What is a balance transfer credit card and how does it work?
A balance transfer involves moving debt from one account to another. And a balance transfer credit card is any card account where that debt is moved.
This guide offers a step-by-step look at the balance transfer process, some possible benefits and what to consider before you get started.
What you’ll learn:
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A balance transfer lets you transfer debt to a credit card. It may help you consolidate debt, simplify payments and potentially pay less interest.
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In addition to credit card balances, some lenders might let you transfer debt from personal, student and car loans.
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You’re not typically allowed to transfer balances between two credit cards from the same card issuer.
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Card issuers may charge a flat balance transfer fee or a percentage of the transferred amount.
How do balance transfers work?
When it comes to credit cards, a balance transfer involves moving debt from one account to another. The process uses the balance transfer credit card to pay off—or pay down—what’s owed on the other account.
It doesn’t result in the debt being eliminated. But ideally, the balance transfer card has better repayment terms, a lower interest rate or both.
Every credit card issuer has its own policies. So it’s helpful to look into those details if you think a balance transfer might be right for you.
While balance transfers tend to happen with credit card debt, you might be able to use one to consolidate student loans, car loans and personal loans too.
How to choose a balance transfer credit card
Balance transfer offers vary depending on the credit card issuer, the card and the applicant. As an applicant, here are some things to consider when comparing balance transfer cards:
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Promotional APR period: Longer promotional periods might mean more time to repay high-interest credit card debt without incurring additional interest charges. Paying off most or all of the debt before the promotional period ends could help save on the total cost of the debt.
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Standard interest rate: Regular interest rates generally apply to balance transfers and new purchases after the introductory period ends. So applying for a card with a lower APR or interest rate might help if you plan to keep using the card after repaying the transferred debt.
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Potential fees: Credit card issuers may charge a flat balance transfer fee or a percentage of the transferred amount. And some cards may also charge an annual fee. So the projected savings on interest should ideally outweigh these potential costs.
- Transfer terms: Most credit card issuers only allow cardholders to transfer external credit card balances. That means you typically can’t transfer balances between two cards from the same issuer.
How to transfer a credit card balance
Balance transfers aren’t complicated, but they involve several steps. Here’s an overview of how the process might look.
1. Decide how much to transfer
To start, consider making a list of any existing balances and their interest rates and repayment terms. This could give you an idea of the credit and balance transfer limits you’ll need for the card you want to transfer to. It can also make it easier to prioritize which debts to transfer if you can’t do them all.
You may be able to transfer balances and consolidate debt on an existing card. Applying for a new card, especially one with a promotional intro rate, could also be an option.
2. Apply for a balance transfer credit card
Some credit card issuers have online applications for balance transfer credit cards. The process may only take a few minutes.
Like other credit card applications, it typically requires basic personal and financial information, including your:
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Full name
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Address
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Income
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Social Security number
3. Initiate the balance transfer
You may be able to request a balance transfer during or after the application process. In most cases, you can start the process online or by phone. You will typically need to provide the details of the account you wish to transfer from and how much of the debt you want to move.
Keep in mind that many banks won’t process a balance transfer request until the account is at least 10 days old.
4. Wait for the balance transfer to go through
Balance transfers could take a few days to several weeks. For example, Capital One cardholders can generally expect a balance transfer to take three to 15 business days, depending on whether the transfer was sent electronically or by check.
It could be necessary to continue making at least your minimum payment due while waiting for the balance to transfer. And if you transferred a full balance, make sure the account has a zero balance after the transfer is complete. Otherwise, the lender may continue to charge interest or fees if there was any amount leftover.
5. Start paying off the balance
If the balance transfer account offers a promotional rate, such as a 0% annual percentage rate (APR), it could make it easier to pay off debt without building interest. But to do that, it’s important to avoid late fees by paying on time and keeping the account in good standing.
Paying off the balance during the promotional period could help you avoid interest charges.
What to consider before initiating a balance transfer
A balance transfer can be a useful tool for lowering the interest rate on your debt, making it simpler to pay off. But it might not be right for everyone.
In general, balance transfers can’t be more than the credit limit on the new account. And there might also be separate balance transfer limits. Before applying for a balance transfer credit card, it may be helpful to consider these questions:
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Will it make repaying my debt easier? A balance transfer might make more sense for people with high-interest debt or those who want more time to repay. It can also be helpful for people who want to consolidate multiple debts into a single monthly payment.
- Will I qualify for a balance transfer? People with good or excellent credit scores are more likely to qualify for a longer promotional period. And that can make it easier to repay the debt without accruing additional interest. Applicants with lower credit scores may still qualify for an introductory APR, but the promotional interest window may not be as long.
Balance transfer FAQ
Still curious about balance transfers? The answers to the following frequently asked questions might help.
Do balance transfers hurt your credit score?
Opening a balance transfer credit card may affect your credit scores because it can trigger a hard inquiry. And hard inquiries can cause a small but temporary drop in your credit scores.
Opening a balance transfer credit card could also lower the average age of your credit accounts. This is factored into your credit scores and is something lenders look at when assessing your creditworthiness.
Can a balance transfer be denied?
Lending decisions are ultimately up to individual credit card issuers. An issuer could deny a balance transfer for reasons such as:
- The proposed transfer amount exceeds the transfer limit or the credit limit on the card.
- The transfer attempt is initiated outside the transfer window outlined in the card’s terms.
- An existing account isn’t in good standing.
- The proposed transfer is to a new account from the same credit card issuer. Most issuers don’t allow balance transfers from different internal accounts.
Can you get a balance transfer card if you have bad credit?
People who have below-average credit scores could find it harder to qualify for a balance transfer credit card with lower interest rates. Even if you don’t qualify for a card with a 0% intro APR, there may still be benefits to transferring balances to a lower-interest card.
What are the disadvantages of a balance transfer credit card?
Balance transfer cards can be a helpful tool to repay debt. But it’s important to remember they don’t erase debt. That still requires diligence and responsible habits. Disadvantages may not be the right way to think about things, but there are things to keep in mind.
For instance, there may be a balance transfer fee. And if there’s a promotional interest rate, it’s important to understand how long it lasts. Fully understanding your card’s terms and conditions can help you avoid potential disadvantages and decide if a balance transfer is right for you.
Key takeaways: Balance transfer credit cards
A balance transfer could help you streamline your finances, consolidate debt and save money on interest. And by knowing how the process works, you can maximize your benefits.
Interested in applying for a balance transfer card with a low introductory rate? Learn about Capital One’s balance transfer credit cards.
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