Avoid common issues that can hamper your goal to save money while paying off debt.
Transferring existing debt to a new credit card can be a good way to both consolidate your payments and pay down what you owe more quickly. But the real value of a balance transfer card is the hundreds or even thousands of dollars in interest you can avoid by taking advantage of a low or no intro APR.
At the end of the day, however, your bank benefits from any mistakes you make. Here’s how to avoid common oversights and pitfalls so that you can get the most out of your balance transfer credit card.
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What’s in this guide?
Problem: You’ve applied for a card with the same provider
Balance transfer offers come with a wide range of terms and conditions, including criteria that determines your eligibility for an offer within a provider’s suite of cards.
Know what's in the fine print.
With most providers or banks, you must be a new customer to qualify for a balance transfer credit card’s promotional interest period.
Before applying for a new card, look for a clause tucked away in the fine print prohibiting you from transferring balances from cards issued by the same provider or bank. It means that an existing Chase customer may not be able to take full advantage of a new Chase transfer card.
Underwriting issuers
When applying for a balance transfer credit card, your provider’s card may actually be underwritten by another financial institution. American Express, for example, is the credit provider for cobranded hotel cards that include Starwood and Hilton Honors. As a result, existing Amex customers aren’t eligible for balance transfer offers from these cards.
What’s tricky is that if you do apply for a new credit card with the same issuer, you could end up approved for the card — and even the balance transfers, in some cases — but not the promotional rates. This could leave you with more credit cards and no lower interest rate.
Learn which banks you can transfer your debt between before applying for a card.
What to do about it
If you accidentally apply for a balance transfer with an existing card provider, your next steps depend on the stage of your application when you become aware of it:
- During the application process.
If you’ve applied and received conditional approval for the card but haven’t yet submitted supporting documentation, call the card’s provider to cancel your application. Let them know that your existing debt is with the same provider and you’re no longer interested in the offer. - After your card application is approved.
If your card and balance transfer is approved, let your provider know your concerns. Some providers process applications quickly, leaving them little room to find a problem until they try to transfer your balance. In other cases, you could be approved for the card but not the balance transfer. Talking with a representative prevents the problem from growing more complicated and could prevent unnecessary charges.
- After your card application is declined.
Your application may be declined because the provider realized you already own a card. You can apply for a different balance transfer card. But remember that applications are listed in your credit report, and applying for too many cards in a short time may reduce your credit score. - If you actually want to transfer a balance to a card with your existing provider.
Some credit card issuers offer balance transfers specifically for existing customers, which is a legitimate way to stay with your issuer with a different card. If you find such an offer, carefully read the terms and conditions to be sure your specific transfer is eligible.
Problem: You’re approved for a partial balance transfer
Partial transfers often come down to credit limits, so let’s start there. When you apply for a balance transfer, card issuers typically allow you to transfer a specific percentage of the credit limit you’re approved for on a new card — often up to 70% to 95% of your total credit amount.
Let’s say you want to transfer a balance of $5,000. You’d need a new credit limit that’s at least 10% to 35% higher to do so, or about $5,500 to $6,500.
If you’re approved for a credit limit that doesn’t leave room for this percentage, your new provider may allow for a partial balance transfer. This means if you’re approved for a $5,000 credit limit, the new issuer might allow you to transfer $4,500 — or 90% of your $5,000 debt — leaving you with a $500 balance on your old card.
The problem is that you end up with two debts: one on your old card and another on your new one. Your new card might offer a 0% APR intro period, but you risk paying interest on your old card’s remaining balance.
What to do about it
If you end up approved for a balance transfer card with a limit that’s too low for you to transfer your debt, either:
- Cancel your application after the new provider sends your new card’s terms and conditions. At that point, you’re expected to either accept or reject them.
- Pay off your old card’s remaining debt as soon as possible so that you can focus on dealing with the rest of it under your new card’s lower promotional rate.
Problem: You’re paying more fees than you expected
Picture this: You’re approved for a great balance transfer card, moving your existing debt over to your new account. Then you get your statement, which shows a balance that’s hundreds of dollars higher than your old card’s. What’s going on?
Balance transfers often come with additional costs that we can forget about until they show up on our statements. In particular, these two fees:
- Balance transfer fees.
Many card providers charge a one-time fee to process each balance transfer. It’s typically a percentage of your total transferred, ranging from 2% to 4%, depending on the card. To put this into perspective, let’s say you’re looking at a card with a 2.5% balance transfer fee. To transfer $5,000, you’d pay a $125 fee. To transfer $10,000, the fee rises to $250. - Annual fees.
If the new credit card requires an annual fee, you might pay it immediately after you’re approved. Meanwhile, if you cancel your old card, that provider could charge you a final annual fee, depending on your card’s terms and conditions. With annual fees ranging from $50 to $100 or more, the extra costs can add up.
Fees can add up to more debt and a larger balance, with providers often excluding the charges from our promo rate, if you carry them across months.
What to do about it
- By the time you notice these charges, it could be too late to avoid them, especially if they’re mentioned as part of the terms and conditions you accepted when taking on the card. If there’s no cause for dispute, prioritize paying off these charges first — even if it means adjusting your budget. That way, you’ll avoid or at least reduce the interest you pay on them, more quickly getting back to paying down your debt.
Problem: You forgot to make a payment
This mistake often comes up with 0% balance transfer offers, which can make it feel like missed payments are no big deal. Even if there’s no interest applied to your balance, you’ll must pay at least your statement’s minimum each month. Otherwise, you could end up dealing with late payment fees and other penalties that include losing your intro offer altogether.
Payments to your old card
Applying for a balance transfer is only the beginning of the process when it comes to moving debt among cards. You’ll wait up to 21 business days for approval and confirmation that your new provider transferred your balance from old cards.
In the meantime, you must continue paying the balance on your old card to avoid late payment fees and other penalties. After you’ve confirmed a zero balance on your old card, cancel it.
What to do about it
- If you forget to make a payment on any card, contact the card provider immediately. Explain that you missed a payment, and let them know when you plan on making one — or make the payment and call them after.
- Sign up for automatic withdrawals with your new card, which can prevent late payments on your account.
Problem: You’ve kept your old credit card open
If you don’t cancel the cards from which you’ve transferred balances, you might be tempted to turn to them for new purchases. It could be undoing the work you did to simplify your debt repayments, not to mention the new interest and other charges you’re adding to your debt.
What to do about it
Cancel your old card as soon as you’ve confirmed your transfers, making sure to:
- Confirm there’s no balance on the old card, otherwise you won’t be able to cancel it.
- Contact your old credit card provider directly to cancel your account.
- Cancel any automatic withdrawals you’ve set up on your accounts, transferring them elsewhere.
- Ask about how long the cancellation can take and any fees, so that you can plan accordingly.
- Request written confirmation from your old credit card provider when the process is complete.
Problem: You’ve made new purchases on your balance transfer card
With most balance transfer credit cards, new purchases accrue interest at the card’s purchase rate, not lower intro rate. You also likely won’t be able to take advantage of a grace period on interest, meaning that interest accrues immediately.
Most banks and providers apply your monthly payment to higher-interest charges first. This means your transferred balances could sit around until after your new purchases are fully repaid, threatening to allow your low or 0% balance transfer offer to tick away before you can pay off your transferred debt.
Put simply: New purchases on your balance transfer card risks fully paying off your debt, regardless of the card.
What to do about it
- If you’ve used your new card for purchases, prioritize paying off these charges as soon as you can so that you can get back to paying off your original transferred debt. At the very least, work to increase your monthly repayments to factor in this new debt.
Problem: You’re carrying a balance when the introductory rate reverts
Most balance transfer credit cards offer an introductory period in which you can defer interest on transferred balances. In that period, you can carry a balance from one month to another without paying interest. If you pay off this balance before your introductory rate expires, you won’t owe that deferred interest at all.
What about if you haven’t yet fully paid off your transferred balance before your intro rate expires? With most cards, your total deferred interest is added to your card’s balance.
After your introductory period, your card’s APR reverts back to the standard or purchase rate offered to you at approval. The difference between your intro rate and revert rate could be as much as 25.99%. If you’re carrying a balance when the introductory period is over, the new interest rate applies to any balance on your card.
What to do about it
- If you still have a balance when your intro rate reverts, work to pay off your debt as quickly as possible. This could mean adjusting your budget to make larger monthly payments or using savings to clear the balance.
- If possible, make payments toward your debt with each paycheck. While credit card interest is charged monthly, it’s actually calculated daily. With more frequent payments, you might be able to reduce the overall interest you pay.
Problem: You’ve ended up with more debt
Your main reason for transferring debt should be to reduce the total amount of money you end pay back while simplifying multiple payments into one. And after all the hard work you’ve put up to pay down your debt, the last thing you want to end up is … well, more debt.
When transferring your credit card balances, read the fine print and stick to the conditions your new provider outlines. The easiest way to avoid ending up with more debt is to prevent the conditions that cause it in the first place.
What to do about it
- Commit to paying down as much of your balance before your intro rate expires. The APR your card reverts to can significantly affect any balance that remains on your card.
- To avoid losing your intro rate, pay your balance transfer card bill on time. Set up autopay or alerts to remind you when it’s time to make your payment.
- Avoid new purchases on your balance transfer card. While some cards extend any intro rate to balance transfers and new purchases, many restrict the low rate to transfers only.
Bottom line
The ideal solution to balance transfer problems is preventing them in the first place. Make sure you that you understand the fine print of your balance transfer card to avoid oversights that can cost you money and throw you off the path to financial freedom.
