How to Transfer Balances on Credit Cards
Navigate the process of credit card balance transfers, from understanding offers to effectively managing your debt.
A credit card balance transfer involves moving outstanding debt from one or more credit cards to a new credit card, typically one with a different issuer. This can help consolidate multiple debts into a single account, simplifying payments and tracking. A common objective is to reduce the total interest paid on the transferred balance over a specific period, creating a more favorable repayment environment.
Understanding Balance Transfer Offers
Before initiating a balance transfer, understanding the offer’s specific terms is important for making an informed financial decision. A significant component is the introductory Annual Percentage Rate (APR), a low or 0% interest rate applied to the transferred balance for a set period. This period can range from 6 to 21 months, providing a window where interest accrues at a reduced rate or not at all. This special rate typically applies only to the transferred balance, not to new purchases, which may accrue interest at a standard APR immediately.
After the introductory period, the APR on any remaining transferred balance reverts to the standard variable APR. This post-introductory rate is generally higher and can vary based on market conditions and the cardholder’s creditworthiness. Issuers typically disclose a range for this standard APR, often between 15% and 25% or higher, depending on the prime rate and credit profile. Understanding this future rate helps plan repayment beyond the promotional period.
Most balance transfers include a balance transfer fee, a one-time charge calculated as a percentage of the amount transferred. This fee commonly ranges from 3% to 5% of the transferred balance. For example, a 3% fee on a $5,000 transfer would amount to $150. Some cards may offer no balance transfer fee, but these are less common and often come with shorter introductory APR periods or higher standard APRs.
Credit limit considerations are a practical aspect of balance transfers. The new card issuer assigns a credit limit based on the applicant’s credit history and income; the transferred balance cannot exceed this limit. It is also important to remember that the available credit for future purchases will be reduced by the transferred amount. Eligibility requirements often include a good to excellent credit score, typically 670 to 850. Some issuers may not allow balance transfers between cards from the same bank.
The Balance Transfer Application Process
Once a suitable balance transfer offer is identified and understood, the next step involves the application process itself. The application requires specific information about the credit accounts from which balances will be transferred. This includes the original credit card account numbers and the precise amounts for transfer from each. Provide these details accurately to ensure correct and efficient processing.
Balance transfer applications can be submitted through several methods. Many card issuers provide online portals for a streamlined experience. Applications can also be completed over the phone with a customer service representative, or by mailing a physical form. The online method is often the quickest and most convenient.
When applying online, the process involves navigating to the balance transfer section of the new card issuer’s website. Applicants enter the account numbers of the credit cards they wish to pay off, along with the specific dollar amount to be transferred from each. There may be fields to confirm the original card issuer and account type. After providing all information, applicants review the summary of their transfer request before submitting.
Upon successful application submission, individuals typically receive an immediate confirmation message on screen or via email. This message serves as an acknowledgment that the application has been received. Processing time for a balance transfer varies, commonly taking 7 to 14 business days. During this period, the new card issuer pays off the specified amounts to the original credit card accounts on the applicant’s behalf.
Managing Your Transferred Debt
After a balance transfer is approved and completed, confirming the transfer’s successful posting to both new and old accounts is an important step. Cardholders should monitor original credit card statements to ensure transferred balances are paid off or reduced. The new credit card statement should also show the transferred amount. This verification helps prevent issues regarding the debt.
Making timely payments on the new credit card is important to avoid forfeiting the introductory APR. Missing or making a late payment can immediately cancel the promotional rate, causing the remaining balance to accrue interest at the higher standard APR. Payments are typically applied first to any interest and fees, and then to the principal balance, which underscores the benefit of having a 0% introductory APR where more of the payment goes directly to reducing the principal.
A strategy for paying down the transferred balance within the introductory APR period involves making consistent payments exceeding the minimum. Dividing the total transferred balance by the number of months in the promotional period helps determine the monthly payment needed to pay off the debt before the higher interest rate applies. For example, a $3,000 balance with a 12-month introductory period requires a payment of at least $250 per month to eliminate the debt within that timeframe.
It is also important to avoid incurring new debt on the card with the transferred balance. New purchases may accrue interest at a different, often higher, APR than the transferred balance, complicating repayment. Cardholders should also be cautious about using the original credit cards from which balances were transferred. Keeping these accounts open but inactive can preserve credit history, but using them for new purchases could lead to accumulating more debt.
When the introductory APR period expires, any remaining balance will begin to accrue interest at the standard variable APR. This change can significantly increase monthly interest charges if a substantial balance remains. Understanding this transition point is important for continued debt management, as it may require adjusting payment strategies to account for higher interest accrual.