If you’re dealing with high-interest credit card debt, a balance transfer can help you save money and simplify payments. By moving your debt to a new credit card with a 0% introductory APR, you can focus on paying off the principal instead of interest. Here’s how to make it work:
- Understand Fees and Terms: Most balance transfers charge a fee (3%-5%), and the 0% APR period typically lasts 12-21 months. Plan to pay off your balance before the regular APR kicks in.
- Check Your Credit Score: A score of 670+ improves your chances of approval. If your score is lower, work on improving it first.
- Review Your Debt: List all debts, focusing on those with the highest interest rates. Use free tools like AnnualCreditReport.com for accuracy.
- Compare Offers: Look for cards with long 0% APR periods, low fees, and manageable post-promo rates. Some cards even waive transfer fees.
- Apply and Transfer: Gather details about your current debts, apply for a card, and initiate the transfer. Keep making payments on your old card until the transfer is complete.
- Stick to a Repayment Plan: Calculate the monthly payment needed to clear your balance within the promo period. Avoid new purchases and set up automatic payments to stay on track.
Balance transfers can save you hundreds or even thousands of dollars if used wisely. The key is planning ahead, paying consistently, and avoiding new debt while you pay off the old. For more tips, visit Steps To Be Debt Free.
Step 1: Learn How Balance Transfers Work
What Is a Balance Transfer?
A balance transfer allows you to shift existing debt to a new credit card with a lower interest rate. The goal? To make every payment count toward reducing the principal during the promotional period. This process typically involves applying for a new credit card with a 0% introductory APR and requesting the issuer to pay off your current balances. While the total debt amount remains unchanged, this approach can help you pay it off faster and simplify your finances by consolidating multiple payments into one.
Before diving in, it’s essential to review the fees and terms to fully understand how this move will affect your financial situation.
Fees and Terms to Know
Balance transfer fees usually range between 3% and 5% of the amount transferred, or they might involve a fixed fee (like $5 to $10), whichever is higher. For example, transferring a $10,000 balance with a 1% fee and a promotional APR of 2% would result in a $100 fee – a much smaller cost compared to ongoing high APR charges.
Promotional periods typically last 12 to 21 months. Once this introductory period ends, the card’s regular APR kicks in, which averages about 22.75% as of November 2023. To qualify for the promotional rate, you’ll often need to complete the balance transfer within the first few billing cycles after opening the account.
Noah Damsky, founder of Marina Wealth Advisors, emphasizes the importance of understanding the fine print:
"I think balance transfers can be really effective, but you have to stick to the terms of the agreement. It’s important to read the terms and speak to the credit card company – and understand what the ins and outs are – before you sign up."
Some cards stand out with particularly appealing terms. For instance, the Wings Visa Platinum offers 0% APR for 15 months with no balance transfer fee, while the Navy Federal Platinum Visa provides 0% APR for 12 months without a transfer fee.
Once you’ve reviewed the costs and timelines, make sure your credit meets the issuer’s requirements before applying.
Eligibility Requirements
Most balance transfer cards require a FICO score of at least 670. However, a score of 690 or higher improves your chances. Issuers also consider factors like your income, total debt, and recent credit activity to ensure you can handle the new credit line responsibly. If your score falls below 670, your approval odds decrease significantly.
If your application is denied, Rod Griffin, Senior Director of Consumer Education and Advocacy at Experian, suggests paying close attention to the denial notice:
"If you were denied because of your credit score, the notice must include a score used by the lender and the risk factors that most affected it. You should focus on the risk factors to understand the steps you should take to improve your credit history."
To boost your chances of approval, consider strategies like paying down existing balances to lower your credit utilization rate or catching up on any missed payments. Checking your credit status in advance is a smart move before choosing a balance transfer offer.
How To Do A Balance Transfer With A Credit Card | NerdWallet
Step 2: Review Your Current Debt
Before diving into balance transfer options, it’s essential to get a clear picture of your existing debts. This means creating a detailed inventory and understanding your credit score to assess your chances of approval.
List Your Current Debts
Start by listing all your debts – credit cards, student loans, auto loans, medical bills, and any others. For each account, jot down the lender, outstanding balance, interest rate, and monthly payment. This gives you a comprehensive view of your financial obligations.
To ensure accuracy, access your free annual credit reports at AnnualCreditReport.com and cross-check the information against your records. If there are any debts not listed on your credit reports, review your bills and collection notices to include them.
Once you’ve compiled everything, focus on the debts with the highest interest rates. Transferring these balances to a 0% promotional rate card could save you the most money during the introductory period. However, don’t forget to account for balance transfer fees, which typically range from 3% to 5% of the transferred amount.
After organizing your debts, the next step is to evaluate your credit score to determine your eligibility for balance transfer offers.
Check Your Credit Score
Your credit score plays a critical role in qualifying for balance transfer cards. Most of these cards require a score of at least 670, so understanding where you stand will help you set realistic expectations and identify areas for improvement.
FICO scores, which 90% of top lenders use in decision-making, are heavily influenced by two factors: payment history (35%) and amounts owed (30%). You can check your credit score for free through AnnualCreditReport.com or through banks and credit card issuers that offer this service.
If your score doesn’t meet the threshold, it’s worth pausing to work on improvement strategies. Rod Griffin, Senior Director of Consumer Education and Advocacy at Experian, advises:
"If you were denied because of your credit score, the notice must include a score used by the lender and the risk factors that most affected it. You should focus on the risk factors to understand the steps you should take to improve your credit history."
Improving your credit score can involve reducing outstanding balances and consistently paying bills on time. A higher score not only increases your chances of approval but may also qualify you for better credit limits or perks on a balance transfer card. Additionally, before applying for new cards, check your current credit accounts – some may already offer lower APRs or balance transfer options.
A strong credit score sets the stage for finding the best balance transfer opportunities.
Step 3: Find and Choose the Best Balance Transfer Offer
Once you’ve completed your debt inventory and checked your credit score, it’s time to search for the right balance transfer card. This step involves carefully comparing multiple offers to find one that matches your financial needs and debt repayment goals.
Key Factors to Compare
Now that you’ve assessed your debts and credit profile, focus on the details of balance transfer offers. Cards designed specifically for balance transfers often come with lower promotional rates, but not all offers are the same. Here’s what you need to consider:
- Introductory APR Period: The promotional 0% APR period is crucial. Most cards offer this rate for 12 to 18 months, though some extend it even longer. If you have a large amount of debt, choosing a card with a longer promo period can give you more time to pay it off. On the other hand, if your debt is smaller, you might prioritize other features.
- Balance Transfer Fees: Some cards have no transfer fees, while others charge a percentage of the amount you move. For example, a 5% transfer fee on a 0% APR card might cost more than a card with a 2.99% promotional rate but no fee. Make sure to weigh these costs carefully.
- Post-Promotional APR: If you can’t pay off the balance within the promo period, the regular APR kicks in. These rates can climb as high as 30%, so it’s important to know what you’ll face after the promo ends.
- Transfer Limits: Some cards cap the amount you can transfer, which might affect how much debt you can consolidate. Ensure the card’s limit aligns with your needs.
- Restrictions: Check if the promotional rate applies only to balance transfers and not new purchases. Using the card for other expenses during the payoff period could derail your strategy.
- Late Payment Consequences: Missing a payment can lead to late fees – sometimes up to $41 – and might void the promotional 0% APR. In some cases, this could even trigger a penalty APR.
Use a Comparison Table
A comparison table can help you weigh your options side by side, making it easier to decide which card fits your strategy. Focus on the features that directly impact your costs and payoff plan, such as the ones below:
| Card Feature | Card A | Card B | Card C |
|---|---|---|---|
| Intro APR Period | 0% for 18 months | 0% for 21 months | 2.99% for 12 months |
| Balance Transfer Fee | 3% | 0% | 5% |
| Post-Intro APR | 16.99%-24.99% | 18.99%-27.99% | 14.99%-22.99% |
| Transfer Limit | $15,000 | Based on credit limit | $10,000 |
| Annual Fee | $0 | $0 | $95 |
When filling out your table, don’t just look at the numbers – do the math. For instance, transferring $5,000 with a 3% fee means you’ll pay $150 upfront. Compare this cost to the interest you’d save during the promotional period to decide if the card is worth it.
Finally, read the fine print. Understand all terms, including fees, transfer limits, and the length of the promo rate. To stay on track, calculate your monthly payment by dividing your total balance (including fees) by the number of promo months. Choose the card that aligns with your debt repayment plan and helps you move closer to becoming debt-free.
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Step 4: Apply for and Complete the Balance Transfer
After choosing the best balance transfer card for your financial goals, it’s time to move forward with the application and transfer process. This step involves gathering the right information, applying for the card, and closely monitoring the transfer to ensure everything goes smoothly.
Gather Required Information
To keep the process efficient and avoid hiccups, collect all the necessary details upfront.
Make a list of your debts, including each creditor’s name, balance, interest rate, and the amount you plan to transfer. For each account, note the creditor’s address and your account number. Double-check these details – especially account numbers – to prevent delays.
Understanding the interest rates on your current cards also helps confirm if a balance transfer will save you money in the long run. Additionally, have your phone handy during the application, as some issuers may require a quick security verification.
How to Apply for a Balance Transfer Card
Applying for a balance transfer card is typically straightforward, but accuracy and attention to detail are key. Most credit card issuers offer online applications that take just a few minutes to complete.
When applying, you’ll need to provide basic information like your income, employment details, housing costs, and existing debts. Keep in mind that submitting an application will likely result in a hard inquiry on your credit report, which can temporarily lower your credit score slightly.
Depending on the issuer, you might be able to request the balance transfer during the application itself, or you may need to wait until your card is approved. Once approved, you’ll need to contact the new credit card company to initiate the transfer. As Matt Freeman from Navy Federal Credit Union explains:
"You’ll need to provide your new credit card company with the account numbers of your old cards and tell them how much of your balance you want to transfer."
Before finalizing your request, carefully review the terms and conditions. Pay close attention to any fees, limits, or restrictions that could impact your plan. Also, continue making payments on your old card until the transfer is fully completed to avoid late fees.
Track the Transfer Process
After submitting your balance transfer request, it’s important to monitor its progress to ensure everything is on track.
Log in to your new credit card account regularly to check the transfer status. Look for updates on pending transactions or other notifications. Balance transfers can take anywhere from two days to six weeks, depending on the card issuer. For instance, Citi processes transfers in as little as 2 to 21 days, while Wells Fargo may take up to 14 days. If you need assistance, you can contact U.S. Bank using the number on the back of your card or call 800-285-8585.
You’ll know the transfer is complete when your new credit card reflects the transferred amount as a recent transaction and the balance on your old card decreases, ideally to zero. If the transfer hasn’t appeared yet, it’s likely still processing. Keep checking or reach out to customer service for updates.
If delays occur, take action to resolve them. Contact the customer service team of your new card to identify any issues, or check with the original creditor to confirm the transfer request was initiated. Be ready to provide your confirmation number and account details to ensure the full amount has been processed.
Once the transfer is confirmed, you’re ready to move forward with your repayment plan in the next step.
Step 5: Create a Repayment Plan
With your balance transfer in place, the next step is all about sticking to a clear repayment plan. This stage is crucial – it’s your chance to pay off your debt before the promotional period ends and avoid those high-interest rates. A well-thought-out plan can help you save money and stay on track.
Calculate Monthly Payments
Start by figuring out the monthly payment required to wipe out your balance within the promotional period. This step is simple but essential.
Here’s how it works: add up your total balance, including any fees. For example, transferring $8,000 with a 3% fee means your balance becomes $8,240. If you have an 18-month promotional period, you’ll need to pay about $458 each month to clear it.
It’s a good idea to pay a little more than this amount. Why? Credit card companies won’t necessarily remind you when the promotional period ends, and having a buffer ensures you’re debt-free before the regular APR kicks in.
Online balance transfer calculators can be a big help here. They let you test different payment amounts, see how they affect your timeline, and compare how much you save versus leaving the debt on your original high-interest card. Once you’ve nailed down your monthly payment, stick to it and avoid any actions that could throw off your plan.
Avoid New Purchases and Common Pitfalls
The biggest risk to your repayment success? Adding new debt while paying off the old. Avoid making new purchases on your balance transfer card or your old credit cards. Most new charges won’t qualify for the 0% promotional rate and will start accruing interest immediately at the standard APR. Instead, use a different credit card or a debit card for daily expenses until your transferred balance is fully paid off.
Trent Graham from GreenPath Financial Wellness highlights the real challenge:
"But it’s really not the interest rate. It’s the fact that they’re overspending with their expenses compared to their income."
To avoid setbacks, set up automatic payments so you never miss a due date. Missing even one payment could lead to late fees and – worse – the loss of your 0% introductory APR. That one mistake could turn your money-saving plan into a costly problem.
Another way to avoid new debt is to switch to a cash-based spending system or stick to using your debit card. This strategy helps you focus on clearing your existing balance. Pair this with a realistic budget that prioritizes your monthly payment and stick to it consistently.
Use Tools and Resources
Staying consistent with your repayment plan is easier with the right tools. Digital resources can help you stay organized and motivated throughout the process.
Debt tracking apps are particularly useful. They can automate payments, monitor spending, and offer personalized strategies to help you stay on track. For example, one user, Mike, shared his experience:
"This is just what I needed to help me get on track controlling my debt. You can modify your balances, interest rate, payment dates, etc. all in the free version! You can also add in if you are paying extra each month. Seeing when I’ll be debt free keeps me from feeling like I’ll be drowning in debt forever."
If you prefer free resources, there are plenty of options. The Consumer Financial Protection Bureau offers a "Your Money, Your Goals" toolkit with tools and handouts for financial planning and debt management. Utah State University Extension provides PowerPay, a free debt reduction tool, along with an online course called PowerPay Money Master.
For more tailored guidance, Steps To Be Debt Free (https://debtloansrelief.com) offers a structured approach to assess your debt and create a customized repayment strategy. This can be especially helpful for staying accountable and on track during the repayment process.
Another app user, Samantha, shared her thoughts:
"This app is easy to follow. I’ve found it really helpful to see the goal, how to achieve it and how long it’s going to take, all in one place. It has given me the most motivation I’ve had to pay off my debts and get ahead."
Whether you choose a paid app, free tools, or professional advice, these resources can make a big difference. They offer features like automated tracking, reminders, and progress updates to keep you motivated and engaged as you work toward becoming debt-free.
Conclusion: Key Points for Using Balance Transfers
Balance transfers can be a helpful tool for managing debt, but their success depends on careful planning, consistent payments, and avoiding unnecessary spending. As CNBC Select puts it:
"Transferring a balance is only the first step toward becoming debt-free. You’ll need to make consistent, sizeable payments and avoid overspending to rid yourself of debt once and for all."
A 2023 TransUnion survey revealed a concerning pattern: many consumers who used personal loans for debt consolidation saw their credit card balances return to pre-consolidation levels within 18 months. This highlights the importance of sticking to your repayment plan without veering off course.
Remember, the 0% APR on most balance transfer offers is temporary. Once it expires, the average rate jumps to 19.33%. To maximize the benefits, set up autopay for more than the minimum payment and avoid using your balance transfer card for new purchases. Missing payments or accumulating new debt can quickly undo your progress.
It’s also essential to avoid viewing balance transfers as a quick fix. NerdWallet warns:
"The biggest risk with balance transfers is that people tend to see it as a ‘get out of jail free’ card and continue to accumulate debt on their old cards."
For extra support, platforms like Steps To Be Debt Free (https://debtloansrelief.com) provide resources to evaluate your debt and create a tailored repayment plan. Regularly revisiting your strategy can help you stay on track.
FAQs
How can I tell if a balance transfer is the right option for managing my debt?
If you’re dealing with high-interest credit card debt, a balance transfer might be worth considering – especially if you can realistically pay it off during the promotional low-interest period. This approach can help you save money on interest and streamline your finances by consolidating multiple debts onto a single card.
That said, it’s not always the right move. If you can’t clear the balance before the promotional period ends, you could face much higher interest rates afterward. Plus, don’t forget to factor in the balance transfer fee, which is usually around 3%–5% of the amount transferred. Make sure the potential savings outweigh this cost before deciding.
What can I do if my credit score is below 670 but I still want to apply for a balance transfer card?
If your credit score falls below 670, getting approved for a balance transfer card can be tougher. In this case, it might be worth looking into credit cards tailored for those with fair credit. These options often come with more lenient approval requirements.
To increase your odds of approval and potentially qualify for better terms, focus on improving your credit score. Simple steps like paying your bills on time, lowering your credit utilization ratio, and reviewing your credit report for any inaccuracies can make a big difference.
What’s the best way to pay off my balance transfer before the promotional period ends?
To clear your balance transfer before the promotional period ends, it’s crucial to have a solid repayment plan. Start by dividing your total balance by the number of months in the offer period. This will give you the monthly amount you need to pay to stay on track.
Consider setting up automatic payments or reminders to ensure you never miss a due date. Keep an eye on your account regularly to confirm that payments are processed correctly. If needed, tweak your plan along the way to make sure you avoid interest charges once the promotional rate runs out.
