Key insights:
- Balance Transfer credit cards can help you simplify multiple debts and potentially reduce your interest costs when they offer low or 0% promotional APR offers
- Fees, expiring promotions and standard APRs can impact overall savings
- Having a clear repayment plan and avoiding new debt can help you make the most of a Balance Transfer strategy
If you’re considering a Balance Transfer, it’s important to understand the facts. A Balance Transfer may be a good idea if you want to simplify your payments from multiple credit card accounts and get a break from paying interest while you tackle your debt. However, there are fees, conditions and credit considerations to take into account before applying.
Let’s take a look at how Balance Transfers work, when they make sense and how to effectively leverage Balance Transfers to pay off debt.
What is a Balance Transfer?
A Balance Transfer is the process of moving debt from one or more credit card accounts to a new card with more favorable terms. Many newly approved Balance Transfer credit cards typically offer a low introductory rate on transferred balances for a set period. This can provide an opportunity to pay down your debt without taking on more interest. However, Balance Transfers typically involve fees that may cut into your interest savings, and once your promotional period ends, you’ll go back to accumulating interest on any balance that remains.
How to transfer a credit card balance
Here’s how to transfer debt to a credit card using a Balance Transfer:
Shop around for offers
Take time before applying to review Balance Transfer offers from multiple card providers to find the one that works for you. Take advantage of pre-qualification offers that allow you to see terms and APRs without affecting your credit.
Apply for your Balance Transfer
Once you decide on your lender, it’s time to apply. Applying for new credit may impact your creditworthiness, so make sure you’re confident in your choice before applying. You’ll typically need to provide your personal information, like your address, income and Social Security number, along with information about your current accounts.
Transfer the balance
If approved, your card issuer will tell you how to transfer your balance. You might be able to complete this process electronically or via check. Some lenders may even pay off your balances for you.
Don’t forget to keep making payments on your old accounts until you’ve confirmed the balance has been transferred. Otherwise, you may be charged late fees, and it could have a negative impact on your credit.
Start paying off your new Balance Transfer card
Consider creating a budget and repayment schedule that helps you pay off as much as your debt as you can before the end of the introductory period. Keep in mind that you may need to pay more than the monthly minimum to pay off your balance and avoid interest once your promotional rate expires.
Tips to make the most of your Balance Transfer
Here are ways to make the most of your Balance Transfer and reach your financial goals.
- Be aware of fees: When you transfer a balance, you may be charged 3% to 5% of the total amount you’re transferring. Make sure the cost of the fee doesn’t cancel out the amount you’ll save on interest.
- Avoid new purchases: While Balance Transfer credit cards allow you to make new purchases, the interest rate for new purchases may differ from your promotional Balance Transfer rate. Plus, increasing your balance may work against your goal of paying down your debt.
- Stay on top of when promotional periods end: For newly approved Balance Transfer credit cards, most low introductory rate offers last between 6 and 21 months. After this period, any remaining balance will accrue interest at the standard Balance Transfer APR.
Should you use a Balance Transfer?
There are several situations when a Balance Transfer may make sense for your specific needs:
- You want to simplify your finances while paying off debt
- You have a high-interest credit card with an outstanding balance that will take several months to pay off
- You qualify for a low introductory APR offer for a newly approved credit card and are confident you can pay off your balance before the promotional period ends
Take stock of your budget and your financial goals before making any decisions.
Balance Transfer FAQs
Here are some common questions you might have about Balance Transfers.
Do Balance Transfers hurt your credit?
Applying for a Balance Transfer credit card can temporarily lower your credit score. But, over time, paying down your debt may help improve your credit score by lowering your credit utilization ratio and building your history of on-time payments.
How long does a Balance Transfer take?
Depending on the lender, Balance Transfers can take anywhere from 2 to 21 days. New Citi cardmembers can expect their Balance Transfers to be processed within 14 days.
Is a Balance Transfer worth it?
Whether a Balance Transfer is worthwhile to you depends on your unique financial situation. Balance Transfers primarily offer two advantages: saving on interest costs and simplifying debt repayment. Look over all your options and do your research to understand the terms and conditions before applying.
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.
