transferred balance before the promotional period expires. Calculating the monthly payment needed can help in budgeting. Paying down the debt can positively impact your credit score by reducing your overall debt load.
Regarding your old credit card, you have the option to close the account or keep it open with a zero balance. Closing an account can reduce the temptation to incur new debt, but it may also impact your credit utilization ratio and the average age of your credit accounts, which are factors in credit scoring. Keeping the old card open with a zero balance can positively affect your credit utilization, but it requires discipline to avoid accumulating new debt.