A balance transfer may help you pay off debt faster, but only in the right circumstances.

11 minute read

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High interest rates make it tough to pay off credit card debt. At 15% APR, more than half of every minimum payment you make is used to pay off monthly interest charges. At 20% APR, that jumps to two-thirds of each payment you make. As a result, you can make payments month after month, but never seem to get anywhere. Learning how to transfer credit card balances to another account can help you pay off debt faster. It can also help you save money.

Q:What is a balance transfer credit card?

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A: 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.

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How to transfer credit card balances step-by-step

Balance transfers can be an effective way to consolidate debt, if…

  1. You owe less than $5,000 total to credit card companies.
  2. You have a good or excellent credit score

If you can qualify for the right card with a long 0% APR teaser interest rate, then you can consolidate debt effectively using this solution. Here is what you’ll need and what you can expect with regard to how fast this solution will pay off your debt.

What you need: Balance transfer credit card with a 0% APR introductory rate offer

Time to find a card: 1-2 hours

Time to get your card: 2-3 weeks

Total time to payoff: 6-24 months

Fees: $3 – 3% of each balance transferred

It will take you a few hours to compare cards online to find the right card for your needs. You should receive your card within 7-10 business days, then you can work with customer service to begin transferring balances. Once your balances are transferred, you will have 6 to 18 months to pay off the balance in full before the end of the 0% APR introductory rate. That means you generally complete this debt solution within one to two years of consolidating your debt.

Step 1: Apply for the right balance transfer credit card

There are two things you want to look for when shopping for a balance transfer credit card:

  1. Low balance transfer fees
  2. The longest 0% APR teaser rate period possible

Most credit card companies offer teaser rate periods of 6-12 months. However, with excellent credit, you could find a card that offers an introductory rate period of 18 or even 24 months. These cards are rare, but worth the hunt. This maximizes how much time you get to pay off your debt interest-free.

NOTE: The COVID financial crisis has limited balance transfer cards

Most credit card companies have scaled back on balance transfer offers in the wake of COVID-19. Many of the best cards that were previously available are not available now. Debt.com’s credit card expert Jason Steele has a full report on which balance transfer cards are still available.

If you’re using an online credit card comparison, it will show you different cards that fit your needs and credit profile. Only apply for the card that looks like the best fit for your needs. If you apply for multiple cards, you’ll create multiple credit inquiries, which can decrease your credit score.

Step 2: Get approved based on your credit score

Once you apply for the card you want, the credit card company will tell you exactly what they’re willing to offer, including:

  1. The period of time you qualify for 0% APR after you first open the account
  2. The credit limit on the card, which will determine how much debt you can transfer
  3. The balance transfer APR that you’d pay AFTER the teaser rate period ends

The higher your credit score, the more favorable all of these terms will be. If you have a FICO over 800, then balance transfer terms should be in your favor. If not, then you may need to choose which debts you transfer. Our expert Laura Adams explains how to do this below.

Step 3: Once you receive your card, transfer your existing balances

In about 7-10 business days, you should receive your card. Then, you can activate it and begin transferring your balances.

The easiest way to transfer your balances is to call the customer service department for the new balance transfer card. You give them the account information and balance of each debt you wish to transfer. Then they do the rest of the work for you.

Balance transfers can be used for consolidating a variety of debts. In fact, you can move more than just credit card balances.

You can transfer balances from:

  • General-purpose credit cards
  • Charge cards
  • Store cards
  • Gas cards
  • In-store credit lines, such as for furniture or electronics
  • Personal loans
  • Auto loans

Just make sure you understand the cost of getting out of debt. Loans, especially secured loans like auto loans, tend to have lower rates than credit cards. So, if you transfer an auto loan balance to a transfer card and don’t pay off the balance before the 0% APR period ends, you could end up paying a lot more before you pay off that debt.

Also, be aware that each debt transferred will incur a balance transfer fee. This can range from $3 per transfer to 3% of each balance you move. This will be applied and rolled into the balance on your new card.

Step 4: Pay off the debt as fast as possible

The transfers themselves take time to complete. According to the credit experts at Experian, transfers may be completed in a week for some cards but could take up to a few weeks.[1] You will need to plan accordingly once you finish consolidating your debt, since this may reduce the amount of time available to pay off the balance interest-free.

Your focus should on the fastest repayment possible. Review your budget to cut any unnecessary expenses. If there are expenses you can cut back or any luxuries you can do without, scale back as much as possible.

This will maximize the cash flow available in your budget for debt repayment. Make the biggest payments possible each month. Your goal is to pay off the total consolidated balance before the 0% APR teaser rate ends.

If you don’t pay off the balance in-full before the 0% APR period ends, then the credit card company will apply the standard balance transfer APR to any balance remaining.

Should I transfer my credit card balance?

This is a common question that people ask. Even knowing how balance transfers work, you may be wondering if it’s the right solution for you. You want to know that it will work and that you’ll be able to become debt-free.

You also want to avoid the risk of making a challenging situation with debt worse, which can happen if you run up new balances on your other cards or start making regular purchases on the balance transfer card. All of this can mean you wind up with more debt instead of less.

Here is just one example of a balance transfer question that Debt.com has received:

Question: I have around $5,000 on, I think, five or six credit cards. I’ve been seeing these offers for other credit cards that say I can transfer my balance to them — and they won’t charge me interest. I don’t see how this isn’t a scam. How can they make money if I move thousands of dollars to them and then pay it all off without a dime in interest?

Are these things legit? If they are, what’s the catch? There’s got to be a catch.

— Richard in Delaware

Debt.com Chairman and CPA Howard Dvorkin responds…

Yes, Richard, these offers are “legit” — and yes, there’s a catch. There are several, actually.

First, I think you’re missing a key element of these offers: They expire. When you sign up for what’s known as a zero-percent APR balance transfer, you usually have between six and 18 months before an interest rate kicks in.

Second, that interest rate can be higher than the one you had on your old cards. If the rate is not significantly lower than the rate on your original accounts, then when that 0% APR period expires, you’ll go right back to paying those high-interest charges.

Third, as Debt.com has written about before: “Unfortunately, nearly all zero-percent APR balance transfer offers require the payment of a 3 percent ‘balance transfer fee’ — so this benefit isn’t really free.” You need to be aware that to pay off your balances interest-free doesn’t mean that you’re paying them off free of any charge. Fees on these transfers will increase the amount you need to pay off before you ever get started.

Still, these offers can be a real boon to dedicated debt hawks who want to pay off their credit cards. Why? Because instead of paying around 16 percent each month in interest — which is the national average right now — that 16 percent can go to paying down those big balances.

Sadly, it seldom works out that way.

Credit card companies don’t make these offers out of the goodness filling their bleeding hearts. Many are publicly traded companies with a responsibility (and a moral obligation) to make money for their shareholders.

These companies know most cardholders aren’t going to use those 18 months to pay down debt. They will simply spend whatever they save in interest payments, and when the zero-percent interest offer ends, many will simply be too apathetic to search for a better offer.

The bottom line…

The truth is Drew, that if you have good credit, find the right card, and are disciplined about repayment, these offers can really help you. But the truth is that credit card companies wouldn’t make these offers if they were losing money on them.

These companies are masters of psychology. They know darn well that many people will see the money they’re saving during the no-interest period and simply spend it elsewhere. Then, when the zero-percent offer expires, they still have big debts to pay at the full rate.

So, please keep in mind that DIY isn’t for everyone. Try it once if you think you can be disciplined enough to be one of the few who pays off the balance as planned. If it doesn’t work, don’t keep re-consolidating! Call in the professionals.

Having trouble getting out of debt on your own? Talk to a certified credit counselor for a free debt analysis.

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Prioritizing balances for transfer

In some cases, you may not get approved for a credit limit that’s large enough to transfer all your balances. Or, you may get approved for a high limit, but a shorter 0% APR introductory period. This means you’d only have a small window to pay off the transferred debt. These are common challenges with balance transfers, even if you have good credit. If you run into either of these situations, then you will need to prioritize your balances and decide which ones you want to transfer.

This is a situation that Susan faced when she applied for a balance transfer credit card:

Question: I was approved for a 20-month balance transfer, but not for the entire amount that’s on my high interest cards. I have three cards open, and I want to transfer all of the highest APR debt and most of the second. The last card has 0% for 5 more months. So, how do I ensure that debt that I want to move gets transferred?

— Susan in Tennessee

Credit expert Laura Adams responds…

Congratulations on getting such a credit balance transfer credit card offer! When used properly, you should be able to save a boatload of interest. But you have to make sure you do the transfers in order of highest to lowest APR. And realize that it’s common to have different interest rates applied to different portions of a balance on the same card.

For example, on one card you might have the following types of annual percentage rates, or APRs, for different types of transactions:

Your new account that’s offering the balance transfer promotion will send the funds to the old account, which shifts or transfers your debt. So, when you transfer a balance, it’s like making a payment and should be applied in order of highest-to-lowest interest rate.

If you believe that your credit card company isn’t applying your payments in the right order, be sure to contact them for more information. If the issue isn’t resolved, you can file a creditor complaint with the Consumer Financial Protection Bureau at consumerfinance.gov.

How the Credit CARD Act affects balance transfer cards

The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act was passed in 2009 to provide additional consumer protections to credit users.[2] Part of the act requires credit card companies to apply payments to a balance in order of highest to lowest APR.

For example, if you use your card to take out a cash advance, this balance will be paid off first as you make payments because cash advance APR is generally much higher than the APR applied to regular purchases.

For balance transfers, this can be both good and bad for card users.

Good: Transferred balances pay off highest APR portion of the balance first

As Laura Adams explains in the question above, a transfer is basically treated like a payment. So, if you only transfer a portion of the balance from one of your accounts, the portion with the highest APR would be transferred first. If you have cards with cash advances on them that are costing an arm and a leg, transferring part of the balances would wipe out those higher interest charges.

Bad: Making regular purchases on a balance transfer card can negate 0% APR

On many balance transfer credit cards, the 0% APR period only applies to balance transfers. Regular purchases made on the card would have purchase APR applied to the balance. Since this rate is higher than the 0% teaser rate applied to the balances you moved, purchases would be paid off first. If you make regular purchases on a balance transfer card, you may miss out on the benefit of the 0% APR period.

More questions about transfers

Q:What is the best balance transfer credit card?

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A: The best balance transfer credit card is the one that offers:

  1. The lowest transfer fees
  2. 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. Compare balance transfer cards »

Q:When you transfer balance on credit cards what happens?

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A: 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. Accounts may take seven days to up to a few weeks to transfer.

Once the balance is transferred to the new card, the balance on the existing card drops 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.

Q:Is it good to transfer credit card balances?

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A: 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.

Q:Can I transfer credit card balance back and forth?

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A: 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.

Q:Can your transfer store credit card balances?

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A: 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.

Q:Can you transfer part of a credit card balance?

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A: 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 a good reason to transfer the whole thing. That way, you can take advantage of 0% APR on the full balance owed.

Q:Can your transfer a loan to a credit card?

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A: 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.

Q:Can you transfer a balance from someone else’s credit card?

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A: 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.

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Published by Debt.com, LLC