High interest rates on credit cards make it tough to pay off debt. At 15% APR, more than half of every minimum payment you make is used to pay off monthly interest charges. As a result, you make payments month after month, but you never seem to get anywhere. Learning how to transfer credit card balances to another account can help you pay off debt faster. It also helps you save money.
A balance transfer credit card is designed to help you consolidate debt. These cards offer low APR on balance transfers. Many offer zero percent APR during an introductory period if you have good credit. That way, you can move debt from your existing high interest rate cards so it’s easier to pay off.
- First, you apply for a balance transfer credit card.
- You get approved based on your credit score.
- You score also determines if you qualify for a 0% APR introductory offer; these offers range from 6 to 18 months, depending on your score.
- Once you open the account, you can begin transferring your existing balances.
- Each balance you transfer incurs a fee; these range from $3 to 3% of the balance moved.
- With your debt consolidated, you make the largest payments possible to pay it off quickly.
- Ideally, you want to pay off the full balance during the zero percent APR period; this means you can get out of debt interest-free.
- At the end of the introductory period, the card’s regular balance transfer APR applies to the remaining balance.
The best balance transfer credit card is the one that offers:
- The lowest transfer fees
- The longest 0% APR promotion period
These two factors make the card more effective because they reduce the cost of getting out of debt. Lower fees mean less to pay off. A long 0% interest rate period gives you more time to pay off debt interest-free.
When you transfer balances, the balance transfer card pays the balance off on the existing card. You need the account number and amount you wish to transfer. Then you call customer service on the balance transfer card and give them the list of accounts you wish to move. A balance transfer immediately drops the balance on the existing card to zero. The account is still open and in good standing. This means you can continue to use the card. Just be careful not to run up a new balance! Otherwise, you can end up with more debt to pay off instead of reducing your debt.
This depends on your budget, credit and how much debt you need to pay off. Credit card balance transfers usually work best for someone who has less than $5,000 or less to pay off. With a good credit score, you should be able to qualify for a one-year introductory offer. That gives you twelve months to pay off the balance without interest charges. Just keep in mind that the payments to reach zero in one year will be around $420 if you owe $5,000. So, if you have limited cash in your budget, this may not be the best solution. But with good credit and good cash flow, balance transfers can be the right choice.
Most credit card issuers have rules for balance transfers. For example, many issuers won’t let you transfer balances from one of their cards; they only accept transfers from cards issued by other companies. So, back and forth balance transfers may be prohibited in some cases. There is also a concern about cost. If you constantly incur balance transfer fees, you’re constantly adding to what you owe. You may end up paying the fees off and then transferring again. So, you might not get anywhere with this method. Finally, be careful about your credit score. Each time you apply for a credit card, you must authorize a credit check. These stay on your credit report for two years. Too many inquiries within 6 months to a year is bad for your score.
Yes. Most balance transfer credit cards let you transfer any existing balance, minus the exclusion mentioned above. Store credit cards tend to have much higher APR, so transferring these balances often makes sense. You save money and keep your store cards in good standing so you can continue using them.
Absolutely. When you set up the balance transfer, you tell them how much debt you wish to move. There’s no requirement to pay off a balance in-full. However, there’s good reason to transfer the whole thing. That way, you can take advantage of 0% APR on the full balance owed.
Yes. There is no restriction on just transferring credit card balances. If you want to move a loan, such as a personal loan or auto loan to your balance transfer credit card, you can. Just be sure you can pay off the debt during the 0% APR period. Remember, loans almost always offer lower interest rates than credit cards. So, unless you pay the balance off interest-free, transferring a loan could increase the cost of repayment. You basically make it more expensive to pay off that debt. It’s also worth noting that you can transfer in-store credit lines for things like furniture or electronics. Just have the name of the original lender plus account number handy and call customer service to make the transfer.
Yes. Unlike other forms of debt consolidation, this one lets you pay off someone else’s debt. You can transfer any balance from any existing credit card, even if it’s not yours. Just be aware that this means you incur fees and are responsible for paying off the other person’s debt.
Originally published at www.debt.com.