If You Have Several Thousand Dollars Of High
The good news is there are balance transfer credit cards out there that offer a low introductory APR that can help you pay off high-interest debt.
How does a balance transfer work? A credit card balance transfer allows you to take a high-interest credit card balance and transfer it to a new credit card with a lower interest rate. Some balance transfer cards offer a 0% intro APR for balance transfers for a limited amount of time.
If you transfer balances from multiple credit cards to one balance transfer card, this can streamline your payments into one easier-to-manage payment.
While balance transfers can be helpful in the debt-payoff process, theyre not a magic solution. You must commit to getting out of debt for it to be a successful move or risk ending up in even more debt. You should also educate yourself about some of the pitfalls of balance transfers before applying for a card.
Heres how to transfer credit card balances to help you pay off debt.
Can You Transfer Ownership Of Your Credit Card Account
We all know that you can transfer a balance from one credit card to another, but what about transferring credit card ownership to another person?
To answer that specific question: No, you cant simply put a credit card that you applied for individually in someone elses name like you would if you were selling your car. After all, the issuer approved YOU for the account based on YOUR credit history and disposable income. The cards spending limit and terms are therefore tailored to your particular financial situation, and another party would have to submit their own application in order to see if they qualify for the same offer.
How Transferring Money From A Credit Card Can Affect Your Score
Keep in mind that using a cash advance to access money can have a negative impact on your credit. The amount of credit card debt you have relative to your total credit limit is called your , a factor that represents 30% of your credit score .
To find your credit utilization ratio, divide how much you owe on all your cards by your total credit limit. Using a significant amount of your available credit can be a red flag to lenders and creditors. Because of this, it’s considered ideal to keep your ratio under 30%. Say your credit card’s credit limit is $10,000 and you have a credit card balance of $4,000. Taking out a cash advance of $2,000 would cause your credit utilization ratio to jump to 60%. A ratio this high can start to negatively affect your credit score.
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How Can A Balance Transfer Help
Wondering whether itâs worth getting a card that lets you transfer a balance? Here are some of the advantages of having one:
A balance transfer could be a way to pay down an existing balance at a lower, more manageable interest rate. Thatâs because credit card companies may offer you a reduced rate on transferred balances for a limited time. If youâre opening a new credit card, this is known as an introductory rate. If youâre transferring a balance to an existing credit card, itâs called a promotional rate. Some cards are even interest free for a limited time.
You might also choose a balance transfer to help you keep track of your finances. If you have multiple credit cards or loans, you also have multiple payment amounts and due dates to keep straight. But if you consolidate that debt onto one credit card account, you only have to worry about one monthly payment.
Save on Interest
Perhaps the biggest benefit of a balance transfer is the ability to save money on interest. For instance, letâs say you transferred your existing credit card debt to a new credit card and that new card has a lower APR for the first 18 months. Paying off the balance before the reduced rate expires could potentially save you a significant amount in interest.
A Balance Transfer Allows You To Move Your Debt From One Credit Card To Another Learn More About How It Can Be Useful
Ever feel like those minimum payments just arenât cutting it? Or maybe youâre having trouble remembering the payment due dates for all your credit accounts?
A balance transfer, which can help you consolidate your debt, might be something to think about. Read on to learn more about how transferring a balance to a credit card works.
- A balance transfer allows you to transfer unpaid debt between accounts to consolidate your debt and potentially pay less interest.
- Some financial institutions let customers transfer balances from credit cards as well as from personal, student and car loans.
- Transferring your debt to a single account may help you simplify your payments.
- Before signing up for a balance transfer credit card, be sure to compare the terms and conditions to avoid potential penalties and charges.
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Beware The Grace Period
People who take advantage of these offers sometimes find themselves on the hook for unexpected interest charges. The problem is that transferring a balance means carrying a monthly balance. Carrying a monthly balance by not paying off the minimum amount due each montheven one with a 0% interest ratecan mean losing the cards introductory APR, its grace period and paying surprise interest on new purchases.
The grace period is the time between the end of the credit card billing cycle and the due date of the bill. During that period a cardholder doesn’t have to pay interest on new purchases. But the grace period only applies if a cardholder is carrying no balance on the card. What many consumers dont realize is that carrying a balance from a promotional balance transfer can affect the grace period if minimum payments aren’t made each month.
With no grace period, purchases on the new card after completing the balance transfer rack up interest charges. One good change: Since the , credit card companies can no longer apply payments to the lowest-interest balances first they now have to apply them to the highest-interest balances first.
Also bear in mind that many offers stipulate that the cardholder’s determines the actual number of months of 0% balance transfer in the introductory period.
The only way to get the grace period back on a credit card and stop paying interest is to pay off the entire balance transfer, as well as all new purchases.
You Could Wind Up In A Heap Of Financial Trouble
As you can imagine, if the person cant pay you back, or they cant in a timely manner, you will be stuck paying it off.
You cant call your credit card company and say to a customer service rep, Look, my friend cant pay me back this $4,000 right away, and so Im going to just wait a few months until he gets his act together, and then Ill pay down this debt. Promise.
Well, you can say that, but you can expect to see your account promptly closed if you do.
We dont need to spell it out for you. Your imagination can probably fill in the blanks fine.
If you do a balance transfer of somebody elses credit card debt onto your card, and it doesnt work out as well as you both hope, you could see your credit score go down, and with it, your credit history.
You could theoretically lose your credit card account if you cant make the payments, or if you do manage to pay off the debt yourself, you might keep your credit score healthy but see your finances wrecked in other ways.
Maybe you have to pay less toward retirement for a while, or you dont go on a vacation for a year and so on.
In other words, you want to think about this very carefully.
But it doesnt mean that you shouldnt do this. There are some pros and a few more cons that youll want to weigh.
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Alternatives To A Balance Transfer
There are many tools and strategies for paying off debt. If a balance transfer might not make sense for you, consider some alternatives:
- Other types of debt consolidation: Use a debt consolidation loan or another type of installment loan to pay off and consolidate debts. While you won’t receive a 0% APR offer, you might be able to get a lower interest rate, fixed monthly payment and a specific payoff date.
- Debt snowball or avalanche: Rather than taking out new loans or moving your debt around, you could strategically pay off your current accounts. The snowball strategy involves paying off the debt with the lowest balance first, which can be rewarding and encouraging. The avalanche strategy is when you pay off the balance with the highest interest rate first, which can save you the most money overall.
- Debt management plan: If you’re struggling to budget and afford your monthly bills, consider meeting with a to discuss your options. The counselor may be able to put you on a debt management plan , which can lower your credit cards’ interest rates or payments and help you pay off the balances within three to five years. However, you might not be able to use or open credit cards during this time.
Confirm A Balance Transfer Is The Right Choice
Before you get started, take a close look at your situation to see if youre in the right position to do a balance transfer. Two main factors will determine whether thats true:
- Your debt. A balance transfer credit card will benefit you most if you have high-interest debt and need more time to pay it off. Its best for less than $10,000 of debt, whether on a single credit card, multiple cards or different types of credit accounts. You cant transfer a balance higher than your credit limit, and $10,000 is at the high end for most consumers.
- Your credit score. Qualifying for a top-rated balance transfer credit card is generally easier if you have a good or excellent FICO score . You might still be able to find a balance transfer credit card with a credit score below 670, but it will probably have a shorter intro APR period. That can make it more challenging to pay down your debt before the introductory offer ends.
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Find The Best Offer On Each Card
Most new credit cards will give you a standard offer, as low as 0% when you sign up for a new account. As I stated above, make sure to read the terms and conditions carefully, as that may be the best rate you can getbut not necessarily the rate you will get. Meaning, if your credit score doesnt qualify for the best rate, you may get stuck with a different promotional offer by the time the credit card company approves you.
When using an existing card, youll typically get a few offers to choose from. For example, look at the offer I got from Discover below:
As you can see, theyre giving me two options with different rates and different lengths of time. You can also see the rate that it goes back to after I enjoy my promotional transfer balance . Now its time to compare your offers.
How To Use A Balance Transfer Check
Some card issuers will send them to you of their own volition others may give you the option to request one. Check your online account or call customer service to find out if you can request a balance transfer check. Once you receive them, balance transfer checks look and act the same way as personal checks, so its important to treat them as such.
If youre planning to use one to pay off another credit card, write the check out to the credit card issuer and send the payment by mail. You can use it to make a payment on a personal loan by making the check out to the lender that holds your loan. Alternatively, you can write the check to yourself, deposit it into your checking account, and make a payment to your credit card account or personal loan online.
When you receive balance transfer checks in the mail, youll usually get a handful of them. If youre not going to use all of them, make sure to shred any unused checks instead of just throwing them away. This way no one else can draw money from your credit line.
After the check is deposited by the recipient, youll see it posted on your associated credit card account, along with the balance transfer fee. Youll then have however long the offer said to pay off that transferred balance free of interest charges.
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How Long Does It Take A Balance Transfer Check To Clear
Once the check has been deposited or cashed, it typically takes a few days for it to clear, just like a personal check. Because there may be a lag between when you write the check and when it gets deposited, its important to avoid using up the available credit youre committing with the check so it doesnt bounce. Treat that money as spent, just as you would with a regular check coming out of your bank account.
Choosing The Right A Balance Transfer Offer
Balance transfer cards are a type of credit card. Like any other credit card, they have an interest rate theyll charge if you carry a balance, late fees if you miss a payment, and credit score requirements to get approved. You may also be able to use your balance transfer card for in-store or online purchasessome of which may even offer rewards. What sets balance transfer cards apart is that theyre designed to entice you to move your existing credit card debt.
There are several key factors youll need to consider when looking for a balance transfer card:
If you already have a balance transfer credit card, skip ahead to Step 2.
Introductory APR period
Most credit card companies offer an introductory balance transfer APR for around 6-18 monthsthough some go up to 24 months! The longest rates are typically reserved for those with great credit scores, as are the best APRs.
Introductory APR rate
To minimize the amount of money youll end up paying, the lower the APR the better. Naturally, 0% interest is ideal. Those offers arent hard to find but can be difficult to get approved for with a subprime credit score.
Instead, credit card issuers may offer a low APR thats a few percentage points lower than their usual rate . If subprime card holders do find themselves eligible for 0% APR offers, it may be for a period on the shorter end of the scale .
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How To Transfer To A Joint
With some credit cards, its possible to transfer a balance from a joint account, or transfer your partners credit card debt to a new joint credit card account. Not all credit cards or issuers allow you to have a joint credit card account, so make sure you choose a card that offers this feature.
To transfer a balance from an existing joint account
Apply for the credit card and include details of the balance transfer request, including all the names of the joint account holders, the account number, financial institution and the amount of debt you want to transfer.
You can go through this process with an individual credit card in your name, or apply for a credit card that offers joint account status for you and your partner.
To transfer a balance from your partners account to a new joint credit card account
Find a credit card issuer that allows joint primary cardholders and compare its balance transfer credit cards. Depending on the issuer, youll either get joint account status immediately or apply as an individual and add your partner.
See our guide on how to apply for a balance transfer for tips to improve your chances of approval.
Does Balance Transfer Affect Credit Score
No credit score impact: balance transfers to one or more existing cards. Perhaps you have several credit cards open and are carrying a large balance on one of your cards with a high interest rate. If you move this balance to one or more of your other cards with a lower interest rate, your credit score won’t be affected …
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Pick A Balance Transfer Card That Fits Your Needs
Now that you know what you owe and what your APR is, its time to choose a balance transfer card that fits your financial needs. Luckily, there are lots of balance transfer offers out there.
When choosing a balance transfer card, consider APR, the length of the promotional low-APR period and any fees. These factors could all make a difference when it comes to paying down your debt.
- How long will the low intro APR last? Most balance transfer cards offer a 0% introductory APR on balance transfers for a set amount of time, and typically on purchases as well. Credit card companies can change their offers, but currently, there are some good balance transfer cards with 0% intro APR offers ranging up to 21 months. Make sure that the promotional period lasts long enough for you to pay down as much debt as possible.
- How long will you have to transfer your existing balance once you have the card? You may only have a matter of weeks to transfer your balance in order to take advantage of an intro offer the amount of time you have varies from offer to offer.
- What kind of fees will you be charged? Many balance transfer cards charge balance transfer fees, typically between 3% and 5% of the amount transferred. Decide whether it makes financial sense for you to transfer the balance. Once you take into account the fee, it may be more expensive to transfer a balance than it is just to leave it on the original card.