Understanding Credit Card Balance Transfers
A credit card balance transfer involves moving debt from one credit card to another, typically to take advantage of lower interest rates. This can be a strategic move to save money on interest and pay off debt faster.
Why Consider a Balance Transfer?
- Lower Interest Rates: Many cards offer introductory 0% APR for a limited time, often 12-21 months
- Debt Consolidation: Simplify your finances by consolidating multiple debts into one payment
- Potential Savings: Reduce interest paid over time, allowing more payment toward principal
Before You Start
Check Your Credit Score
Your credit score largely determines eligibility for balance transfer cards. Most issuers require good to excellent credit (670+) for their best offers. Check your score for free through AnnualCreditReport.com, Credit Karma, or Experian.
Calculate the Total Cost
Consider these factors:
- Balance transfer fee (typically 3-5% of transferred amount)
- Annual fee of the new card
- Regular APR after promotional period ends
Step-by-Step Transfer Process
-
Choose a Balance Transfer Card
- Compare offers from multiple issuers
- Look for longest 0% APR period possible
- Check transfer fee percentages
- Review regular APR rates
-
Apply for the New Card
- Submit application online or by phone
- Provide personal information, income, and employment details
- Have existing credit card information ready
- Wait for approval decision
-
Initiate the Transfer
- Contact the new card issuer
- Provide account details for old card
- Specify transfer amount
- Allow 5-7 business days for processing
-
Monitor and Make Payments
- Continue payments on old card until transfer completes
- Check both accounts to confirm completion
- Set up automatic payments on new card
Best Practices
Do's
- Transfer balances early in the promotional period
- Create a repayment plan
- Set up automatic payments
- Pay more than the minimum when possible
Don'ts
- Make new purchases on the transfer card
- Close old credit cards immediately
- Miss payments during the promotional period
- Transfer more than you can repay
Calculate Your Monthly Payment
Use this formula to determine required monthly payments:
Monthly Payment = (Transfer Amount + Transfer Fee) ÷ Months in Promotional Period
Important Considerations
Remember: Balance transfers don't eliminate debt - they simply move it. Success depends on having a solid repayment plan and avoiding new debt.
Common Restrictions
- Maximum transfer limits
- Time limits for completing transfers
- Restrictions on transfers between cards from same issuer
- Limitations on number of transfers
Long-Term Financial Health
For more detailed advice, consider consulting a credit counselor to develop a comprehensive debt management plan. You can also use debt payoff apps for motivation and tracking.
Compare offers and research cards on websites like NerdWallet and CreditCards.com to find the best balance transfer option for your situation.