Understanding Balance Transfers
A balance transfer involves moving debt from one credit card to another, typically to take advantage of a lower interest rate or promotional offer. Many credit card issuers offer promotional 0% APR periods that can last anywhere from 12 to 21 months.
Benefits of Balance Transfers
- Lower Interest Rates: Take advantage of promotional rates to reduce interest payments
- Simplified Payments: Consolidate multiple debts into one monthly payment
- Debt Repayment: Focus on paying down the principal balance faster
- Credit Score Impact: Potential improvement by lowering credit utilization
Steps to Perform a Balance Transfer
1. Evaluate Your Current Debt
Before initiating a transfer, gather information about your existing debt:
- Total balance amount
- Current interest rate
- Monthly payment requirements
2. Research Balance Transfer Cards
Look for cards offering:
- Long 0% APR promotional periods
- Low or no balance transfer fees
- Reasonable regular APR after promotion ends
- Credit limit high enough for your needs
Popular balance transfer cards include the Chase Slate Edge℠ and Citi® Diamond Preferred® Card.
3. Apply for the New Card
Once you've identified a suitable card, apply online through the credit card issuer's website. Be prepared to provide personal information, including your income and employment details. You can check your credit score for free on websites like Credit Karma or Credit Sesame.
4. Initiate the Transfer
You can transfer balances in two ways:
- Through your new card's online portal
- By calling the card issuer directly
You'll need:
- Account numbers for existing cards
- Amount to transfer
- Billing information
5. Monitor and Confirm the Transfer
Transfers typically take 5-7 business days to complete. During this time:
- Continue making payments on your old card
- Check both accounts regularly
- Keep records of transfer confirmation
Important Considerations
Transfer Fees
Most cards charge a balance transfer fee of 3-5% of the transferred amount. Calculate whether the fee is worth the interest savings:
| Transfer Amount | 3% Fee | 5% Fee |
|---|---|---|
| $5,000 | $150 | $250 |
| $10,000 | $300 | $500 |
Credit Score Impact
- Hard inquiry when applying for new card
- Increased available credit
- Potential temporary dip in credit score
Best Practices
- Never miss a payment - this could void your promotional rate
- Avoid making new purchases on either card
- Set up automatic payments
- Track your progress monthly
- Create a repayment plan to clear balance before promotional period ends
For additional guidance, consider consulting resources like the Consumer Financial Protection Bureau or using tools like the Debt Snowball Calculator to help you pay off your debt.