A balance transfer credit card is one of the best ways to get rid of your credit card debt. If you follow each step carefully, you can save a lot of money.
You’ll save money because many balance transfer credit cards come with an introductory 0% APR for a period of time, usually 12 to 21 months. If you still have a good credit rating, you may qualify for one of these 0% cards.
But even if you only have a good credit score, it’s worth looking into the options. You won’t get a 0% introductory APR, but you may find a card that offers a lower APR than the rate you’re currently paying on your credit card.
If learning how to transfer a credit card balance sounds complicated, you can relax. I’ll walk you through this step-by-step guide to balance transfers, and you’ll know exactly what to do.
Step 1: Make a list of your debts
If you have debt on more than one card, write down the APR and balance of each credit card. Add up the balances and you’ll know how many credit cards you need to transfer.
Note that this may not be the actual amount you need to repay. If there are transfer fees, they must be added to the total amount transferred. More on this in the next section.
Step 2: Choose the right credit card
It’s fairly easy to compare balance transfer credit cards online. The tricky part is choosing the one you can claim and which also meets your needs.
First, make sure you have a high enough credit score to be approved for your target card. Free credit scores are common now, and you can often get one from your credit card issuer, a credit scoring app, or a website that offers free scores.
Next, focus on the details of each card you’re considering. Unless you’re sure you can pay off the balance quickly, find a card with a long introductory period.
Once you’re pretty sure you can get approved for your target credit cards, read each card’s terms and fees. Here’s a checklist to make sure you don’t miss a thing:
- Introductory period. Note how long the period lasts before you are charged the referral APR, which is the purchase APR you will get at the end of the introductory period.
- Deadlines for Balance Transfers. Some offers have expiration dates. For example, the issuer may require your transfer to begin within 60 days.
- Transfer fee. If there is an offer to waive or reduce fees, there is usually a delay. For example, you may be required to begin the transfer by a specific date. If you do not transfer before this date, a 3% transfer fee may become a 5% fee.
- Purchase APR. This is the rate you will get on any remaining balance after the introductory 0% APR period ends.
If your chosen credit card has a balance transfer fee, you’ll need to add it to the total amount you want to transfer.
Here’s an example: Let’s say you want to transfer $5,000 to a new card. If the fee is 3%, you will pay $150 more to transfer your debt (5,000 x 0.03). So the amount you owe now is $5,150. If the issuer charges a 5% fee, you’ll pay an additional $250 (5,000 x 0.05). This is just one example of why understanding the details is so important with balance transfers.
Once you’ve selected the balance transfer credit card you want to apply for, you’re ready for the next step.
Step 3: Apply for a balance transfer credit card
With a balance transfer, you use one card to pay balances on other cards. Your new sender will need information about your current balances, such as account numbers and the amount you wish to transfer.
Complete the card application, and if you’re approved, you’re good to go.
Step 4: Request the transfer
There are several ways to request a transfer. Choose the method that is available or that you feel most comfortable with.
- Balance Transfer Cheques: Your new issuer may provide you with checks for a balance transfer. You would make the check payable to the credit card company you wish to pay. Note: Do not confuse balance transfer checks with convenience checks. Convenience checks often count as a cash advance, which means there’s no grace period and possibly a higher interest rate.
- Online transfer: You can also request a transfer online. Log in to your new account and you will likely see a transfer request form. You will need to provide details, such as account number and balance. With some issuers, you can even begin your balance transfer during the card application process.
- Telephone transfer: If you prefer to contact your new credit card company directly, you can call them. Make sure you have all transfer details to hand before placing the call.
The transfer is not complete until you receive confirmation from the issuer that your account balance has been paid. Continue to make payments to your old card until you’ve confirmed the transfer is complete. Otherwise, you will be hit with late payment fees.
Also remember that the amount of your transfer cannot exceed the credit limit assigned to you on your balance transfer card. If this happens, you can call the issuer and ask for a limit that allows you to transfer the entire amount. But I don’t recommend trading unless you have an excellent payment history.
Step 5: Pay off the debt
If you’re worried about the math involved, you can stop worrying. It’s quite simple.
Here’s an example: Suppose your balance transfer card has an introductory rate of 0% for 18 months and a transfer fee of 3%. You transfer $5,150, which includes the 3% transfer fee.
Your introductory rate lasts for 18 months, so you need to work out how much you need to pay each month to ensure your balance is zero at the end of 18 months.
Your monthly payment: $5,150 ÷ 18 = $286.11.
It is essential that you make your payments on time. It’s not an offer to wait 18 months to pay it off in a lump sum. You will have a minimum payment due each month, but you will pay the monthly amount you calculated.
Many balance transfer cards have rules regarding timely payments. For example, some issuers will terminate your 0% rate if you make late payments. Do whatever it takes, like setting up a direct debit, to make sure you make your monthly payment by the due date.