How To Do a Balance Transfer the Right Way

Are you stuck with high interest rates on your credit cards? Carrying credit card debt adds stress to your life and punishes your wallet.

A balance transfer can provide some much-needed relief by temporarily lowering the amount of interest you owe on your existing credit card balance. That could create the window of time you need to pay everything off!

But you need to be careful.

There is a thin line you need to walk to ensure the balance transfer is a helpful financial maneuver. If you don’t have a smart plan, it also could actually lead you to additional financial headaches.

In this article, I’m going to help you make sure your balance transfer experience goes smoothly so you can eliminate that pesky debt once and for all!

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Table of Contents

• How to Complete a Balance Transfer in 5 Easy Steps
• Frequently Asked Balance Transfer Questions
• 6 Mistakes to Avoid When Completing a Balance Transfer

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How to Complete a Balance Transfer in 5 Easy Steps

Do you think a balance transfer could be right for you?

Let’s take a step-by-step walk through the process of moving your debt from one card to another.

Step 1: Know Your Existing Numbers and Stop Spending

Before you can determine whether accepting a balance transfer offer is a good idea, you need to ensure you know your existing credit card situation inside and out.

Some of the information you’ll want to familiarize yourself with is:

• The total balance owed on your credit card(s)
• The APR (interest rate) your card(s) are charging
• The due date for your next credit card payment(s)

Also, it’s important to STOP SPENDING with this credit card. New spending will accrue additional debt, which will be harder to pay off. This may also delay your ability to find the “true balance” that you need to transfer.

It may be uncomfortable to look at these numbers, but you’ll need them for future steps in this process. And this discomfort is necessary to truly tackle your credit card debt.

So, own it and prepare to get rid of it!

Step 2: Find the Balance Transfer Card That’s Right for You

You may be able to find a balance transfer offer on one of your existing credit cards. Or you can search for a new credit card that has an introductory balance transfer offer.

To find the former, contact your existing issuer to inquire about potential balance transfer offers. This could be preferable as it may not require a new hard credit inquiry.

If you need a new credit card to complete the transfer, Team Clark has a list of top balance transfer cards that can help you get started.

Things you’ll want to assess when comparing your options include:

• Length of time for 0% APR for your balance transfer: These offers can vary anywhere from 6 to 21 months.
• Balance transfer fees: Some cards will allow a balance transfer without a fee. But most typically charge a fee of 3%-5% of the amount of your transfer. So a $1,000 transfer could carry an upfront fee of $30-$50, for example. (This is how they make money on your transaction, even if you pay it off before the 0% period is over.)
• Period of time you have to make the balance transfer: Some card issuers have a strict timeframe in which you need to complete your balance transfer in order for it to be eligible for the promotional rate. Typically this is in the first 60-120 days of account opening. Make sure you’re picking one that fits your timeframe.
• Transfer restrictions: Some credit card issuers will not let you transfer a balance from one of their credit cards to another card they issue. So, if you have a credit card balance with one issuer, you may need to seek a card from another issuer.
• Long-term benefits of the card: Ideally, the card you pick for your balance transfer may have a purpose in your wallet beyond this initial 0% APR period. Perhaps you’re looking for cash back rewards, a low APR or travel benefits. These things are great, but be mindful of what got you into credit card debt in the first place.

Step 3: Apply for the New Balance Transfer Credit Card

Once you have picked a new balance transfer credit card, you’ll want to go forward with the application process.

Note: If you’re worried that you might not be approved for the card you’ve chosen, you may want to use a tool like Credit Karma’s Approval Odds to help you understand your chances of success before submitting the application.

Keep in mind that card issuers are going to process a hard inquiry on your credit report when you submit an application.

This could cause your credit score to go down in the short term. And it can have an impact on your ability to get a car loan, mortgage or other major loan.

However, it’s important to remember that the existence of a large sum of credit card debt is also damaging to your credit score. It hurts your credit utilization ratio and can be a red flag to lenders.

So, taking on a new balance transfer card with the goal of riding yourself of existing debt can actually be a net positive for your credit score in the long run — even if it temporarily brings it down.

Step 4: Contact Your New Credit Card Issuer to Complete the Transfer

Once approved for your new balance transfer card, you’ll have to initiate the balance transfer process by submitting a balance transfer request.

Typically, you can do this over the phone, on the card issuer’s website or via the card issuer’s app. I recommend starting this process with a phone conversation. It will be worth your time to get help from someone who is familiar with that card issuer’s specific process.

Be prepared to provide your new card issuer the information that we gathered in Step 1. This includes your account number from existing credit cards and the total balances you’re looking to move over.

Pay special attention to the due dates on your existing cards. And ask questions about the timeline for the balance transfer to be processed. You don’t want to miss a payment on your existing cards while waiting for the transfer to be completed to your new card. These transfers can take anywhere from a couple business days to a few weeks to complete.

Step 5: Develop and Execute a Payoff Plan

Your work is not done once the balance transfer is completed. In fact, the hardest work may still be ahead of you.

It’s important to devise a plan to ensure that you take full advantage of this interest-free period to pay off as much of your debt as possible.

First, DO NOT spend on new purchases with this balance transfer card. Make sure you pay your existing balance off first to avoid further interest charges.

A simple plan you might choose would be to take the balance you owe and divide it by the number of months you have for the 0% APR to come up with a monthly installment.

For example, if you transferred $3000 to a card with a 0% APR period for 15 months, you could pay your debt off by making 15 monthly $200 payments.

You may even want to be slightly more aggressive than that to ensure that you pay everything off before the end of your 0% APR period. Failure to do so could leave the balance exposed to regular APR rates that could be more than 20%. Yuck!

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Frequently Asked Balance Transfer Questions

Balance transfers are not something most people do often, so it’s completely normal to have questions about the process.

Each card issuer has its own set of procedures for balance transfers, so you’ll want to verify you’re doing things properly for your specific scenario.

I’ll address some popular questions here as a general resource, but I do recommend that you consult with your card issuer to get specific answers to questions about your account.

Should I Apply for a New Credit Card or Check Offers on an Existing Credit Card?

Before you apply for a new credit card, which will require a hard credit inquiry, you’d be wise to check with your existing credit card issuers to see if they’re offering a balance transfer promotion.

Collect any offers from existing credit cards and compare them with the offers from the best balance transfer credit cards. Evaluate key factors like the length of the 0% APR term, balance transfer fees, annual fees and the long-term APR for balances.

You may determine that a new credit card has the best offer, but it’s worth checking with your existing card issuers to save yourself the trouble of applying.

How Much Money Can I Expect to Save via Balance Transfer?

This depends on the amount of credit card debt you’re carrying, but the numbers can be staggering.

For example, someone with $10,000 worth of credit card debt at a 25% APR is likely paying more than $200 per month on interest accruing on that balance without making any new purchases.

An 18-month 0% APR period could be worth $3,600 in interest savings. (Keep in mind that this person would likely have to pay a balance transfer fee of 3-5% to move the balance, but that still is more than $3,000 in interest savings.)

A balance transfer would not only alleviate that person from owing that $200 per month for the duration of the 0% APR period, but it could help them “stop the bleeding” and pay the balance off so that they don’t accrue any more interest in the future.

If you have a very small balance on your credit card, it’s likely that you’re better off finding a way to make a lump sum payment to eliminate your debt rather than jumping through the hoops of a balance transfer.

What Do I Need to Do to Make Sure the Balance Transfers Properly?

Be prepared to overcommunicate with both your existing credit card issuer and the new card issuer.

You’ll initiate the process with your new card issuer, but you’ll need all of the information from your existing account to ensure the balance is transferred properly. Essentially, your new card issuer is paying your old card issuer.

Allow plenty of time for your new issuer to complete the transaction, and follow up with your existing card issuer to ensure the transfer properly clears you from any obligations on that balance.

Ask clarifying questions if you’re confused, and make sure you’re ahead of any payment due dates from both issuers.

How Long Does It Take to Complete a Balance Transfer?

The amount of time required to complete a balance transfer varies by card issuer.

If you’re fortunate, you may be able to have this whole transaction wrapped up in a couple of business days. However, it’s best to be prepared for this to take as long as 2-3 weeks from beginning to end.

That’s why it’s important to make sure you’re still making payments on your existing card balance, if necessary.

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6 Mistakes to Avoid When Completing a Balance Transfer

Now that you have a good plan in mind for your balance transfer, let’s ensure that you don’t fall into some of the most common mistakes with this transaction.

Team Clark contributor Beverly Harzog has highlighted six mistakes to avoid during your balance transfer:

Mistake #1: You Don’t Know There’s a Deadline on the Offer

Most balance transfer offers are available anywhere from one month to four months after your application gets approved. Don’t waste this opportunity by missing the deadline.

Special offers that waive the transfer fee, which ranges from 3% to 5%, might have a deadline, too.

The catch? You have to make the balance transfer within the first 60 days of opening your account. After that, it’s a 5% fee, and if you’re transferring $7,000, that’s $350 you’d save ($7,000 x .05 = $350).

Mistake #2: You Stop Making Payments on Your Old Card Too Soon

This is a biggie because it can cause all kinds of credit chaos for you. It can take a week for a balance transfer to complete. If you stop making payments on your old card too soon, you could get hit with a late payment fee. It’s unlikely to get reported to the bureaus because the balance transfer will eventually go through, but still, you don’t need this headache while you’re getting rid of your debt.

It’s a good idea to call your old credit card issuer and get verbal confirmation that the balance has been paid. But don’t stop there. Check your account online and confirm the balance is zero there, too.

Mistake #3: You Don’t Know When the 0% Rate Ends

With a balance transfer card, your goal is to pay off your balance during the interest-free introductory period, if at all possible.

If you still have a balance at the end of that period, then the “go-to rate” kicks in. This means that the purchase APR for your balance transfer card is now applied to your remaining balance. Plan your monthly payments so your debt is paid off by the time the intro period ends.

Mistake #4: You Pay Your Credit Card Bill Late

Most balance transfer cards have a clause that tells you what triggers the loss of an introductory rate. Paying your bill late is a common one.

If this happens, then you’ll lose the 0% APR and the purchase rate will be applied to your remaining balance. Plus, you could get hit with a late payment fee. If your payment is over 60 days late, you could even end up with a penalty rate, which is often around 30%.

Don’t let this happen to you! Set up automatic payments, text reminders or e-mail alerts. Do whatever it takes to remind yourself that a payment is due.

Mistake #5: You Assume the Intro Rate Applies to Cash Advances  

You might make an assumption that the 0% APR is extended to cash advances. This is a major problem, though, and here’s why.

Cash advances often carry very high APRs. We’re talking around 25% and even higher. The worst part, though? There’s no grace period. So you pay an astronomically high APR and the interest starts accruing as soon as it’s posted to your account. Just say no to cash advances, whether it’s on a balance transfer card or on any other credit card you possess.

Mistake #6: You Use Your Balance Transfer Card for New Purchases

This is kind of connected to the cash advance problem in that it’s easy to assume that your purchase APR also has an intro rate. When it comes to credit cards, making assumptions almost never works out in your favor.

Some cards do offer the intro rate for both balance transfers and purchases, but that isn’t the point. You can’t get out of debt if you keep adding to your debt.

If there isn’t a 0% APR on purchases, there’s still a costly problem to consider: The presence of an existing balance from your balance transfer eliminates the interest grace period users typically enjoy on new purchases.

That means interest on the new purchases starts accruing right away. This works against your goal of eliminating credit card debt that is subject to interest charges.

We’re trying to eliminate debt. Using your balance transfer card to make new purchases is just an all-around bad idea.

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