Every week or so, you probably get credit card balance transfer offers in the mail or notice them online. The ads feature smiling people with carefree lifestyles, along with a tempting message: Transfer your balance from your high-interest credit card to another credit card with a low introductory rate.
If you transferred your balance each time you were offered a promotional rate, you’d be in trouble! But if you shop around for the right credit card offer—and if you have a solid plan in place—you can use a balance transfer to help pay off your credit card debt and save a significant amount of money on interest!
What is a balance transfer credit card?
A balance transfer credit card is a class of card that offers a low annual percentage rate (APR) for a limited period (usually between 6-21 months). After the introductory period is up, you’ll start paying the standard rate—which depends on the card and your creditworthiness.
You can transfer funds from one or more credit cards to your new card. Keep in mind that your new card will have a limit on the amount you can transfer, so you may not be able to move over all the funds you want.
The new card will typically charge you a balance transfer fee—a percentage of the amount you transfer (usually 3-5%), with a minimum fee of $5 to $10.
Do you know how to transfer credit card balances?
After applying for your new credit card and receiving approval, you can contact the new issuer to request a balance transfer. (Sometimes you can even start the process when you are applying for the card.) The issuer will either pay off the amount directly to your old credit card company, or they will send you a check for the transfer amount, which you’ll need to forward to the old card issuer. Depending on the card, it usually takes 2-21 days to complete the transfer process.
Be careful of blank balance transfer checks that the credit card company may send you. They can have high balance transfer fees, and the low promotional rate offered for the card might not apply to the checks!
When is the right time to do a credit card balance transfer?
- You can’t pay off your current card in three months or less.
- Your current credit card has a high interest rate.
- You have difficulty juggling multiple card payments.
- You have a good-to-excellent credit score, which can help you get approved by a new card issuer.
- The new card has a long introductory period, giving you plenty of time to pay down the balance.
- Most importantly—you have a detailed plan in place for paying down the new credit card’s balance during the promotional period. Otherwise, you’ll end up just postponing your payments without reducing your overall debt—plus paying a transfer fee.
As you are making your decision, here are some useful things to know:
- You can’t transfer balances between credit cards issued by the same bank.
- You won’t know your new card’s transfer limit until after you have been approved.
- Cards usually require that you make the balance transfers within a certain timeframe (usually between 30-120 days) in order to qualify for the low rate and/or to get a reduced balance transfer fee.
- The low introductory rate may apply only to balance transfers, only to new purchases on the card, or both. Also, the limited time periods may be different for transfers and new purchases.
- As with any financial agreement, read the terms—including the fine print—thoroughly. Be sure that you fully understand the conditions and interest rate you’re being offered.
Once you have made the transfer, be sure to:
- Watch the calendar. The credit card company is not obligated to remind you when the promotional period is about to end, so stay vigilant. You could go from 0% to a high APR quickly!
- Pay on time. A single missed payment could void your low rate for the card, reverting the balance to the regular interest rate—or higher. You may want to set up automatic payments to keep yourself on track.
- Pay more than the minimum. Paying the minimum amount each month will help you avoid late penalties, but it won’t help you pay off your debt.
- Don’t get tempted by rewards. While some cards offer rewards for new purchases, be careful about using the card for anything other than paying off your debt because you might rack up more debt.
Like any tool, a credit card balance transfer can be beneficial if you use it wisely. However, if you’re not intentional, you could pay the balance transfer fee, accumulate more debt with additional purchases, not pay off your balance, and find yourself in a worse position than before.
Be sure to have a plan for paying down your balance during the allotted time period, and stick to it! When you achieve your financial goal, you’ll know it’s been worth it—and you can smile like the people in the advertisements! Ready to transfer a credit card balance? Easily transfer a balance from another credit card to your Coast Central Visa Credit Card at no additional cost.