How to Transfer Credit Card Balances to a New Card

Recently been approved for a new credit card with a 0% interest balance transfer offer? This introductory rate often only lasts for a short, predetermined period. After that, the interest rate on balances will certainly go up.

So how to transfer a balance from one credit card to another? Here are 10 steps on how to transfer a credit card balance from an old card to a new one with a lower rate.

Key Takeaways

  • Choose one or more cards with the highest rates and transfer those balances first, if the new credit limit permits.
  • Read the small print and note the balance transfer fee.
  • The terms will generally require completion of the balance transfer within a certain number of days, usually 60 days from account opening.

1. Choose the Balances to Transfer

How to transfer credit card balances to another card? First, a consumer should make a list of all credit cards, including the balances and interest rates charged on those unpaid balances. Choose one or more cards with the highest rates, and transfer those balances to save on interest.

The balance doesn’t have to be in the consumer's name to qualify for a transfer, so if someone's new spouse has a high-interest credit card balance and they have excellent credit, a 0% APR balance transfer offer can pay off an old balance and help a couple start over together with lower debts.

2. Calculate the Fee

Read the fine print and note the balance transfer fee. This expense will have to be paid upfront on the amount transferred. The fee is typically around 3% (or $30 for every $1,000) transferred but can run as high as 5%.

With the new, lower interest rate, will a cardholder still come out ahead after the balance transfer fee? Use a free, online balance transfer calculator to do the math.

3. Understand the Penalties

Transferring a balance at 0% still requires a minimum monthly payment on the balance to keep the promotional rate. A key question: What interest rate kicks in if a cardholder loses the 0% rate because of a missed payment? Will the penalty rate be worse than what the cardholder was paying before the transfer? A consumer has to make an honest assessment of their payment history before taking such a risk.

4. Know When the Promotion Ends

For how many months is the 0% rate valid (which can run for 6, 12, 15, 18, or even 21 months)? If planning to pay off a transferred balance during an introductory period, a cardholder should calculate whether they're likely to be able to pay it in full during that time. If not, what interest rate kicks in when the promotional period ends? If the rate is variable, how high can it go and how often can it change?

5. Watch the Time Limit to Transfer

If opening a new credit card account to take advantage of a 0% annual percentage rate on transfers, a cardholder should realize that the terms will require completion of the balance transfer within a certain number of days to receive the promotional rate, typically within 60 days after account opening. Complete the transfer the day after that window closes and the regular balance transfer rate takes effect.

6. Meet Transfer Requirements

A balance transfer cannot be done if the new account is with the same company that's owed the balance. Also, a past-due payment with the creditor that will receive the transferred balance, or if the cardholder has filed for bankruptcy, may block the transfer.

7. Decide How Much to Transfer

Check the credit limit on the new card; a balance transfer can't exceed the available credit line. Also, balance transfer fees count toward that limit. For example, if a cardholder has $10,000 in available credit, they won’t be able to transfer a $10,000 balance with a 3% balance transfer fee. They'd need $10,300 in available credit to complete the transaction.

8. Determine the Destination of Funds

Should the funds go directly to the high-interest credit card to pay off any remaining balance? In some circumstances, the cardholder can deposit the check into their bank account, but this is tricky. Make sure the credit card spells out that the funds deposited to a bank account will not be considered a cash advance. That could trigger high interest in the transaction.

Ask questions before transferring a credit card balance. What interest rate kicks in when the promotional period ends? If the rate is variable, how high can it go and how often can it change?

9. Follow Creditor Instructions

Each credit card company will have its own instructions for completing a balance transfer. Here are some options:

Balance transfer checks. The new card issuer (or issuer of the card the balance is being transferred to) supplies the cardholder with checks. The cardholder then makes the check out to the card company they want to pay. Some credit card companies will let the cardholder make the check out to themselves, but make sure this doesn't constitute a cash advance.

Online or phone transfers. The cardholder gives the account information to the credit card company to which they are transferring the balance and that company arranges the transfer of funds to pay off the account. For example, if you are paying off a $5,000 balance on a high-interest Bank of America Visa card and transferring that balance to a Citi MasterCard with a 0% APR balance transfer offer, you would provide Citi with the name, payment address, and account number for your Bank of America card, and indicate that you want $5,000 paid to that Visa account.

Direct deposit. The cardholder needs to have ready the bank account and routing number of the account into which they want to deposit the balance transfer funds.

10. Watch for the Transfer to Clear

Keep an eye on each old account with a balance that's being paid off to see when the transfer clears. In the meantime, don’t miss any payment deadlines on those accounts and avoid late fees.

Allow at least two to three days (and up to 10) for the new creditor to pay off the old creditor. Each creditor has its own time frame for completing a balance transfer. Keep an eye on the new account to see when the balance has transferred, and consider closing the old account to avoid the temptation to use it again and accrue more debt.

However, if you've had the old card for a long period, it might be best to leave it open and be diligent about not racking up additional debt. The reason has to do with your credit score, which is impacted by the length of your credit history. Closing the account could shorten your credit history and negatively impact your credit score.

The Bottom Line

Transferring high-interest debt to a 0% interest credit card can be a good way to save money and make it easier to pay off a balance. Following these steps, along with changing spending habits, can help a consumer end up more financially healthy than before the balance transfer.

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