Thursday, November 24, 2022

Should I Transfer Credit Card Balance To Another Card

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What Happens To Your Old Account When You Transfer The Balance

Should I Transfer My Credit Card Balance To A 0% Interest Account?

Your balance drops to zero, or whatever is left in pending purchases or residual balance after your transfer if, for example, you were unable to transfer the entire amount due to your new cards limit. Your account will otherwise remain open unless you decide to close it.

Consider setting up an automatic subscription payment on the card, like Netflix or your local paper delivery, and then enroll in autopay for your statement. This will allow you to keep a small amount of activity on the card and continue building a positive credit history. That said, if youre paying a high annual fee, or youre concerned about the temptation to overspend, you might be better off closing your account.

The Effect On Your Credit Of Balance Transfers

Aside from the requisite credit check that comes with applying for any new credit card, resulting in a temporary hit to your credit score, moving debt around can also have an effect on your overall credit report. For instance, getting approved for a new card gives you more available credit, which can raise your credit score.

You must however have good or excellent credit history to get approved. A denied application not only hurts your credit score, but also may require you to look for another way to pay down your debt.

Closing the card you transferred your credit card balance from can also hurt your credit score.

There is nothing stopping you from continuing to charge on the card you transferred from, says Tayne. But closing that account could hurt your credit score because it will decrease the length of your credit history and increase your credit utilization.

Like every financial decision you make, applying for a balance transfer credit card should not be taken lightly. Instead, understanding how a new application will affect your credit score and making a plan for your remaining credit can prevent a decrease in your credit score.

Best Free Balance Transfer Credit Cards:

Balance transfer credit cards for bad credit would, in theory, allow you to reduce the cost of existing debt by providing a low introductory interest rate. Reality is a bit different, though. No major issuers currently offer worthwhile balance transfer credit cards to people with bad credit. Most bad-credit credit cards either require a security deposit equal to the credit line or have very small unsecured credit lines . Thatâs because issuers want people with poor credit to prove themselves before giving them the opportunity to transfer their credit card debt.

As a result, you will not find any 0% balance transfer credit cards for people with bad credit below. Instead, weâve listed popular credit cards for bad credit, since using credit responsibly will allow you to improve your credit score and eventually qualify for one of the best balance transfer credit cards.

The best balance transfer credit card is not one-size-fits-all. The answer depends on how much you owe, how quickly youâll be able to repay it and what your credit score is. Those factors will tell you which cards are attainable and help you figure out how much each will save you. But we can certainly point you in the right direction.

Here are the best balance transfer credit cards:

Card Name

Lastly, you can check out our editors’ latest picks for the best balance transfer credit cards on the market.

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Authorize The Balance Transfer

Once approved, you can start the balance transfer. This can usually be done by check, online or by phone. To pay off another card by check, your balance transfer card company will write a check to the card issuer you’re paying or will send you balance transfer checks by mail. If done online or by phone, you’ll enter in your account information for the card/s you’d like to pay off.

The balance transfer process usually takes five to seven business days — but it can take up to three weeks. As such, you’ll want to continue to make minimum payments due on the card you’re paying off until the transfer officially goes through — otherwise you risk getting dinged for a late payment on your .

Once the transfer goes through, it will appear as a payment on the credit card you’re paying down. If you’ve transferred the entire balance, the balance on your statement should be zero. The balance you’ve transferred will appear on your new credit card statement.

Do You Earn Cash Back On Balance Transfers

Should I get a balance transfer credit card?

Like cash advances or purchases of money orders, balance transfers are not considered to be purchases so, in general, theyre not eligible for cash back rewards. There may be some very rare exceptions with certain promotional offers, but these are few and far between. That said, the interest saved by moving your debt to a card with a lower interest rate will far outweigh the value of most cash back returns.

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You Cant Pay Off One Card Using Another Card From The Same Bank

Banks make money when you pay interest and other fees and generally wont allow you to pay off one card using another card from the same bank. If youre interested in a balance transfer offer, your best bet is to shift the balance from one bank-issued card to one with a 0% APR offer from a different issuing bank.

You can get around this restriction by using the balance transfer offer as a deposit to your checking account, then using that money to pay your credit card bill.

How Much Time Youll Need To Pay It Back

A balance transfer is just a promotionit usually doesnt last forever.

My advice would be to think about how much time you need to pay all of the balance back before the promotion ends.

If youre getting a big bonus at the end of the year and need a short-term tie-over, then you may be good with a shorter duration .

On the other hand, you may need a longer period, which would typically be at a higher rate.

It all depends on what your current and future financial needs are, so think about that before you choose.

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Best Balance Transfer Credit Cards

Here are a few of our favorite credit cards with a 0% APR introductory offer and a 3% balance transfer fee:

  • Rewards

  • 0% for the first 20 billing cycles on balance transfers and purchases*

  • Regular APR

  • Either 3% of the amount of each transfer or $5 minimum, whichever is greater

  • Foreign transaction fee

Bmo Air Miles Mastercard*

Should I Transfer My Balances To a 0% Credit Card?

Even though this card has no annual fee, it comes with perks that may benefit you if you dont think youll be carrying a debt for a long time. In addition to the introductory offer of 1.99% interest on balance transfers for the first nine months, you can collect Air Miles at an accelerated rate on your new purchases youll get twice the miles when you shop at Air Miles partners, and 1 mile per $20 spent everywhere else. New cardholders receive 800 bonus miles, too.

This card comes with an extended warranty and purchase protection and a discount on Cirque du Soleil shows. However, if you dont pay off your balance within the first nine months, your interest rate will go up to 22.99%, which is a typical interest rate for most credit cards, and it may accumulate quickly if you still have a lot of debt to pay off.

  • Annual fee: None

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How Long Do Credit Inquiries Stay On Your Credit Report

For most people, according to FICO, a new hard credit inquiry will stay on your credit report for two years but it only impacts your score for one year. Its important to note that these inquiries can stack up. For example, if you get a new mobile phone and service plan in January and then apply for a new credit card in February, you may see a bigger hit to your credit score than just five points due to multiple hard inquiries.

Are There Other Options To Consolidate Credit Card Debt Or Help Pay It Off Without A Balance Transfer Credit Card

Getting a personal loan with a competitive interest rate is one way to consolidate your credit card debt. If you feel youre having trouble handling your debt, consider seeking advice from a nonprofit credit counseling organization. On the other hand, if you have access to adequate funds, you might be able to negotiate your way into paying less than what you actually owe on your credit card through a one-time payment. Using a home equity loan to consolidate your credit card debt is typically best avoided, as defaulting on it brings with it the risk of losing your home.

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Read The Fine Print And Understand The Terms And Conditions

Before you go through with a balance transfer, a word of warning: Its crucial that you read the fine print and the terms and conditions.

For instance, if the balance transfer card of your choice has a balance transfer fee, calculate how much it will cost to make the transfer and how much you may save on interest to see if it makes sense for your situation. Its important to stay on top of the specifics to make sure youre making the best use of an offer.

And its a good idea to check whether the bank sets limitations on the following:

  • Its important to note that are based on the issuers assessment of your credit and other factors. Depending on your situation, you may not be approved for a limit that will cover the balance you want to transfer. Some issuers also only permit a maximum balance transfer.
  • Any restrictions with certain cards For example, if you want to transfer a balance to the Citi® Double Cash Card, you cant transfer balances from any Citibank cards you already have.

Figure Out The Best Amount To Transfer

Credit Card Balance Guide What Is It How Much To Carry

Usually it makes sense to transfer as much of your debt as possible onto a 0-percent card to minimize your interest payments but not always. Balance transfer cards usually carry higher-than-average APRs and if you cant repay the balance before the introductory period ends it could potentially cost you more in interest rates and fees than if you leave the balance where it is. If your current account has a lower interest rate, you should do some math to figure out whether transferring all of your balance or just a portion of it will cost less.

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When Does It Make Sense To Transfer A Balance Multiple Times

Transferring a balance multiple times can make a lot of sense if you do so as part of a solid plan to pay down debt that you can’t afford to repay in one balance transfer cycle.

Balance transfers offer promotional APRs for limited amounts of time. Sometimes it’s as long as 15 months. If you have $10,000 in credit card debt and can only afford to make payments of $400 per month, you won’t be able to pay off the full $10,000 in a 15-month period. You’ll be $4,000 short.

It can still make sense in this situation to transfer your $10,000 balance to a card with a 15-month promotional 0% intro APR. If you do, you won’t pay any interest on the full balance for more than a year.

Then, when your promotional rate expires, you can transfer the outstanding amount to a new balance transfer card to keep the remaining debt at 0%. If you can get a new balance transfer card with a promotional APR of 0% for at least 10 months, you’d be able to successfully pay the remaining $4,000 without incurring any additional interest.

What If This Doesnt Work

If you use a balance transfer and cant pay off the debt quickly OR you have too much debt or a low credit score and cant make this strategy work, you have other alternatives for consolidating debt:

  • A personal debt consolidation loan is another way to consolidate debt on your own. You can usually get a low interest rate if you have a good credit score, so this can be a good option for mid-range amounts of debt that are too big for consolidating with the method described above.
  • A debt management program is an assisted form of debt consolidation. That means you can use it even in spite of a bad credit score. It also works for large volumes of debt people have consolidated up to $100,000 or more using the program and still managed to get out of debt in less than or around 5 years.
  • The really good news with both of these options is that you can include debt that was already previously consolidated using a balance transfer. So if you use the method described above to consolidate and then it doesnt work, you can still consolidate in another way.

    Discuss options to get out of credit card debt with a trained credit counsellor

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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 Balance Transfers Work

    Balance Transfer Credit Cards: What You Need To Know

    While the exact process for balance transfers can vary widely, here are the steps you generally have to take when working with major issuers:

    1. Apply for a card with an introductory 0% APR offer on balance transfers or use an offer on a card you already have. To qualify for the best offers, you generally have to have good or excellent credit . Something to keep in mind: Same-issuer transfers generally arent allowed. For example, if you want to transfer a balance from a Citi card, you cant transfer it to another Citi card.

    2. Initiate the balance transfer. If youre doing this online or by phone, youll need to provide information about the debt youre looking to move, such as the issuer name, the amount of debt and the account information.

    Sometimes, balance transfers can also be initiated using convenience checks, or the checks issuers send you in the mail. Before using one, though, read the terms to find out if it will count as a balance transfer and what your interest rate will be.

    3. Wait for the transfer to go through. Once the balance transfer is approved, which could take two weeks or longer, the issuer will generally pay off your old account directly. That old balance plus the balance transfer fee will show up in your new account.

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    Where Did Credit Cards Get Their Start

    • How much credit you currently have
    • Whether or not you intend to apply for a mortgage, car loan or personal loan within the next six months
    • If you can get a 0% balance transfer offer on your existing credit card

    Whether you transfer a balance to a new credit card or an existing credit card to take advantage of low interest rates, make sure you dont use the old card anymore, otherwise your debt situation will be worse than it was before you made any changes.

    What Is A Good Credit Card Utilization Rate

    Sometimes called your debt-to-credit ratio, your credit card utilization is the ratio of your overall outstanding balance to your overall credit card limit. For example, if you have a $10,000 limit across your credit cards and your total balances are $5,000 then your credit utilization rate is 50%

    In general, when it comes to your credit score, the lower this ratio the better. Experts generally agree that 30% or lower is ideal, but according to FICO, those with near-perfect credit scores have ultra-low utilizations below 5%.

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    How To Make A Balance Transfer

    You can either set up the balance transfer when you apply for the card, or can make the transfer later once youve been accepted. You have up to 60 days after being accepted to transfer funds onto the new card. Heres how it works:

    1. Choose the balance transfer card thats right for you compare our balance transfer offers for help in finding the best deal.

    2. Apply for a Barclaycard online you can use our free eligibility checker before you apply, to see if youre likely to be approved. Its quick, its easy and it wont affect your ability to apply elsewhere.

    3. Request the balance transfer you can do this during your application or after youve been accepted. Youll have 60 days to transfer your old balance to your new account. If you dont complete the balance transfer, your promotional offer will expire.

    Once youve got your card, go online to activate it .

    What Happens To Your New Account Once You Pay Off The Balance

    Credit card debt consolidation

    Although you may have opened a balance transfer card with the sole purpose of consolidating and paying off your debt, the account wont automatically close after you pay off the balance. The best balance transfer credit cards tend to be lighter on ongoing perks, since their biggest feature tends to be a generous intro APR period on transfers, but there are still reasons to keep your new account open even after youve completed and paid off your transferred balance.

    Depending on what else your card offers, in addition to benefiting your credit score, you may also be able to earn modest rewards on future purchases or utilize ongoing consumer protections. If you demonstrate responsible usage with the card over time, its possible the issuer may also reach out to you with another balance transfer offer in the future.

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