Understanding Balance Transfers
A balance transfer involves moving debt from one credit card to another, typically to take advantage of a lower interest rate. Many credit card companies offer promotional rates, such as 0% APR for a certain period, which can significantly reduce the cost of carrying debt and help you pay down your debt faster.
Step 1: Evaluate Your Current Situation
Check Your Credit Score
Your credit score plays a crucial role in qualifying for the best balance transfer offers. You can check your score for free through services like AnnualCreditReport.com, Credit Karma, or Credit Sesame.
Assess Your Debt
Make a list of all your credit cards, including:
- The outstanding balance on each card
- The interest rate for each card
- The minimum monthly payment
Step 2: Research Balance Transfer Offers
Look for cards with these key features:
- Low or 0% introductory APR
- Reasonable balance transfer fees (typically 3-5%)
- Length of promotional period
- Annual fee
- Transfer deadline requirements
Popular balance transfer cards include:
Websites like NerdWallet and The Balance can help you compare offers.
Step 3: Apply for a Balance Transfer Card
Be prepared to provide:
- Personal information (name, address, SSN)
- Employment and income details
- Information about balances to transfer
- Account numbers for existing cards
Step 4: Initiate the Transfer
You can typically complete the transfer through:
- Online banking portal
- Phone call to new card issuer
- Balance transfer checks
- Mobile app
Important: Continue making payments on your old cards until the transfer is confirmed complete.
Step 5: Create a Repayment Plan
Calculate your monthly payment using this formula:
Monthly Payment = (Transfer Amount + Fee) ÷ Months in Promotional Period
Consider:
- Setting up automatic payments
- Paying more than the minimum payment
- Setting up payment reminders
- Tracking monthly progress
Common Mistakes to Avoid
- Missing initial transfer deadline
- Exceeding transfer limit
- Making late payments (may void promotional rate)
- Continuing to use old card
- Not accounting for transfer fee
- Making new purchases on the transfer card
When the Promotional Period Ends
Prepare for the end of your 0% APR period:
- Mark promotion end date on calendar
- Plan to pay off full balance before deadline
- Research options if balance remains
- Consider additional balance transfer if needed
For additional guidance, consider consulting a financial advisor or visiting the Consumer Financial Protection Bureau for more resources and guidance.