Chris Bridges, Founder and CEO, VITAL Card Inc.
Credit cards can serve as a powerful financial tool when used responsibly. But carrying high-interest debt on your credit card account can be tough — especially when it comes to paying that debt off.
Plus, obligations like student loan payments and other types of debt can further strain your personal finances. Fortunately, you can manage your credit debt by learning how to transfer a credit card balance.
How do credit card balance transfers work?
Certain credit cards allow you to transfer the balance of one or more credit cards to another card. This way, a cardholder can take advantage of a relatively low interest rate, or annual percentage rate (APR), on the new card.
For example, if you have a high-interest credit card with a $2,000 balance, you can transfer that balance to another card with a 0% APR introductory period. That way, your monthly payment can go toward paying down debt instead of interest payments.
Most promotional periods last for a minimum of six months as long as you make monthly payments on time. During this term, you can make interest-free payments based on your transferred balances and fees.
When the promotional period ends, however, any remaining balances will likely start accruing interest on either a fixed or variable APR. In general, credit card companies issue balance transfer cards to cardholders with excellent credit.
To qualify for this type of credit card, applicants usually need a FICO Score of 670 or above. It is essential to only transfer balances that you can afford to pay off in a timely manner — this is a great way to make sure you protect your credit score.
If you find yourself struggling to make payments on a balance transfer, reach out to your lender and explain the situation. In some cases, credit card issuers may work with cardholders to create a sustainable repayment plan.
When should you initiate a credit card balance transfer request?
If you have an excellent credit score and prefer not to take out a personal loan to pay off credit card debt, you may want to consider a balance transfer. This way, you can consolidate your debts into a single account number instead of dealing with numerous creditors.
Before requesting a balance transfer, consider whether you will qualify for the promotional interest rate, what the fees and charges will be, and how long the promotional period will last.
Make sure to establish a plan to repay the transferred balances while the intro rate is in effect since any remaining balance after the introductory period expires will be subject to the card’s standard interest rate.
Do balance transfers negatively impact your credit?
Whenever you open a new line of credit, there may be a slight dip in your credit score. This is because opening a new account requires a hard inquiry on your credit report.
Fortunately, this drop is generally temporary as long as you manage your new account responsibly by making on-time payments in full. Since closing old credit cards can lower your credit score, it’s generally important to leave your old account open even after the balance transfer.
A new account opening can also decrease your average credit age, potentially lowering your credit score.
If you don’t pay off your entire balance within the intro APR period, you may be charged a high APR on the remaining balance. Keep in mind interest charges can add up swiftly, potentially leading to credit card debt that may be difficult to overcome.
What are the advantages of balance transfers?
Cardholders can benefit from balance transfers in a few ways, including reducing interest charges, consolidating multiple credit card balances into one payment, and potentially improving their credit score.
When you transfer a balance, you’re essentially moving the debt from one credit card to another. This can be beneficial if you find a credit card with a lower interest rate than your current card.
By doing this, you might save money on interest and possibly pay off your debt more quickly. Another advantage of balance transfers is that you can consolidate multiple credit card balances into one payment.
As a result, you can simplify your finances and make it easier to keep track of your spending and payments. Additionally, making timely payments on your consolidated balance may increase your credit score over time.
What are the potential downsides of balance transfers?
Transferring one or more balances from one credit card to another can make it easier to manage your debt. However, there are a few potential downsides to consider before you initiate a balance transfer.
First, balance transfers often come with fees, such as annual fees and late fees.
Also, make sure you have enough available credit on the new card to cover the balance transfer. Otherwise, you may be charged a penalty fee.
In the same vein, a balance transfer fee tends to range between three percent and five percent of the overall transfer amount. Additionally, most balance transfers have a 0% introductory APR, but after that period expires, a higher interest rate may apply to any remaining balance.
In some cases, making late payments or going over your credit limit on the new card may nullify the introductory period. That means you’ll start accruing interest on the transferred balance right away.
If you’re transferring a balance from one card to another with the same credit card issuer, it’s possible that your credit limit could be lowered as a result. So while balance transfers can be helpful in managing your debt, it’s important to consider all the factors.
How to transfer your credit card balance
First, find a credit card with a 0% APR introductory balance transfer offer. This can help you to avoid high-interest charges while you pay down your debt.
Next, contact your current credit card issuer and let them know you want to transfer your balance. They will likely require some information from the new credit card issuer in order to process the transfer.
Finally, once the transfer is complete, be sure to make at least the minimum payments on both cards every month. Keep in mind that paying more than the monthly minimum may speed up the process.
How to find the best balance transfer credit cards
When trying to pinpoint the right card for a balance transfer request, look for credit card offers with a zero or low introductory rate on balance transfers. Also, check that the card has a low balance transfer fee.
Some cards charge a percentage of the balance that you’re trying to transfer. Avoid these cards if possible, especially since the fees can add up and negate any interest savings.
If you tend to pay off your balance in full every month, you may want to look for a card that offers rewards like cash back or travel points.
For instance, VITAL Card can help you earn cash-back rewards while you build your credit and learn how to manage your finances. This way, you can earn rewards while you get out of debt.
Lastly, consider a credit card company that offers good customer service so you can receive prompt assistance if you need it.
The bottom line
In summary, transferring a balance from one credit card to another can help you pay off your debt while avoiding high interest rates.
Determine whether you should move forward with this method of debt consolidation by leveraging your knowledge of balance transfer FAQs, such as how to transfer a credit card balance.
Do your due diligence when researching balance transfer cards, and make sure you understand the card terms, including fees.
If you’re looking for a way to learn more about credit while you work on your credit score, try VITAL Card. VITAL Card is more than just a credit card — it’s a powerful financial tool that helps you to share and spend responsibly. Learn more about our ever-growing online community and card benefits today.
VITAL Card blog posts are intended for informational purposes only and should not be considered financial or any other type of advice.