8 Questions to Ask Before You Make a Balance Transfer

A woman holds multiple credit cards wondering about making a balance transfer

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Balance transfers have some benefits, like allowing you to take advantage of a lower interest rate, but, they also have some disadvantages, like the balance transfer fee and possibly an annual fee. To make sure you're getting the most from a balance transfer answers these eight questions before you move your credit card balance to a new credit card.

Will You Be Opening a New Account?

Be aware that opening a new account can impact your credit score — first by adding an additional inquiry to your credit report and second by lowering your average credit age. The new account needs to have a high enough credit limit so you can transfer your balance. There's no guarantee that you'll be approved or that your credit limit will be enough. You'll just have to wait and see after you make the application.

Do You Qualify for the Promotional Rate?

A pre-approved offer for a low introductory balance transfer interest rate doesn’t mean you actually qualify for that rate. You typically must have excellent credit to get the best balance transfer interest rate. Don’t make any assumptions. Check with the card issuer to find out what you need to do to get the best interest rate.

When Does the Promotional Offer End?

Any promotional interest rate should last at least six months, but some promotional rates last as long as 18 months. Before you move your balance, make sure you know when the promo rate will end so you’re not surprised when the new rate takes effect. 

What Will the Post-Promotion Interest Rate Be?

When the introductory interest rate expires, your regular balance transfer interest rate could skyrocket — going from 0% to 22.99%, for example, depending on your card's balance transfer APR. If you haven’t paid off your balance transfer, your monthly finance charges will increase and could even be higher than they were before you transferred the balance. Try to pay off as much of your balance as possible before the promotional rate ends.

How Long Will It Take You to Pay off the Balance?

Do you have a plan to pay off your balance transfer? Or are you just moving the balance because you want to get a low-interest rate for a few months? Transferring a credit card balance is better when you can pay the balance off within the promotional period. If you can’t pay it off soon, try to pay it off shortly after the promotional period ends. The longer it takes to pay off your balance transfer, the more you’ll pay in interest charges. Of course, it helps if the introductory period stretches out over a long period of time.

Will the Balance Transfer Save You Money?

Don’t assume that a low introductory interest rate means you’ll save money overall. You still have to pay the balance transfer fee and an annual fee charged by your new credit card. A balance transfer calculator can help you determine whether you’ll actually save money by transferring your credit card balance.

Does the New Credit Card Already Have a Balance?

If you’re transferring to a credit card that already has a balance, it could take you longer to pay off the balance transfer. Because of the credit card payment allocation rules, the minimum payment will apply to the balance with the lowest interest rate, i.e. your balance transfer, while anything above the minimum will be applied to higher rate balances.

The good news is that your balance transfer won't incur interest if you have a 0% introductory rate. The bad news is that you may not get a chance to pay it off before the promotional period ends if you can't first pay off the existing balance.

How High Will Your Credit Utilization Be After the Transfer?

Your credit utilization impacts 30% of your credit score. If the balance transfer will result in a credit card balance that’s more than 30% of your credit limit, your credit score can take a hit. Before you move your credit card balance, check to make sure your credit score won’t be hit. Fortunately, a high credit utilization will decrease as you pay off your credit card balance.