If you are working to reduce your credit card debt, a balance transfer to another credit card can be an effective way to reduce your interest payments as you reduce your credit card balances.
There are two things to consider as you consider a credit card balance transfer:
Be careful that you are not transferring a balance to a credit card that has a higher APR than your original card, and
Don't plan to use low introductory APR balance transfer offers over and over to put off paying back your debts.
With that in mind, moving debt to different cards can help keep your credit card interest payments at manageable levels, help you focus your funds on paying off your credit cards, and build healthy credit habits that can help increase your credit score. Here are the steps to take into account when you transfer your credit card balances:
- Know your existing credit card's interest rates, balances, and balance transfer limits
- Weigh your available offers against your existing cards' offers
- Select the card with the best balance transfer offer available to you
- Transfer your balances to the card with the best offer or your new card
- Pay down your credit card debt
1. Know your existing credit card's interest rates, balances, and balance transfer limits
Start the process by listing out your current credit cards, writing down each of these elements to understand the full picture of your debt.
Interest rates (APRs)
Each credit card you have will apply an APR assigned for your purchases, which can be found on your credit card's statement. While the national average for credit card APRs is about 18%, yours may range between 7% and 30%. Look to see if any of your cards charge a different APR for balance transfers and if you have a balance transfer offers available on your existing cards.
Write down how much you currently owe on each credit card.
Balance transfer limits
Credit cards will have a limit on the amount you can transfer to the debt from another credit card. Document the balance transfer limit of each card by looking at the card's statement.
With a document listing each of your credit card's terms as above, you'll be prepared to move on to the next step for transferring your balances.
2. Weigh your available offers against your existing cards
Check to see if you have any pre–approved offers for a balance transfer credit card, then compare those offers by checking online or with your current card issuers to see what other credit cards may have balance transfer options. Consider any promotion rates (and how long those rates will last), the limits of your balance transfer, any fees assessed for each balance transfer you make, and the APR that will apply after the promotional rate expires.
3. Select the best balance transfer card available to you
Now you should have a list of your terms for both your existing credit cards and any other balance transfer offers. This will help you to select the best balance transfer offer available to you.
Selecting one of your existing cards for a balance transfer
If one of your current credit cards offers you better balance transfer terms than any of your preapproved balance transfer cards offer, it may be easiest to transfer your balance within your existing credit card portfolio instead of opening up a new card.
This can help you move your debt to the credit card with the lowest interest rate, which can help you save money on interest payments.
Selecting a new balance transfer credit card
If none of your existing credit cards can match the balance transfer APRs and duration from your pre–approved offers, then opening up a new balance transfer credit card may make sense.
Most balance transfer offers will include introductory low APR for balance transfers for a set period of time. No interest will accrue on the balance transfer amount during that introductory window. These can be very appealing offers, especially when you are planning to aggressively pay back that transferred debt during that introductory window.
Be aware, however, of what the APR will be when the introductory window expires: these APRs may be much higher than your current APRs, so you will want to be certain that you have reduced the debt enough so that your interest charges don't increase after the introductory period closes.
Citi offers an array of credit cards that feature balance transfer offers, including Citi Simplicity® Card, Citi® Double Cash Card, Citi Rewards+® Card and Citi® Diamond Preferred® Card, and you can learn more about our balance transfer credit card options here.
Be aware of balance transfer fees
While lower interest rates can help you save money by reducing interest payments, be aware that many balance transfer offers charge a fee for each balance you transfer.
4. Transfer your balances
The actual act of transferring your balance is simple: the card you are transferring the balance to will collect all information about the balances you are moving and will process the transaction on their end. You can typically complete this process online or through your credit card's app.
5. Pay down your credit card debt
One key condition of a balance transfer is that they will expect on-time payments as scheduled. Missing one payment could mean that any introductory or promotional APR can be taken away: putting you back at square one with a high interest rate.
While reducing your interest payments may be your main balance transfer goal, you should also be looking to managing your debt more efficiently going forward.
To ensure you pay down your debt, use what you are saving in interest payments to pay even more than the minimum monthly payments.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.