Understanding Balance Transfers

If you're a newcomer to credit cards, you may be curious about balance transfers.

In essence, this transaction involves shifting debt from one credit card to another. When done wisely, balance transfers can help reduce your interest costs by moving your balance from a high-interest card to one with a lower rate.

If you want to learn how to execute a balance transfer, here's a brief guide to help you begin.

Discover the ideal balance transfer card for you

Whether for personal or business purposes, not all credit cards qualify for balance transfers.

Many balance transfer credit cards come with benefits such as prolonged 0% annual percentage rate (APR) introductory periods, as well as cash-back incentives and sign-up bonuses.

If you haven't done so yet, it's important to find and apply for a balance transfer card that meets your needs.

Here are some key factors to keep in mind:

• Length of the introductory APR period: After the introductory phase, the card will switch to a higher variable APR if the transferred balance isn’t fully paid off.
• Fees for balance transfers: This is the cost associated with your transfer, typically ranging from 3% to 5%.
• Transfer completion time: Consider how urgently you need the transfer; most issuers process it within 5-7 days, while some may take up to 21 days. Also, ensure that you don’t miss any payments during the transfer process.

For instance, the Citi Double Cash® Card (see rates and fees) provides a lengthy introductory APR for balance transfers and a competitive cash-back rate, allowing you to earn rewards on future purchases while consolidating your debt.

Another option is the Bank of America® Customized Cash Rewards credit card, which features a 0% introductory APR for 15 billing cycles on purchases and any balance transfers made within the first 60 days.

Once the introductory balance transfer fee period concludes, the Bank of America Customized Cash will have a variable APR ranging from 18.74% to 28.74%. A 3% introductory balance transfer fee applies for the first 60 days after account opening, increasing to 4% for future transfers. Our guides to the top personal and business balance transfer cards can provide helpful insights to begin your search.

Steps for Completing a Balance Transfer

After selecting the appropriate card, you’ll need to initiate the balance transfer by reaching out to the issuer of your new balance transfer card — remember, do not contact the issuer of the card you’re transferring from.

The specific procedure for requesting balance transfers can differ among issuers, but most allow you to complete the process online or via phone. Keep in mind that some cards impose limits on transfer amounts, which means you might not be able to move the full balance to your new card.

Be patient while the balance transfer is processed

Next, wait for confirmation that your transfer has been successfully completed.

As always, the time required for this process can vary by issuer; it might take two weeks or more for them to approve and execute a balance transfer. During this waiting period, you may still need to make payments on the debt you’re attempting to transfer.

For most major issuers, balance transfers are typically handled directly, meaning the issuer will send a payment straight to your previous account for the approved amount, and that sum (along with any transfer fees) will then appear on your new account.

Ensure you pay off the balance on your new balance transfer card

Finally, it's important to make your payments on time to reduce the transferred balance before the introductory period expires, avoiding any additional interest charges. Late payments can sometimes void the benefits of the introductory period, leaving you back at square one.

To prevent accumulating credit card interest, aim to pay off all your cards in full and on time — this is one of our 10 commandments of credit card rewards.

Key Takeaway

Initiating a balance transfer is quite simple once you understand what to anticipate.

Balance transfer credit cards can be an excellent way to reduce debt without the burden of high credit card interest rates, but ensure you pay off the transferred balance before the introductory period concludes.

For additional details, refer to our guide on what a balance transfer is and how it operates.

Discover more: Top balance transfer credit cards

Last updated 10/2/24