How To Avoid Common Mistakes With Balance Transfers

Don't let a transfer miscue mess up your money-saving master plan

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Balance transfer credit cards are a great opportunity to save money on a high-interest-rate balance by moving your balance to a card with a lower introductory rate. If you can tackle the full balance by the end of the promotional period, you can shave hundreds, maybe even thousands of dollars off the cost of paying your balance over time. Getting the full benefit of your balance transfer can be tricky. If you’re not careful, one small mistake could cost your promotional rate for good.

Shop for the Best Rates and Terms

The balance transfer fee is often a certain percentage of the balance transfer, so choosing a card with a low balance transfer fee—or no fee at all—helps you save more money on top of the promotional interest rate, especially on higher balances. Some cards offer introductory terms as long as 21 months, and others may waive the transfer fee (although the term is usually not as long with zero fee offers).

Don’t Attempt Transfers Between the Same Credit Card Issuer

You generally can’t transfer a balance from another credit card issued by the same credit card company. Many credit cards include the credit card issuer’s name in the title, but it’s not always so obvious, particularly with co-branded retail credit cards. For example, Capital One also issues credit cards branded with Bass Pro Shops CLUB, Kohl’s, Sony, GM, Walmart, and a few others.

There’s no real harm if this happens, except you won’t be able to reduce your credit card debt as you had planned, and your credit score will be slightly dinged by the addition of a new account and the credit report inquiry by the bank.

Check Your Eligibility

On top of credit requirements, your ability to qualify for a balance transfer offer depends on whether you’ve received a promotional rate or even a sign-up bonus from that credit card issuer before. You may not be able to take advantage of a balance transfer offer on the same credit card—or even on another card from the same credit card issuer—within a certain time period, usually 15 to 24 months.

Don’t Forget About Your Old Card

It can take several days, or even weeks, before the balance is actually transferred from your old credit card to the new one. In the meantime, you’re still responsible for the minimum payment on your old credit card. If you miss just one payment, you could be hit with a late fee. Continue monitoring your old credit card to verify when the balance transfer is complete.

If your approved credit limit ends up lower than the amount of the transfer you request, the credit card issuer may decline the request or transfer less than the requested amount.

Meet the Balance Transfer Deadline

With most balance transfer deals, the offer won’t be on the table for long. You’ll only have between 60 and 120 days of opening your account to make the transfer. In addition, the clock starts ticking when you’re approved and agree to open the account, which may be several days before you receive your card. In some cases, the credit card issuer may set a specific date for the balance transfer offer. Unless you need to make purchases to earn a sign-up bonus in the first few months of opening your account, it’s safer to transfer the balance right away so you won’t miss the window.

Don’t Make Purchases Unless There’s a Special Rate for Them, Too

Unless the promotional rate applies for both transfers and purchases, you should hold off on using your credit card for purchases until your transfer is completely paid off. That’s because once the funds are transferred to your new card account, you probably won’t get a grace period for any purchases you make. You’ll have to pay off your full balance—including the balance transfer—to avoid paying interest. Otherwise, your purchase balances will be subject to finance charges at the regular interest rate from the date of the purchase.

If you’re hoping to transfer a balance and earn a sign-up bonus on the same card, you’ll have to act quickly. Meet the minimum spend for the sign-up bonus first. Pay off that balance, then initiate the balance transfer before the deadline.

Plan Ahead To Pay in Full Before Time Runs Out

You’ll receive the full benefit of the balance transfer offer when you pay off the entire balance during the promotional period. Calculate the amount you need to pay each month to pay off the balance before the introductory rate expires.

It’s simple to calculate your payment. Start with the balance you plan to transfer, add in the balance transfer fee and annual fee (if there is one), then divide the total amount by the number of months or billing cycles in the promotional period.

For example, consider a $3,000 balance with 3% balance transfer fee, a 12-month 0% APR, and no annual fee. The formula is: Balance + Fee / Number of Payments.

$3,000 + ($3,000*.03) = $3090 / 12 = $257.50. Just make 12 monthly payments of $257.50, and your balance is cleared.

Always Pay on Time

Falling behind on your payments not only leaves you vulnerable to late charges, it also puts you at risk of losing your promotional interest rate. Catching up on your payments eliminates future late fees, but doesn’t bring back the promotional rate, which means you’ll lose all benefit of the balance transfer offer.