Getting out of credit card debt may be easier by taking advantage of balance transfers. Moving your high-interest debt to another credit card with a lower interest rate can save you on interest and also allow you to streamline multiple debt payments into one.
Before you take the leap, it’s important to know how to do a balance transfer on a credit card. It’s also critical to know what to look for when choosing a balance transfer card to help ensure that making this financial move pays off.
How Do Credit Card Balance Transfers Work?
Completing a balance transfer is one way that you can effectively pay a credit card bill with another card. A credit card balance transfer allows you to take the balance from one or multiple credit cards and transfer it to a new credit card.
Ideally, you’re transferring the balance to a credit card with a lower interest rate. Some balance transfer credit cards even offer a 0% introductory annual percentage rate, or APR, for a predetermined amount of time, which can allow you to focus on paying down your balance without accruing interest.
Balance transfers can also allow you to simplify your payment schedule by rolling all of your credit card debts onto one new card that you’ll then work on paying off. That way, you’ll only have to worry about one monthly payment rather than multiple due dates and minimum required payments. However, you’ll likely incur a balance transfer fee in order to move over your balance to the new card.
Keep in mind that while credit card balance transfers are helpful when it comes to potentially saving on interest and simplifying payments, they aren’t an instant way to get out of debt. You need to commit to using a credit card responsibly by making on-time payments and avoiding getting into more debt. You’ll also want to ensure that you can pay off your balance before any promotional APR offer ends, at which point the interest rate will increase.
What to Consider When Choosing a Balance Transfer Credit Card
Before opening a new credit card and requesting a balance transfer, you’ll want to know a few things. Specifically, make sure you know how long the introductory APR offer will last, if there is one, as well as the types of debt you can transfer and the fees you may need to pay. That way, you can ensure you choose a credit card that meets your needs.
Length of the Introductory APR Offer
Many credit cards, in an effort to gain your business, will offer introductory APRs for as low as 0% — though you’ll most likely need good or excellent credit to qualify for these cards. When doing your research, make sure to look at how long the introductory period is, as they can last anywhere from six to 21 months.
Due to how credit cards work, once the introductory period ends, the credit card issuer will charge you their normal APR — and it could be higher than your old credit card. That’s why it’s critical to assess whether the introductory period will provide enough time for you to pay off your balance in full.
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Types of Debt You Can Transfer
Different credit card issuers will have varying policies on what types of debt you can transfer. Aside from credit card debt, you may be able to transfer other types of debt, such as:
• Personal loans
• Auto loans
• Medical debt
• Retail or store cards
• Student loans
Additionally, keep in mind that issuers may not allow balance transfers from certain cards.
If you know there’s a certain type of debt you’d like to transfer, make sure to check with a credit card issuer to find out what is or isn’t allowed before signing up for a new card.
Balance Transfer Fees
Although you may not have to pay interest if you have a 0% APR introductory period, you may still have to pay a balance transfer fee. This fee is usually either a percentage of your transfer amount — typically 3% to 5% — or a flat fee, depending on the card issuer. For example, if you want to transfer $6,000 and the credit card issuer charges a 3% balance transfer fee, you’ll need to pay $180.
It’s important to factor this fee into the equation to ensure making a balance transfer will actually save you money. You should be able to find out what the balance transfer fee is by looking at the cardholder agreement for the credit card.
Timeline for Balance Transfers
Some credit card issuers have deadlines as to when you can conduct a balance transfer after opening a card. For instance, you may only have a matter of weeks from when you open the card to transfer over your balance.
The exact timeline will vary from issuer to issuer, so make sure to take a look at your issuer’s credit card rules, and be prepared to act when you get your new card.
How to Transfer A Credit Card Balance to Another Card: Step by Step
If you decide you want to transfer existing debt to another credit card, you’ll first need to take stock of your current debts and their interest rates. Also determine how much of your debt you want to transfer. From there, here’s how to do a credit card balance transfer.
1. Apply for a Balance Transfer Card
Once you’ve picked the balance transfer credit card you want, it’s time to apply for it. To do so, you’ll need to submit the required information, which may include your name, address, Social Security number and income.
Additionally, you may be subject to a hard credit inquiry, which could temporarily affect your credit score. If you’re approved, you can take the next steps.
2. Transfer the Balance
Contact your new credit card issuer to ask what the exact steps are to conduct a balance transfer, and to find out whether it’s possible to transfer the amount you want to. When it comes to how to transfer a balance from one card to another, there may be several methods available to you, including:
• Online transfer: You may be able to log into your online account and request a transfer by filling out a form. In some cases, you may be able to request a balance transfer online when you fill out your credit card application.
• Phone transfer: You may be able to call the number on the back of your credit card and make a transfer over the phone. Make sure you have all the required details on hand before calling.
• Balance transfer checks: Some credit card companies issue you checks to make the balance transfer. You’ll make the check payable to the credit card company from which you want to make the transfer. Just make sure to ask whether this will be considered a cash advance (that’s what you’d do if you were trying to transfer money from a credit card to a bank account, and it generally has a higher interest rate).
3. Wait for the Balance Transfer to Go Through
After you’ve made your request, you’ll need to wait for your new credit card to finish processing the balance transfer. In the meantime, keep your old credit card open and continue to make payments on any amount that’s due. That way, you’re not on the hook for a late payment, which could lead to late fees and have an effect on your credit.
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4. Pay Off Your Balance
Once the balance transfer is complete, you can start paying it down. Follow the terms stated on your cardholder agreement to ensure that you continue to qualify for the introductory APR — for instance, some issuers may revoke your rate if you make late payments.
Aim to pay off the entire balance before the introductory period is over and a higher interest rate kicks in.
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Credit Card Balance Transfer vs Personal Loans: What’s the Difference?
Both credit card balance transfers and personal loans give you the opportunity to save on high-interest debt, but there are key differences between the two. For one, personal loans are a type of installment loan, where you borrow a lump sum of money and pay it back over time. Meanwhile, a credit card is a type of revolving credit that allows you to keep borrowing money up to your credit limit as long as you pay down your balance.
Personal loans tend to charge interest right when the loan is disbursed, whereas with a credit card, you may be able to take advantage of an introductory APR, if you qualify for one. However, balance transfers tend to have lower limits compared to personal loans. Plus, personal loans may offer lower interest rates compared to a credit card’s purchase APR, which is what will kick in after the promotional period ends.
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Doing a Credit Card Balance Transfer: What to Know
Getting a credit card balance transfer can help you manage your debt, but isn’t the answer for everyone. To decide whether it’s right for you, determine the amount of debt you want to transfer and see whether it’s likely the amount will be within the credit limit of your new credit card. If you have a high amount of debt, a personal loan may be a better choice.
In addition, a balance transfer only makes sense if you can qualify for a lower interest rate than you have with your current credit card. If your credit score isn’t that great, you may not qualify for an introductory APR offer. In this case, it may be better to seek alternatives, such as taking out a personal loan or sticking with your current credit card until you can raise your credit score and qualify for a better card.
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Knowing the specifics of how to transfer a credit card balance can help you determine if doing so is financially smart. Take the time to calculate the fees you may be paying for a balance transfer, and compare that amount to how much you’d be saving on interest charges. If the fee you’d pay is much lower than the interest charges, transferring a balance from one card to another may be worth it.
Looking for a new credit card?
The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.1
Do balance transfers affect your credit score?
Balance transfers can affect your credit score since you’re applying for new credit, which may result in a hard credit inquiry. This can cause a temporary drop in your score.
How long does it take to transfer a balance from one credit card to another?
Typically, a balance transfer takes anywhere from five to seven days. However, it may take up to a few weeks to complete depending on your credit card issuer.
How do you qualify for a balance transfer?
You typically need a good or excellent credit score — meaning 670 or above — to get approved for a balance transfer credit card.
Photo credit: iStock/CentralITAlliance
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