Balance Transfer Credit Cards: Consolidate Debt and Save

What is a Balance Transfer?

A balance transfer is a credit card transaction in which debt is moved from one account to another. For example, you might transfer an outstanding balance from a high-interest credit card to a different card that offers a lower interest rate, often a 0% introductory APR.

The purpose is to consolidate debt and potentially save on interest, giving you a clearer path to paying down what you owe. However, a balance transfer does not eliminate debt; it moves it to another card, ideally at a lower rate.

A balance transfer can take from a few days to several weeks to complete. The exact time depends on the issuer and the method used. Electronic transfers may take 4-6 days, while checks can take up to 15 business days. During this time, continue making at least the minimum payments on your old card to avoid late fees.

Yes, you can typically transfer balances from multiple credit cards to one balance transfer card, as long as the total amount, including fees, does not exceed your credit limit. Each transfer is processed separately, and you may need to provide account information for each card.

Transferring a balance may temporarily lower your credit score due to a hard inquiry when you apply for the new card. However, responsibly using the new card and making on-time payments can improve your score over time. The temporary dip is usually small and can be offset by lower credit utilization and improved payment history.

A balance transfer can take from a few days to several weeks. Electronic transfers may take 4-6 days, while checks can take up to 15 business days. The exact time depends on the issuer and the method used. Continue making at least the minimum payments on your old card until the transfer is complete.

Sources: NerdWallet (YouTube), Bread Financial, Wells Fargo, Capital One, Discover

How Balance Transfer Cards Work

Balance transfer cards are credit cards that advertise a low or 0% introductory APR on balance transfers for a set period, usually 12 to 21 months. During this promotional period, you can transfer balances from other cards and pay no interest on that transferred amount, allowing more of your payment to go toward the principal.

After the intro period ends, the standard APR applies to any remaining balance. It's important to understand the terms, including the length of the intro period, the balance transfer fee, and the regular APR.

Sources: Visa, NerdWallet

0% Intro APR Periods

Many balance transfer cards offer a 0% introductory APR for a limited period, typically ranging from 12 to 21 months. For example, the Wells Fargo Reflect® Card offers 0% intro APR for 21 months on balance transfers, and the Citi® Diamond Preferred® Card also offers 0% intro APR for 21 months.

These promotional periods give you a window to pay down your transferred balance without accruing new interest charges. It's crucial to know the exact length of the intro period and to plan your payments accordingly.

The intro APR typically applies only to balance transfers made within a specified time, often the first 60 to 90 days. Missing this window may mean you don't qualify for the promotional rate, so check the card's terms for the exact deadline.

• 0% intro APR periods vary by card and can range from 12 to 21 months.
• The intro APR applies only to balance transfers made within a specified time (often the first 60 to 90 days).
• After the intro period, the standard purchase APR will apply to any remaining balance.

Sources: Visa, NerdWallet, Yahoo Finance, Citi

Balance Transfer Fees

Balance transfer fees are typically between 3% and 5% of the transferred amount. For instance, the Citi Double Cash® Card charges a 3% intro fee for the first 4 months, then 5% thereafter. Some cards may waive the balance transfer fee, but this is not common. Always check the fee structure before applying, as it affects the overall cost of the transfer.

• Typical balance transfer fees range from 3% to 5% of the amount transferred.
• Some cards may offer a promotional lower fee for transfers made within the first few months.
• A few cards may waive the fee altogether, but this is rare.

Sources: Wells Fargo, CNBC Select, Bread Financial, CompareCards

Choosing the Right Offer

When choosing a balance transfer card, consider several factors: the length of the 0% intro APR period, the balance transfer fee, the regular APR after the intro period, and any annual fees. Cards with a longer intro period are advantageous if you need more time to pay off the balance, but they often come with higher transfer fees.

To qualify for the best balance transfer offers, you generally need good or excellent credit, typically a FICO score of 680 or higher. If your credit is lower, you may still qualify for a card with a shorter intro period or a higher APR.

• Compare intro APR lengths, transfer fees, and post-intro APR.
• Look for cards with $0 annual fees to avoid extra costs.
• Review the terms for balance transfer fees and any promotional fee periods.
• Check your credit score to see which offers you're likely to qualify for.

Sources: CNBC Select, Bread Financial

Side-by-side category

Balance transfer cards can be broadly categorized by the length of the intro APR period and fee structure. Some cards offer a long 0% period (18-21 months) with a higher transfer fee (5%), while others offer a shorter period (12-15 months) with a lower fee (3% or less). The table below compares typical categories based on these factors.

Sources: Visa, NerdWallet

Step-by-Step Transfer

Once you've chosen a balance transfer card and been approved, the actual transfer process is straightforward, but it's important to follow the steps correctly to ensure a smooth transition.

1. Apply for the balance transfer card and get approved. Make sure your credit limit is sufficient to cover the amount you want to transfer, including any transfer fees.
2. Request the balance transfer. You can often do this online, by phone, or by submitting a balance transfer check. You'll need the account number of the card you're paying off and the amount to transfer.
3. Provide the issuer with the necessary information, including the credit card account number of the debt you're transferring.
4. Wait for the transfer to complete. This can take from a few days to several weeks, depending on the issuer and whether it's an electronic transfer or a check.
5. Confirm that the transfer went through and that the old card balance is paid. Continue making payments on the new card, and aim to pay off the balance before the intro APR period ends.
6. Track the progress of your transfer. If it is not completed within the expected time, contact the new card issuer to check the status. Also, verify that the transferred amount, including any fees, does not exceed your credit limit, as this could cause the transfer to be declined.

Sources: Wells Fargo, Capital One