Transferring high-interest credit card debt to a card with a lower (or 0%) interest rate can save you time and money while you repay the debt.
To learn how to do a balance transfer, review this step-by-step process.
Step 1: Review Your Credit Card Debt
First, evaluate approaches for your credit card debt situation. Will you transfer the balance of only one card, or will you consolidate debt from multiple high-interest cards onto one card? Do you have a target date in mind for being debt-free? Review your current annual percentage rate (APR), and decide how much you’re going to transfer to another card. This information will make choosing the best balance transfer card easier.
A balance transfer is best when you can move debt from a high-interest card to a lower-interest card. However, keep your credit utilization ratio (the amount of your debt compared to your available credit) low.
Ensure that your existing credit card accounts and credit history are in good standing before taking action. Most balance transfer cards require a good to excellent credit score. For FICO scores, “good” is 670 and up.
Step 2: Will You Transfer Debt to an Existing or New Credit Card?
You have two balance transfer options: Open a new credit card with a limited-time 0% APR, or transfer a card’s balance to an existing card with a lower interest rate.
Most issuers prevent balance transfers to a new card from the same issuer. Figure out any restrictions such as these before applying for a new card.
The first option will save you the most money on interest. For the second option, determine whether your existing lower-interest card can support the transfer without getting maxed out. If not, you’ll need to either request a credit limit increase or decide whether to apply for a new card.
Here’s a simple example of potential balance transfer cost savings:
|Existing Card: 20% APR||New Card: 0% Balance Transfer APR for 12 Months|
|Balance Transfer Fee||N/A||3% ($5 minimum)|
|Debt Repayment Time||12 months||12 months|
|Total Amount Repaid||$6,000||$5,150 ($850 savings)|
To transfer debt to a card you own, skip to Step 5 below.
Step 3: Review Balance Transfer Card Offer Terms
Many balance transfer card offers are available, so focus on cards that fit your financial needs. Pay close attention to the following terms:
Length of zero-interest deal: Most range between 12 and 21 months, but watch for promotions spanning longer periods, which give extra time for transferred debt reduction and cutting the amount you need to pay monthly.
Balance transfer fee: Some cards don’t charge a balance transfer fee, but most cards do, typically 3% to 5% of the transfer amount or $5 to $10, whichever is greater. Seek low-fee cards, and figure out each card's fees.
To calculate potential balance transfer fees, follow this formula: Total amount you want to transfer x balance transfer fee amount (% written as a decimal) = total fee. For example: $2,500 transfer x 0.03 (3% fee) = $75 fee.
Transfer deadlines: To qualify for the introductory APR deal or discount on any transfer fee, a quick balance transfer may be necessary. To enjoy the entire interest-free period, initiate balance transfers right away.
Credit score requirements: If the card you want requires excellent credit but your credit score falls in the “fair” range, your application probably won’t be approved. If approved, your credit limit may be too low for your balance transfer goals. Focus on cards compatible with your credit profile.
Step 4: Analyze Your Top Picks
Compare cards by calculating how much you’ll pay monthly to clear the transferred balance before the promotional APR period ends:
Take the total amount of debt you’ll transfer to the card and add the balance transfer fee to it. This is the total balance transfer cost.
Example: $5,000 debt + $150 fee = $5,150 balance transfer total cost
Next, divide the total balance transfer cost by the 0% balance transfer APR offer length in months. That gives you the minimum amount you’ll need to pay each month to eliminate the transferred debt interest-free.
Example: $5,150 / 12 months = $429.16 minimum monthly payment
If the minimum monthly payment is too high for your budget, find another card with a longer introductory APR offer to spread out and reduce the monthly payment.
If you don’t pay down the balance on time, you’ll pay the standard balance transfer interest rate on the remaining balance.
Step 5: Apply for the New Card
This is the easiest part. An online credit card application requires only a few clicks. You’ll need your Social Security number, address, employment, income information, and perhaps credit-related history for identity verification. Not approved immediately? Don’t sweat it. The issuing bank may just need more time. Wait for mailed information before applying for another card.
Step 6: Gather Information
Get ready for the balance transfer to your new card. If you’re transferring debt from multiple accounts, you’ll need to collect details for each account:
- The account number for each account you are transferring debt from.
- The exact amount(s) of debt you’ll be transferring to the new card.
Step 7: Request a Balance Transfer
Request a balance transfer online or by phone. Start the process by contacting your new card’s customer service department, tell them you’d like to start a balance transfer, and share the information from Step 6.
The new card issuer will contact your old card’s issuer and move the balance amount you specified. Be patient. The transfer process may take anywhere from a few business days to a few weeks for new card accounts.
If you’re consolidating debt from multiple cards, repeat this step for each transfer balance, prioritizing the transfers from cards with the highest interest rates.
Step 8: Make a Plan To Pay Down the Transferred Debt
You’re using a 0% APR card to cut interest costs and get rid of debt, so if you don’t pay down your balance transfer before the introductory rate offer ends, the cost-saving value of the transfer may be lost.
Tips to keep you on track with balance transfer repayment:
- Create or update your budget: Ensure that your monthly budget includes the minimum payment needed to pay off the balance on time.
- Track your spending: Build a custom spreadsheet wizard, use credit and debit accounts offer spending analysis, or download apps like Mint or Wally.
- Reduce or eliminate extra expenses: Dedicate dollars to debt repayment by cutting unnecessary costs. Trim here and there and the dollars add up.
- Paid off your debt? Continue spending cautiously: After paying off your balance transfer card, continue budgeting and tracking your spending to avoid future debt.
Balance transfers are a useful credit card feature that can save you big dollars in interest costs, over time.
Now that you know how to do a balance transfer, check out which cards The Balance has deemed best for balance transfers.
myFico. "What is a FICO Score?"
Citizens Bank. "How to Apply for a Credit Card."
Regions Bank. "How Do I Apply for a Credit Card?"
Bank of America. "What is a Balance Transfer and How Can It Help You?"
Discover. "How to Complete a Balance Transfer."