You have probably heard of a balance transfer. But how do we work? And how could it save me money on my next credit card bill?
These are questions we get from people new to the world of credit cards. So keep reading to find out the answers, as well as how balance transfers work, the fees that can be associated with a balance transfer, and the duration of a typical balance transfer.
What is a balance transfer?
A balance transfer is a type of transaction in which debt is transferred from one credit card account to another. If approached correctly, they can save you money on interest payments i.e. if you transfer your balance from a high interest rate card to a low rate card. lower interest.
For example, a debt is changed from an interest-bearing credit card to a balance transfer credit card with 0% Introductory Annual Percentage Rate (APR) could eventually be repaid without interest.
What is a balance transfer credit card?
A credit card balance transfer is a credit card that allows you to transfer balances from other accounts. These typically offer an introductory APR of 0%, incentivizing transfers.
Some issuers also allow you to transfer other types of debt, such as car, student, and personal loans, to your balance transfer card.
Keep in mind, however, that balance transfers come with a few costs and limitations. You will usually have to pay a balance transfer fee, which is usually 3-5% of the total transferred amount. And your card may have a balance transfer limit, preventing you from transferring the entire balance of a card or loan.
Also, transfers between the same issuer – for example, transferring Chase debt to another Chase card – are generally not permitted.
How to transfer credit card balance
The exact steps for credit card balance transfers vary by issuer, but generally you’ll want to:
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First, apply for (and get) a balance transfer credit card, preferably with an introductory APR of 0%. Check out our list of the best balance transfers personal cards And business cards for options.
Next, initiate a balance transfer with your card issuer. This can usually be done online or over the phone, and you will need to provide details such as the name of the issuer and the type and amount of debt you wish to transfer. Some balance transfers can also be initiated via convenience checks.
Once requested, wait to see if the transfer is approved. It could take two weeks or more. If approved, the issuer will usually refund your old account directly. The old balance, plus the balance transfer fee, will appear in your new account.
Finally, pay off the balance and save a (potentially) substantial amount on interest payments.
At the end of the line
Balance transfers are the transfer of debt from one credit card to another. It is best to do this with a balance transfer card. You will then contact your card issuer to transfer the balance, which can take two weeks or more. The goal is for you to save on long-term interest payments.