How to transfer a credit card balance and buy yourself time to pay off debt
- When you transfer a credit card balance, you move your debt from one credit card to another, usually one with a lower APR, or a 0% introductory APR.
- By moving the debt to a card with a lower interest rate, you ultimately pay less in interest and save money in the long run.
- If the new card has a 0% introductory APR offer, you're also buying yourself time to pay the debt without accruing interest.
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When it comes to credit card debt, there's one strategy in particular that just might save you a lot of money on interest in the long run: the credit card balance transfer.
A balance transfer is exactly what it sounds like: You move your credit card balance (the money you owe) to another card. Primarily, people use this strategy to move or consolidate their debt to a balance transfer card with an introductory 0% APR offer, which buys them time to pay their debt without accruing interest.
If you have good credit, finding a credit card that offers low or no interest on balance transfers for a certain amount of time is a great way to give yourself a little more time to pay off debt while avoiding potentially large interest rates in the process.
You don't have to transfer a balance to a card with 0% APR. If you transfer to a card with a lower APR than the one currently carrying the debt, it will accrue interest more slowly, meaning you'll be able to make more headway on your debt. However, note that balance transfers usually come with a fee, so you'll want to run the numbers before transferring to any card, no matter the interest rate.
Here's how to complete a credit card balance transfer.
How to transfer a credit card balance
1. Look up your current credit card APR
Before attempting to transfer your credit card balance to a new card, you'll want to know what your APR is on your current credit card so you can compare it with the APR on the better product. Log online and check the terms and conditions, or take a look at your last statement.
2. Do some research
With your current APR in mind, you can do a little research to see which other credit cards might offer better interest rates on balance transfers. Remember that the better your credit score, the more likely you are to find credit cards with longer introductory periods and lower APRs.
3. Do the math
Once you find a card you think seems better than the one that currently holds your balance, you'll want to run some numbers.
Most credit cards charge a balance transfer fee (up to 3% on the total of the balance transfer amount, typically), so you'll want to determine whether it's worth paying that fee, or if it would be cheaper to just keep your balance on your current card with the APR you're currently paying.
If you have an end date in mind for paying off your debt on your current card, that could make better sense, financially.
4. Apply for the new credit card
Once you have thoroughly read through the details on the new credit card and believe you've found a card that makes sense for a balance transfer, you'll want to apply for the card. You can do this online and usually find out instantly if you're approved. Your actual card should arrive in the mail in a few days.
5. Gather your current credit card and new one once it arrives
You'll need account information for both to actually complete the balance transfer.
6. Complete the balance transfer online or over the phone
If you want personalized help, you can always call the customer service center for your new credit card, and someone will walk you through the balance transfer (or complete it themselves). Balance transfers can also be done easily and quickly online through the website of your new credit card company.
7. Continue making payments until the balance transfer goes through
Balance transfers can take a few days or weeks to go through, so be sure to continue making payments on your old card for as long as the balance remains. Check back frequently so you know when the transfer occurs and can switch your payments over to the new account.
8. Keep track of your payments
Remember that the main reason most people want to complete a balance transfer is to pay off debt without accruing unnecessary interest. In order to do that, you'll need to be smart and stay on top of your payments.
Make sure you keep track of exactly how many months you have to make the zero or low-interest balance transfer payments before a new (always higher) APR kicks in.
Take the amount of debt you transferred and divide it by the number of months you have on the introductory APR. If you can pay that amount each month on your new credit card, you'll be able to avoid paying interest while you pay down your debt.
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