Moving one or more high-interest credit card balances to a lower-rate card can help you save money on interest and get out of debt faster. And, if you choose your transfer card wisely, you can move your debt for free as well as benefit from fewer fees, better terms, and card rewards!
Depending on the transfer card you choose, it can also come with benefits like a higher limit, sign-up bonuses, an interest-free introductory period, better rewards, or improved fraud and security features.
Read on to learn how to do a credit card balance transfer and when and why you should consider doing it.
Card Trick: How to Transfer a Credit Card Balance
Moving money from an existing credit card to a newly issued one can make it easier to pay down your balance with a better interest rate, lower fees, or more flexible payment terms.
Here’s a step-by-step guide to transferring your credit card balance, as well as a look at when it does (and doesn’t) make sense to do so.
1. Review Your Current Balances and Interest Rates
Before you start the balance transfer process, you should review your current credit card balances and the limits and interest rates on those cards. You can find your updated credit card balances and interest rates on your monthly statement.
Depending on how much debt you have, it might not be possible to move all your balances onto one card. In this case, you’ll obviously want to prioritize transferring balances from cards that have a higher interest rate first.
2. Choose the Perfect Balance Transfer Card
Next, shop around for a card to transfer your balance to. The best balance transfer offers will include a low or even 0% APR promotional rate. While this initial introductory offer is important, you also want to know what your interest rate will jump to after the promotional period expires.
If you’re not sure whether you’ll pay off the full balance before the offer expires, or if you plan to use the card for more than the balance transfer, you want to ensure you are comfortable with the higher rate charged when the introductory period ends.
Ideally, your monthly payment should be lower than at least one of the cards you are planning to move money from. Remember, if you are making only minimum payments on a card you will not be able to make progress on paying down your debt.
Also, compare balance transfer fees. Some credit card companies don’t charge a fee, while others will charge you a percentage typically ranging from 3-5%. Depending on how much you transfer, these fees can add up.
At 1st Advantage Federal Credit Union, we offer great rates and free balance transfers on our Ist Advantage Standard Mastercard so you can maximize your savings.
You should also look carefully at the credit limit you are likely to be offered on your new card (this will depend at least partly on your credit score). This needs to be more than the total amount you are hoping to move to your new card.
Be aware of any other fees the card comes with, such as annual maintenance fees or late payment charges. Choose a card, such as the 1st Advantage Standard Mastercard, that charges no annual fee.
Remember to take careful note of the length of the introductory period during which you will be charged no, or at least significantly lower, interest on your balance.
This is your “breathing room” where you will have a valuable chance to get ahead on your payments without further interest charges, so the longer it is—the better. Most cards offer introductory periods from 6-9 months.
4. Apply for Your Balance Transfer Card
Once you’ve found a card that offers you a significantly lower interest rate for a good period of time, with a little or no balance transfer fee, and a credit limit that works for you—it’s time to go ahead and apply.
If you have not done so already, check your credit score. The better this is, the more likely you are to qualify for a higher credit limit and a lower APR (not the introductory rate) on your card.
Most credit card issuers allow you to complete the application online or over the phone. You’ll likely need to provide:
- Proof of identity and residency
- Information about your job and income
- Information about your existing card balances
- Authorization for a credit check
Finally, wait to hear if you have been approved for your balance transfer card.
5. Complete the Balance Transfer Process
Once you’ve received your balance transfer card, you want to complete the balance transfer process as soon as possible. Be sure to check with the card issuers regarding how long you have to do this once your card is issued.
You can transfer balances to your new card by providing details to your new card issuer over the phone. To do so, you may also need to contact your previous card issuers to get details about your balance, account number, and transfer procedures.
With this information in hand, you should be able to complete the transfer process online or over the phone, provided you do not surpass your credit limit. In some cases, your new card may come with balance transfer checks you can send to the holder of any debt you want to transfer.
6. Wait for Your Balance Transfer
After you initiate the balance transfer process, you have to wait for your balance transfer credit. This can take a few days to a few weeks depending on your card issuers. Be careful about not using your card for other spending during this time.
Sometimes you will receive an automatic notification that the transfer has taken place, while other times, you will have to check on the status manually. Remember to check with both your new card issuers and each of your previous card providers.
6. Pay Off Your Balance
Once your high-interest debt has been transferred to your new credit card, you will have to begin paying off this balance. Try to pay off as much of your account balance as possible while the lower introductory APR is still in effect.
When Is a Balance Transfer a Good Idea?
You shouldn’t transfer balances simply to avoid paying off your credit card bill or just to gain access to a higher credit card limit. Rather, use a balance transfer as a sensible way to buy some breathing room while you work to reduce your spending and pay down your debt.
So when should you consider a balance transfer? A balance transfer can be a wise idea when:
- You have fast-rising but still manageable balances on one or more cards
- When you get a raise, start a new job, or come into a cash lump sum unexpectedly
- In advance of a wedding or other major life event or before applying for an auto loan or mortgage
In these cases, a cash transfer can help you:
- Nail down card debt before it gets out of control
- Use an unexpected windfall to significantly reduce what you owe
- Take responsibility for your past spending and start to improve your credit score
You should probably avoid a balance transfer if:
- You have already maxed out one or more of your cards
- You are struggling to make minimum payments on one or more cards
- You just want a card with a higher credit limit to park your existing debt
In these cases, you are better off consolidating your debt into a lower-rate, fixed-interest personal loan or talking to your creditors about debt relief.
Remember that if you do not have a plan in place to reduce card spending and pay off your balance, you will most likely continue to rack up credit card debt, despite doing a balance transfer.
3 Smart Things to Do After Your Balance Transfer
With your balance transfer in place, it can be tempting to relax. But this is actually the time to take steps to turn short-term gains into long-term improvements in your financial health. Here’s how:
- Don’t close your old cards. It can be tempting to cut these up, but keeping cards open with just minimal use can help improve your credit score over time by showing that you know how to handle more sources of credit responsibly.
- Monitor your credit score: Your credit score might have taken a hit if you opened a new source of borrowing and then used a big chunk of your available credit. Keep an eye on it over the coming months. You’ll see it improve as you pay off your balance.
- Avoid new debt: All your hard work setting up the transfer and paying off your new card depends on you not racking up new debt because your old debt is more manageable.
Make Your Transfer Count With 1st Advantage
A balance transfer can be a new beginning. Make yours count with a low-rate credit card from 1st Advantage Federal Credit Union.
Our 1st Standard Mastercard offers qualifying members a great everyday APR, plus:
- No annual fee
- No balance transfer fee
- No cash advance fee