Figure Out How Much You Need To Transfer
Before you do a balance transfer, you need to know how much you want to transfer. If you have multiple credit cards with balances, you might be better off consolidating it all into one balance. Or you may have excellent rates, so you may only want to move bits and pieces of your debt.
Regardless, the first step to doing a balance transfer is figuring out exactly how much to move. Remember, there are costs involved in doing this, so youll have to decide whats worth it and what isnt.
When youre looking for which balances you want to transfer, the first thing you should target is the annual percentage rate that youre paying on each of the balances, regardless of how high your balance is. The APR determines how much you pay in interest every month on the balance you carry over and is the primary reason most people do balance transfersto get a lower rate.
So for example, if you have a $5,000 credit card balance at 15.99% APR, you might want to consider finding a better card to transfer that balance to. But if youre like my friend and have a 2.99% lifetime rate on a certain credit card, odds are you wont do much better than that, so youre best to leave that balance where its at.
After youve gone through all your credit cards and determined exactly how much you would like to transfer, its time to get more realistic and figure out how much space you have to do one.
Choose The Card To Transfer The Balance To
- That the interest rate for balance transfers is lower than your current card and will stay lower the whole time your balance will be on it. Many cards offer an introductory interest rate such as a tempting 0% rate that goes up after a few months.
- What the balance transfer fee is even if the interest rate is 0%, most lenders charge a balance transfer fee of 2-5% of the balance.
- How much youre allowed to transfer check the minimum and maximum amount you can transfer and whether it meets your needs. With an Aqua card, you can transfer up to 90% of your available credit card limit .
- Check who the lender is you probably wont be able to transfer between two cards issued by the same lender, even, if the cards have different branding. For example, you cannot make a balance transfer from an Aqua card to any other card provided by NewDay and store cards.
Do Balance Transfers Hurt Your Credit
Transferring credit balances between credit cards affects your and the average age of your credit accounts, both of which play a role in determining your credit score. The credit utilization ratio refers to the credit youve used compared to your total available credit and should ideally be 30% or lower.
Assume you have a credit card with a of $10,000 and an outstanding balance of $3,000. Its credit utilization ratio stands at 30%. You then transfer this balance to a new card with a $5,000 credit limit, taking its credit utilization ratio to 60%. The converse holds true as well. For instance, if you transfer a $3,000 balance from a credit card with a $5,000 credit limit to a new card with a credit limit of $10,000, you can expect to see an improvement in your credit utilization ratio.
Canceling an old credit card after a balance transfer brings down the average age of your credit accounts, especially if youve used it for a long period. Getting a new card has a similar effect too. Incidentally, both actions have the potential to lower your credit score.
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What To Know Before Applying For A Balance Transfer Card
Most credit card companies will only provide the intro APR offer if you make your payments on time. If you pay late, the company may rescind the offer completely.
To avoid this, set up automatic payments on your card and have the payment go through a few days before the official due date. Then, create a reminder on your phone to log on and double-check that the autopay has gone through.
Also, you have to transfer the balance yourself by calling your current credit card issuer or logging onto your account online. Make sure to initiate this process as soon as the new card has been opened. The countdown on the intro APR offer starts when the account has been opened, not when the balance has been transferred. If you wait too long, the balance may no longer qualify for the interest-free discount.
Most balance transfer offers are only open to consumers who have a between 700 and 750, but some cards will approve those with a score between 650 and 700. If your credit score is below that range, you may need to wait and improve your credit score before applying for a balance transfer.
Having a credit card balance can be a symptom of overspending. Before you apply for a balance transfer, start tracking and budgeting your expenses. You need to fix the habits that got you into credit card debt before applying for a balance transfer, or this strategy will just be a temporary fix and not a long-term solution.
Alternatives To Balance Transfers
If you have credit card debt of $10,000 or more, a personal debt consolidation loan may be worth considering. Like credit cards, these loans are unsecured, and although their interest rates are more than the 0% introductory offer on many credit cards, their regular rates are often much lower than the standard APR on credit cards.
Other options to consider: a home equity loan, home equity line of credit or cash-out refinance. These loans are secured, which means the interest rates will be significantly lower than a credit card or personal loan. But there are risks, too: any time you borrow from your home equity, you’re putting up your home as collateral. If you can’t make your payments, you could lose your home.
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How Do Balance Transfers Work
A balance transfer involves moving outstanding debt from one credit card to another cardtypically, a new one. Consumers generally use credit card balance transfers to secure a significantly lower promotional interest ratesay, 0% for 12 to 18 monthsand perhaps better benefits, such as points for purchases or rewards programs for earning cash back.
If you have been approved for a card with a 0% interest balance transfer offer, find out whether the 0% rate is automatic or depends on a credit check. Next, decide which balances to transfer cards with high interest rates should come first.
There also will be a transfer fee that is charged on making the balance transfer. Typically, the fee will be 3% to 5% . If there is an amount cap on the fee, then it can make transferring a larger balance worthwhile. Be sure to check the on your new card before you initiate a transfer, as your requested balance transfer cannot exceed the available credit lineand balance transfer fees count toward the limit.
Understanding Credit Card Balance Transfers
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Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas’ experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.
The 0% introductory interest rate on balance transfers is a common feature of many credit cards targeted to consumers with good to excellent credit. While this offer looks great on the surface, people who take advantage of it might find themselves on the hook for unexpected interest charges.
The problem is that transferring a balance means carrying a monthly balance, and carrying a monthly balanceeven one with a 0% interest ratecan mean losing the credit cards grace period and paying interest charges on new purchases. Heres what you need to know about this potential situation and how to avoid it.
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How To Choose The Best Cibc Credit Card For A Balance Transfer
There are several factors to consider when youre deciding to make a balance transfer:
- Promotions: You want to pay your debt off as quickly as possible. So the lower the interest rate, the better
- Promotional period: Check if the offer is long enough for you to pay off your balance. When the promotion ends, the interest rate goes back up. If youre still carrying a balance, youll have to pay a higher interest rate
- Card issuer: You cant transfer a balance to a card thats from the same issuer. For example, if you want to transfer a balance to a CIBC card, it has to come from a non-CIBC card
- No interest-free grace period: Unless youre using a 0% interest rate offer, youre charged interest as soon as the balance transfer is posted to your account
- New purchases: The promotional rate only applies to the balance you transferred. That means for new purchases, youre charged the higher regular rate. Also, any payments you make will go toward your balance transfer first. So the interest on your new purchases will keep adding up until you pay off your balance transfer
How Will You Know If The Full Balance Was Transferred
Your new card provider will inform you whether or not it will transfer the full balance of your old card in advance. You get to know this when your new card provider approves your transfer. Once the transfer is complete, you may check the amount thats transferred through your old or new card providers online platform.
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Shop For Other Balance Transfer Offers
Its disappointing to come across a 0% balance transfer promotion that you cant qualify for because its issued by your current bank. Thats when you have to look around to see what else is available.
Rick Orford, founder of finance blog Surplus Academy, says to consider the APR and fees first, then continue checking the fine print.
The best balance transfer offer has no annual fee, a 0% APR and a 0% to 2% balance transfer fee, says Orford.
Next, look at how long youll have to pay down your transferred balance with no interest. Zielke favors choosing the card with the longest promotional period.
The longer you have with zero interest, the better to maximize your ability to pay it off before it ends, he says.
When considering offers, look at how much you want to transfer. You need to be sure that the card youre applying for can offer a high enough credit limit to accommodate the full transfer amount. Orford recommends trying to negotiate with the card issuer to get a higher credit limit if necessary.
The best balance transfer offer has no annual fee, a 0% APR and a 0% to 2% balance transfer fee.
Rick Orford, Surplus Academy
The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.
What Is A Joint Balance Transfer
A joint balance transfer is when a balance is transferred to relieve a partners debt. Not all credit card providers allow this, but there are several that give you the option to move your debt to a partners credit card.
There are two ways to do this: transfer between two names, or create a joint account for the debt. Transferring between accounts involves moving your balance to a new card with your partners name attached.
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Request A Balance Transfer
Typically, the first step of doing a balance transfer is getting in touch with the issuer of the card to which you’re moving debt and providing some information about the balances you want to move. Effectively, you’re saying, “Here’s this debt. Can I move it to this account?”
Cards have certain rules about what types of debt you can transfer. For example, same-issuer transfers generally arent allowed you cant move a balance on one Chase card to a different Chase card.
Some common ways to request a balance transfer:
Online. Generally, you can log onto your account and request a balance transfer through the issuer’s online portal. Be prepared to provide information about the debt you’re looking to move, including the issuer name, the amount of debt and the account information. With some credit cards, you can request balance transfers while filling out the application before you’re even approved.
Phone. You can call your issuer to request a balance transfer. As with online balance transfers, come prepared with information about the debt you’re looking to move.
You might be able to skip this process by using a convenience check from your issuer. Some issuers mail these checks with special interest rate promotions to cardholders, and sometimes these count as balance transfers. You can use these to pay off credit card debt on another account. Before using these, read the terms and make sure you understand the rates and fees associated with the offer.
What The Transfer Fees Are
This is a common hidden cost to balance transfers. As you can see in the offers above, Offer one comes with a 3% transfer fee.
This means that if I transfer $10,000, Ill get hit with a $300 fee right off the batso my balance will be $10,300 at 0%.
Offer two has no transfer fee, but the interest rate is higher.
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How To Do A Balance Transfer On A Credit Card
Learning how to transfer a credit card balance to another card requires understanding the intricacies of the process. Once you do, carrying out a balance transfer becomes rather straightforward. Aspects that need your attention include:
Selecting a balance transfer card
Make a selection based on whether you might benefit more from getting a card with a time-based 0% APR offer or one that comes with a low regular APR. If youre getting a 0% APR balance transfer card, check the duration of the promotional period and the APR that applies once the promo period ends. Also take note of any balance transfer fees, annual fees, APRs on purchases and added features.
Selecting the balances to transfer
If you wish to transfer balances from multiple cards, select the ones with the highest APRs first. Remember that the total amount you transfer needs to remain less than the available credit limit of your new card.
Initiating the balance transfer process
Waiting for a decision
Your card provider holds the right to approve or deny your request for a balance transfer. Reasons for denial may include waiting for too long after getting a new card, wanting to transfer more than your available credit limit or trying to transfer a balance from a card issued by the same card provider.
The actual transfer
To Get The 0% And Fee You Usually Have To Do The Balance Transfer Within The First 1
For most cards, the 0% period is only reserved for balance transfers that are made within the first 60 or 90 days though always check your card for its time limit, as it does vary. After this has passed, any transfers would incur expensive interest at the card’s normal rate, unless it’s paid off in full.
This can sometimes apply to the one-off transfer fee too, so it’s likely you’d pay a higher fee on later transfers, in addition to interest.
There are some notable exceptions to this though, with certain cards requiring you to request the balance transfer when you apply, and others allowing transfers at any point during the 0% period. But as the 0% period usually starts on the day the account is opened, you’d have less interest-free time if you waited.
How to request a balance transfer When you apply for the new card, it will usually include a ‘Do you want to transfer debts from other cards?’ section. Here, put in the details of the other card. If you’re successful in getting the new card, it will pay the other one off.
If you don’t do it at the initial application, you can usually submit the request via your card’s online banking or by calling the lender.
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How To Choose A Balance Transfer Card
Not all balance transfer credit cards are created equal.
There are several things you should consider when picking your card.
A credit card with the longest intro APR period. That will give you more time to repay the balance. Many cards offer 0% APR on both purchases and balance transfers, but sometimes the intro APR timeframe is shorter for balance transfers than it is for new purchases. Make sure you understand how long the balance transfer offer lasts and whether new purchases are subject to an interest charge.
A credit card without an annual fee and other benefits. Look for cards that also have other benefits, such as cash-back rewards when you make certain purchases or a sign-up bonus if you spend a certain amount within 90 days. Just make sure you don’t end up with a large balance that you can’t afford to repay.
A card with a low balance transfer fee. The lowest available is usually 3%, but there may be cards that don’t charge any balance transfer fees at all. However, if you find a card with a longer intro APR period, paying a higher balance transfer fee may be worth it.
Just note: You cannot transfer your balance to the same card issuer that you currently have. For example, if you have a balance on a Wells Fargo credit card, you cannot transfer that balance to a new Wells Fargo card and still qualify for the intro APR offer. You have to choose a new credit card company.