How To Do a Balance Transfer

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Americans collectively owe $870 billion in credit card debt, according to the latest research by the Federal Reserve Bank of New York.

Even more alarming, the number of credit card accounts becoming seriously delinquent is on the rise. According to the same report, the percentage of credit card accounts 90 days or more delinquent rose to 4.99% from 4.80% in the last quarter of 2018.

Although the best way to avoid such trouble is to heed our advice and charge to your credit card only what you can afford to repay in full at the end of the month, sometimes a balance starts to add up. Don’t despair; it can happen to the best of us.

If you identify the problem early enough, one of the best ways to get out of debt without paying interest is to do a balance transfer between credit cards.

Here, we’ll show explain how to do a credit card balance transfer the right way, step-by step.

How To Do A Balance Transfer in 6 Simple Steps

  1. Do The Math
  2. Compare Top Balance Transfer Credit Cards
  3. Read the Fine Print
  4. Apply
  5. Initiate Balance Transfer
  6. Pay off Your Debt

1. Do The Math

credit card balance transferBefore you’re ready to do your balance transfer, you’ll need to know your current interest rate, your total balance, and how much you would pay in interest over a year with your current credit card.

To do this, multiply your balance by whatever your interest rate is and get the total number in dollars that you can expect to pay in interest every year (assuming you don’t pay down the debt each month).

Note: You can also use our balance transfer calculator to do this math for you.

Quick Example:

Let’s say you have $1,000 worth of debt on a high-interest credit card with a 27% APR.

In one year, $1,000 x .27 = $270 in interest alone!

That means you’ll never see this $270 ever again – It simply goes to your credit card company to pay them for the courtesy of letting you borrow their money. We say that’s a waste, let’s find a better solution.

Transfer that balance to a 0% credit card, and here’s what happens through the magic of mathematics:

A card with a 0% APR offer for 12 months would make your monthly payment $83.33, whereas a card with an 18-month introductory period would mean your payment is smaller at $55.55, plus you’d have 6 more months to pay it off.

But wait – we forgot the 3% balance transfer fee, which is about standard for most cards.

In a scenario where you are transferring a balance of $1,000, you’ll be charged a 3% fee and need to add $30 to your balance, making the total amount for you to pay off during your intro period, $1,030.

Your monthly payments would be $85.83, and though you still have to pay a $30 balance transfer fee, it’s far less than $270.

2. Compare Top Balance Transfer Credit Cards

Believe it or not, you will pay your balance off one day. When you’re paying 0% in interest, it can happen a lot sooner than you believe!

Even if your spending is frozen while you pay off your balance, be prepared to one day utilize your credit limit to earn cash back rewards, travel points, and more.

Ask yourself what you want in a credit card, and find a card that has those particular benefits in addition to the 0% interest period.

Do you only care about having the most time to pay off debt? Then, shop for a credit card with the longest intro APR period.

Common intro periods are 12 months, 15 months, and 18 months. Sometimes, you can even find a balance transfer credit card with a 21 month introductory period.

That’s almost double the time you can take advantage of zero interest, giving you more time to pay off your balance without any penalty.

Are you breathing easier yet?

3. Read The Fine Print

Find out if the balance transfer credit card you have your eye on has any restrictions on balance transfers.

For example, the Chase Freedom Unlimited card offers 1.5% cash back on spending, but not for balance transfers.

Another example of fine print is with the Citi® Double Cash Card. Though it offers robust cash back rewards, if you want to use this card to do a balance transfer, just know you can’t transfer balances from any existing Citibank cards you already have.

It’s best to find out these things before doing a hard credit inquiry and signing up for a new card.

4. Apply For Your Balance Transfer Credit Card

Once you’ve chosen the balance transfer credit card you like best, it’s time to apply. But remember, choose wisely.

Hard inquiries show up on your credit report, so we recommend checking your creditworthiness through a free service like Credit Sesame first.

That way, you know if your score is in the right range.

5. Initiate the Balance Transfer

Simply log in to your credit card account and fill out an online form to begin your balance transfer process.

Or, if you’re a phone person, call the customer service number on the back of your card and ask them to assist you with completing the balance transfer.

#6 Build Good Habits and Pay Off Your Debt

It might be tempting to let your balance sit for a while – After all, it’s not accruing interest!

But a year will go by faster than you think, and after going through all this trouble don’t you just want to pay off your balance and move on?

Factor your new monthly payment into your budget, or pay slightly more than the minimum amount so that you can pay off your balance and begin using your credit card for rewards faster.

For example, if you must pay $85.83 in order to pay off your $1000 debt + $30 balance transfer fee in 12 months, challenge yourself to pay $94 instead.

By paying less than $10 more per month, you’ll pay off your debt 1 month faster and experience a new sense of freedom. Just watch, you’ll see.

Additional Disclosures: Millennial Money has partnered with CardRatings and for our coverage of credit card products. Millennial Money, CardRatings and may receive a commission from card issuers. This site does not include all financial companies or financial offers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.

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