How to Do a Balance Transfer in 5 Steps

Photo to accompany a story about balance transfer tools. Getty Images

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During a moment of mounting financial anxiety for many of us, one of the best debt management tools has suddenly become scarce. 

Where have all the balance transfer deals gone? 

Credit card issuers including Chase and American Express have scaled back or completely eliminated the opportunities that make balance transfer cards helpful for paying off debt, like zero-interest introductory periods.

“Balance transfer cards are a great way to save money, but they’ve become a lot harder to get these days,” says Ted Rossman, an industry analyst at CreditCards.com.

Banks are becoming risk-averse, Rossman says, because of concerns that borrowers financially struggling during the coronavirus crisis are more likely to default on their credit card balances. 

So you won’t be getting many pitches in your mailbox or email with these types of offers. 

But balance transfer cards can still be part of a smart debt payoff strategy. Here’s how to find the best deals out there, even in a tough market—and how to evaluate whether a card like this is right for you. 

What’s a Balance Transfer Card?

Typically, a balance transfer is when you move a balance from a credit card with a high annual percentage rate (APR), which is the annualized interest rate plus loan fees, to a credit card with no interest for a limited period of time.

In other words, you’re moving debt from one account to another to avoid paying high interest on your balance. The balance transfer card offers a length of time, called an introductory period, in which it will charge a 0% APR. The length of the introductory period varies across credit cards and promotional offers. 

It doesn’t reduce the amount you owe—and you still have to make minimum payments—but this strategy can help you pay off your debt faster since all of your monthly payments will go toward the principal balance.

“Balance transfers can be a huge way to save on interest,” Rossman says. “The average credit card rate is 16%. But many people are paying even more, sometimes even 30%.”

Why Balance Transfer Deals Are Hard to Get Now

These days, promotional financing offers are not only harder to come by. It’s also more difficult to get approved, says Beverly Harzog, a credit card expert and consumer financial analyst for U.S. News and World Report. 

Lenders are being pickier about who they make these offers to, showing preference for customers with higher credit scores and other qualifications, such as steady income and a low credit utilization ratio

“There are still some offers available, but they’re going to be a lot harder to get. You’re going to need a much higher credit score — even from six months ago —  and a sufficient proof of income,” Rossman says.

A word of caution: applying to just one credit card, let alone multiple, can temporarily lower your credit score. Rossman says you should only apply for a balance transfer card if you believe your odds of getting approved are high. He recommends your credit score be at least above 700 before you consider applying for a balance transfer card. (Here’s how to check your credit score.)

How to Spot a Good Balance Transfer Deal

Despite the overall trend, some balance transfer cards are still offering zero-interest introductory periods.

When you’re evaluating an offer, note that there’s an upfront cost to balance transfers. All of these offers include a fee for the transfer of your balance, ranging from 2% to 5%. (In the past, some card offers waived these fees, but those deals aren’t available at this time.) 

For each card, check out the APR after the introductory period too. If you don’t pay off your debt in full by the end of these introductory periods, a new interest rate will kick in that in some cases might be higher than the one you already have.

  • Citi Simplicity® Card*: 0% for the first 18 months on balance transfers (after, 14.74% to 24.74% variable APR)
  • Citi Rewards+℠ Card*: 0% for the first 15 months on balance transfers (after, 13.49% to 23.49% variable APR)
  • PenFed Gold Visa® Card*:  0% for the first 12 months on balance transfers (after, non-variable APR rate of 17.99%)

The above offers are accurate as of August 17, 2020. Information was collected independently by NextAdvisor.

How to Use a Balance Transfer Card Responsibly 

A balance transfer is not a magic solution to erasing debt. While it can offer some temporary relief, you need to commit to paying down your transferred debt during the introductory period for it to be a successful move.

Rossman says you should only use a balance transfer card to pay off your credit card debt— not to rack up more debt or earn rewards.

The best way to use a 0% APR offer is to stick to a plan where you pay off your balance before the promotional offer expires. If you haven’t completely paid it off by the time the offer ends, your card will start accruing interest on your remaining balance.

How To Do a Balance Transfer

If you need months to pay off high-interest debt and have good enough credit to qualify, here’s how to transfer a credit card balance:

1. Check your current balance and interest rate

Review your current financial situation before making any major decisions. If you’re considering a balance transfer card, go over your current credit card balances and interest rates first. It’ll help you determine what’s the appropriate amount to transfer to another credit card.

Before you apply, you’ll want to take a hard look at your debts and finances to figure out how long of a balance transfer introductory period you’ll need for repayment.

2. Understand the terms and calculate the costs

If the card you picked has a balance transfer fee, you should calculate how much it will cost to make the transfer and compare that figure to how much you may save on interest during the introductory period. By comparing the two, you’ll be able to see if applying for a balance transfer card actually saves you money. 

Then figure out how long of an introductory period you’ll need for repayment. Calculate your debt balance after transfer fees are added, and divide by the number of months of the introductory period. Can you contribute that amount to paying off your debt each month?

3. Research balance transfer offers

Once you’ve figured out how much time you’ll need, you can start researching balance transfer offers and make a list of those that fit your needs. Consider the length of the introductory period, the balance transfer fee, and the APR that will kick in after the introductory period. 

Check to see if the card has any credit limits or unusual restrictions. For example, most banks don’t allow you to transfer balances between any cards you already have with them.

Also, check the fine print to see what kind of penalties might apply. Some cards will end the introductory period and hike your interest rate if you make a late payment, for example. 

4. Apply for a balance transfer card

Once you’ve done your research and figured out which balance transfer card is best for you, you can apply online. You’ll have to provide information on the application, such as your address, date of birth, and Social Security number. 

Pro Tip

Before you apply, check your credit score; it’s available for free through some bank or credit card sites. You can also get your score from one of the three major credit bureaus: Experian, Equifax, or Transunion. This will give you a sense of your approval odds beforehand. And don’t apply to multiple balance transfer offers at once, or you’ll risk damaging your credit score.

It’s a waiting game after you’ve submitted your application. Sometimes, it only takes a few days to hear a response back from an issuer. And sometimes, it can take a few weeks. If you’re rejected, don’t take it personally. Many banks are tightening their lending standards during the coronavirus pandemic. If you are approved for the balance transfer card, you can proceed with the next steps to transfer the balance. 

5. Request a balance transfer

Typically, you’ll have to contact your new credit card company to initiate a balance transfer request. You can make the request either over the phone or online. 

The new issuer will ask you for your account numbers from your previous cards and how much of your balance you’ll want to transfer. It could take several days or possibly weeks to complete the balance transfer request, so you should keep making payments on your old card until you get confirmation the transfer was successful. 

And act quickly—most cards will only give you a short window of time to make the transfer before interest kicks in again.

*All information about the Citi® Double Cash Card, Citi Simplicity® Card, Citi Rewards+℠ Card, PenFed Gold Visa Card, U.S. Bank Visa Platinum Card, and Aspire Platinum Mastercard has been collected independently by NextAdvisor and has not been reviewed by the issuer.