Transferring your balance from one credit card to another credit card can result in a lower interest rate and lower monthly payments. Balance transfers are ideal if you want to consolidate your credit card debt minus a debt consolidation loan. The process of transferring your balance is relatively simple. Here are a few steps you can take to ensure a smooth transition.
Shop around and compare balance transfer offers.
Practically every credit card company offers at least one balance transfer credit card. But this doesn’t suggest picking a random card. Do your homework and familiarize yourself with the terms. For example, some credit card companies charge a balance transfer fee, which is between 3 and 5 percent of your outstanding balance. Other credit card companies offer 0% interest for the first 12 to 18 months, then a variable interest rate after the introductory period ends. Read the fine print before submitting your application and fully understand the terms. Ideally, you want a card with the lowest balance transfer fee and the lowest interest rate.
Fill out an application once you decide the best balance transfer credit card.
The majority of credit card companies have online applications. Some applications will ask you to list the balances you want to transfer. This includes the creditor names, your account numbers and your current outstanding balances. Understand, however, that balance transfer offers are subject to credit approval. If you have credit problems or a low credit score, the credit card company may deny your application.
Transfer your balances.
There are different ways to transfer your balance. If you provided your creditor names and account numbers with your application, your new credit card issuer may complete the transfer for you. But in some cases, you transfer balances after you’re approved. Your new credit card company may issue convenience checks, wherein you write a check to your old credit card companies paying off your balances. Another option is calling up your new credit card issuer and completing the transfer over the telephone.
Maintain your monthly payments.
It can take a few weeks to complete a balance transfer. Until you receive a final statement confirming that your old credit cards are paid in full, continue to make minimum payments to your old credit card companies. Skipping a payment can trigger additional fees and damage your credit.
If you’re juggling multiple credit card accounts and you’re paying a high interest rate, a balance transfer can make good financial sense. You can simplify your finances and save money in the process. But a balance transfer isn’t right for everyone. Some people move their debts to a low-rate credit card, but continue to use their paid off credit card accounts. They rack up additional charges, which can potentially double their debt.
After transferring your balances to a new credit card, cut up your old credit cards to avoid re-accumulating debt. If you’re tempted to use your old credit cards, close the accounts.