Credit cards

How to transfer balance from one credit card to another

The average household owes about $15,000 in credit card debt, according to the Federal Reserve Bank of New York. And that number has been steadily rising since the 2008 financial crisis. It’s no surprise that the average American has a hard time keeping up with payments. Credit card interest is generally high, so if you’re not paying off your entire balance each month, those charges can quickly add up and make it difficult to cover basic monthly expenses.

The good news: It’s possible to pay off your debt. A large chunk of credit card holders have successfully reduced their balances through a process known as a “balance transfer.” During this process, you consolidate one or multiple high-interest rate cards into one low-rate card that offers 0% introductory rates for any length of time (usually between 6 and 18 months).

What is a balance transfer & how does it work?

Balance transfers shift debt from one credit account to another. You’ll pay a fee (usually 3%-5%) and your interest rate will drop. The average credit card balance transfer fee is about 4%, according to, though some charge as much as 5%. So if you have to pay money to do a balance transfer, then why do it? Well, in many cases, it’s actually possible to save more money than you pay.

A typical credit card has a 15% interest rate. So if you have $5,000 of debt on your card, moving it to another with 0% introductory APR for six months would save you $400 in interest-and potentially hundreds or even thousands down the line.

For example, imagine that you have $10,000 in credit card debt at 17%, and each month’s balance costs an additional $200 in interest charges. By transferring your balance to a new card with 0% intro APR for 12 months (with a 5% fee), you could save yourself more than $1,700 over the following year ($15 monthly payments x 12 months x 3%). The longer your introductory period, the greater your savings will be.

So as you can see, most people can save large amounts of money with a balance transfer. The question is: how do you transfer your balance from one credit card to another? How do you avoid paying any penalties or extra fees for transferring the debt? This article will explain exactly how to do this with 5 simple tips.

1) Call Your Current Card Company First

Even though you might not think so right now, many banks want to help their customers pay off their debts responsibly. If they know that you’re sending your balance to a new card with lower APRs, they might be willing to waive any fines or fees for transferring the debt. Plus if there’s no balance transfer fee, you’re pretty much saving your self $200-300 in fees by just using a credit card with a lower APR.

Make sure you call before sending the balance anywhere. Sometimes transferring can take up to two billing cycles for the new account to appear on your statement (that’s 60 days from when you submitted your request). If it doesn’t show up within that time, be sure to call and ask why not. It could be that they didn’t receive the request at all or there was an error in processing it.

2) Look For A 0% Intro APR Card

The easiest way to save money on interest is to find a credit card with 0% introductory APRs for 12 months or more. This means that for the first 12 months after you open the account, there will be no interest on any credit purchases. On a $10,000 balance transfer, that can save you over $1,500 in interest (using our previous example). There are quite a few cards with 0% APRs these days including BankAmericard Better Balance Rewards Card and Citi Simplicity® Card – No Late Fees Ever .

3) Watch Out For Cash Advance Fees

After looking at all of your options, make sure to check out each card’s cash advance policy. If you use a credit card for an unplanned cash advance in order to pay off your balance faster, you’ll usually have to pay some extra fees. Usually this fee is around 3%. So if your interest-free introductory APR is only for 6 months, you might end up losing some of the savings.

4) Set Up Auto Payments

If you choose a credit card with no balance transfer fee, it’s best to set up automatic payments from your bank account each month. Also, if there are any other fees that will be due during the billing cycle (usually between 1 and 5% of the original balance), they can get taken out automatically as well. This way you won’t have to worry about paying anything on time and getting hit with fees because you forgot. Make sure to keep an eye on when those fees are due so you don’t overpay at the end of the month though!

5) Don’t Expect To Get 0% For Life

If you choose a card with an interest-free introductory APR, make sure to check out how long it lasts. If there are no restrictions on having your balance transferred after the introductory period ends, feel free to pay off the debt entirely without worrying about any fees. But if the 0% APR only applies to purchases for 6 months and then goes back up to 15%, do not transfer the full balance immediately! Instead, try transferring smaller amounts of money until you know exactly when your new credit card’s rates will change. Then decide whether or not it makes sense to pay off the rest of your balance right away or keep it going at 0%.

Things to consider before transferring your balance

Before you make a balance transfer, it’s important to understand how much money you can save and whether or not there are any penalties if you do not pay off the balance in time.

The risks of transferring a balance

If you cannot pay off your credit card bill in full every month, avoid doing a balance transfer. Why? Because if you do not pay off the entirety of your debt by the time that 0% introductory APR expires (usually 12 months), you will be hit with a huge interest rate in addition to any other penalties or fees. For example, if you have transferred $10,000 from one credit card to another and then only paid off $8,000 when your intro APR period ends (and did not make additional charges on that same account), you will still be charged an extremely high interest rate on that remaining $2,000.

The advantages to transferring a balance

While we already mentioned that you should not transfer your balance unless you can pay off the entire amount in full before your introductory APR period ends, if you do decide to do it anyway, transferring your debt will save quite a bit of money on interest payments.

For example, imagine that you transferred $10,000 from one credit card with an 18% APR to another card with a 12% APR (or 0%). If this new account has no annual fee and no other fees for making transfers between cards or for going over your limit (and those are pretty standard nowadays), then after 15 months when the intro rate expires, you would have paid just under $1,400 in interest.

If, however, you had kept the original $10,000 on that 18% credit card and made only the minimum payments throughout that 15 month period, then at the end of those 15 months you would have paid over $3,300 in interest on that same balance because your total interest charges go up with every payment (which is due to compounding interest).

How many balance transfers can one person do?

It’s possible for a person to do multiple credit card balance transfers, but it is recommended that they only do one at a time. It’s important to keep in mind that during the balance transfer, you will technically have twice the debt: the old credit, and the new credit. This may temporarily impact your credit score negatively.

Why is it bad to multiple balance transfers?

If your credit score decreases while making payments toward debt, it will send out warning signals about your financial habits and jeopardize your chances of getting approved for future loans (among other things). While lowering interest rates can be a nice benefit of doing balance transfers, they should only be done to pay off existing debt, or after someone has fully paid off their existing debts.

In addition, doing multiple transfers in a short period of time may mean that you could lose out on fee waivers or interest rate reductions from card companies.

So, while in theory you can keep transferring credit card balances, it doesn’t work out that well in practice.

How many balance transfers can you do on one card?

You can do multiple balance transfers to one account, but your credit limit may not be high enough to cover it. For example, say you have a $3,000 remaining credit on a card with a $10,000 total limit. If you began the transfer process, that could potentially leave $7,000 in debt for which there is no room on the card.

Although some people are able to get multiple balance transfers on one account, it’s probably not worth the risk because if you do make a mistake and go over your card limit, your entire account could be shut down. This means any other transactions that you make on your credit card will be rejected, making it very difficult to stay afloat.

By Moneypilot

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