How to do a balance transfer
Quick insights
- A balance transfer moves debt from one card to another to help manage payments.
- Some cards may offer a low intro APR for a set period when you move your balance to a new card.
- A balance transfer may take several weeks to complete, depending on the bank.
A credit card balance transfer moves what you owe from one or more cards to a different account. This strategy is often used to consolidate debt or potentially move to a lower interest rate, so more of each payment may go toward what you owe. With a clear plan, a balance transfer may help reduce interest charges and give your budget some breathing room.
Breaking down balance transfers
A balance transfer is the process of moving debt from one card to another. Many people do this to take advantage of a low introductory annual percentage rate (APR), which is the cost of borrowing money. Moving debt to a card with a lower rate might allow more of your monthly payment to go toward your actual debt rather than interest.
Transfers typically involve a fee, usually a percentage of the total amount moved. For example, if you transfer $1,000 and the fee is 5%, a $50 charge may be added to your new balance. The other potential restriction is that you typically can’t transfer balances among credit cards from the same issuer. Checking specific requirements and fees beforehand can help you decide if a transfer fits your financial goals.
Steps to complete a balance transfer
The balance transfer process begins with evaluating your current debt and applying for a new card or checking for offers on your existing accounts. Once approved, you provide your old card details to the new issuer to request the move:
- Check your current balances and interest rates to calculate potential savings.
- Research and apply for a credit card that offers a low or reduced introductory APR on transfers.
- Request the transfer by providing the account numbers and the amounts you wish to move.
- Continue making at least the minimum payments on your old card until the transfer is confirmed.
- Create a plan to pay off the balance.
What information do you need for a balance transfer
To complete a balance transfer, you’ll typically provide certain details about the accounts you intend to move, such as the following:
- Account details: The full account number for the credit card you’re moving the balance from.
- Issuer information: The name of the bank or financial institution that issued your current card.
- Transfer amount: How much of your balance you want to move to the new card.
- Personal identification: Your Social Security number and contact information.
How long does a balance transfer take
The time it takes to complete a balance transfer may vary depending on the financial institutions involved. While some transfers might be processed quickly, others could take several weeks. It can be helpful to monitor both your old and new accounts during this time to ensure everything is handled correctly.
By continuing to pay at least the minimum on your original account until the transfer is complete, you may avoid potential late fees. Once finished, the amount generally appears as a completed transaction on your new statement. The old balance will then update to reflect the payment.
Common mistakes to watch out for
While moving debt could be a helpful tool, there may be some potential pitfalls to watch for:
- Ignoring transfer fees: Many banks charge a fee to move your balance, often a percentage of the total amount transferred or a minimum fee.
- Missing the promo window: If you don’t pay off the balance before the intro APR expires, you will be charged the standard interest rate.
- Adding new debt: Using the old card for new purchases after the transfer may lead to more debt and higher interest costs.
- Exceeding credit limits: You might not be eligible to transfer your entire balance if it exceeds the limit on your new card.
- Closing old accounts: Closing a credit line abruptly may sometimes have an effect on your credit report.
In summary
A credit card balance transfer may be an efficient way to manage debt by moving high-interest balances to a card with a lower rate. By understanding the fees and timelines involved, you can make a more informed decision that fits your goals. If you stay disciplined with your payments, you may be able to pay off your credit card debt sooner than you planned.
