How to Transfer Balances Between Credit Cards

Transferring credit card balances can be a strategic financial move to manage debt efficiently. It involves moving existing credit card debt to a new card, often with a promotional interest rate. Its primary objective is to consolidate high-interest debt, reduce interest paid, save money, and accelerate repayment. This streamlines multiple payments into a single, manageable monthly obligation.

Preparing for a Balance Transfer

Before initiating a balance transfer, evaluate your financial standing and carefully select a suitable new credit card. Lenders assess eligibility based on factors like credit score. A good to excellent credit score, often a FICO score of 670 or higher, generally increases the likelihood of approval for cards offering favorable balance transfer terms. A low debt-to-income ratio is also considered favorably by card issuers. Note that most credit card companies do not permit balance transfers between cards issued by the same financial institution.

Selecting the appropriate credit card for a balance transfer requires considering key features. A promotional Annual Percentage Rate (APR), frequently advertised as 0% or a very low rate, allows interest-free repayment for a specific duration. This introductory period can range from six to 24 months, or even longer, providing a window to reduce the principal balance without accruing interest. It is important to understand precisely when this promotional period concludes, as the regular APR will then apply to any remaining balance.

Most balance transfers include a one-time fee, commonly ranging from 3% to 5% of the transferred amount. This fee is typically added to the transferred balance, increasing the total amount owed on the new card. Calculating the impact of this fee against potential interest savings is a necessary step in determining the overall benefit of the transfer. After the promotional period ends, any outstanding balance will be subject to the card’s standard regular APR. This rate can be significantly higher than the introductory rate.

Each balance transfer card comes with a maximum transfer limit, which defines the total amount of debt that can be moved to the new account. This limit may be equivalent to the card’s overall credit limit or a lower amount, depending on the issuer’s policies and the applicant’s creditworthiness. If the desired transfer amount exceeds this limit, only a portion of the debt can be transferred. Before applying, gather specific details from existing credit card accounts, including account numbers, current balances, and the names of the creditors, as this information will be necessary for the transfer request.

The Balance Transfer Process

Once a suitable balance transfer credit card has been selected, initiate the transfer. During the application process, some card issuers provide the option to request a balance transfer directly. This allows simultaneous application and debt transfer initiation.

If the balance transfer was not requested during the initial application, it can usually be initiated after the new credit card has been approved and received. Most issuers offer various methods for this, including online banking portals, mobile applications, or by contacting customer service directly. When submitting the transfer request, it is necessary to accurately provide the account numbers and current balances of the credit cards from which debt will be transferred.

The time it takes for a balance transfer to fully process varies between card issuers, typically two days to six weeks, often five to 21 business days. Throughout this waiting period, continue making minimum payments on old credit card accounts. This prevents late fees or additional interest charges while pending. Confirmation of a successful balance transfer typically occurs through notifications from both the old and new card issuers, and by observing balance changes on accounts.

Managing Your Transferred Balance

After a balance transfer has been successfully completed, consistent financial discipline becomes important to maximize the benefits. Making all payments on time is necessary, as a single late payment can result in the forfeiture of the promotional APR, causing the regular, higher interest rate to apply to the entire balance. This change can significantly increase the total cost of the debt.

It is important to note the exact date when the introductory APR period concludes. Marking this date on a calendar allows for proactive planning to pay down the balance before the higher regular APR takes effect.

Avoiding new debt on the balance transfer card is also important. New purchases on the card may accrue interest immediately, as promotional rates often apply only to the transferred balance, not new transactions. Similarly, it is advisable to avoid incurring new debt on other credit cards while working to pay off the transferred amount.

To effectively pay down the transferred balance before the promotional period expires, consider paying more than the minimum required payment each month. Calculate the monthly payment needed to clear the balance within the interest-free period. Dividing the total transferred balance by the number of months provides a target monthly payment to achieve debt freedom without interest. While closing old credit card accounts might seem logical, it can negatively impact your credit score by increasing credit utilization and reducing average account age. Generally, it is advisable to keep older accounts open, especially if they have no annual fees, to maintain credit history and a lower utilization rate.