Understanding the guidelines of the balance transfer process
A balance transfer is a great way to pay off your existing credit card debt at a much lower rate, but these deals are restricted by many terms and conditions. We’ve compiled a list of the most frequently asked questions we get from users in hopes that it will make your debt consolidation journey easier.
Our pick for balance transfers: Blue Cash Everyday® Card from American Express
- $150 statement credit after you spend $1,000 in purchases on your new Card within the first 3 months.
- 3% cash back at U.S. supermarkets (on up to $6,000 per year in purchases, then 1%).
- 2% cash back at U.S. gas stations and at select U.S. department stores, 1% back on other purchases.
- Low intro APR: 0% for 15 months on purchases and balance transfers, then a variable rate, currently 14.99% to 25.99%.
- Over 1.5 million more places in the U.S. started accepting American Express® Cards in 2017.
- Cash back is received in the form of Reward Dollars that can be easily redeemed for statement credits, gift cards, and merchandise.
- No annual fee.
- Terms Apply.
- See Rates & Fees
How a balance transfer works
Balance transfers are pretty straightforward. The goal of a balance transfer is to get open balances from one or more credit cards onto a new card. Usually this is done to consolidate debt or get a lower APR. The most difficult part of the process is comparing your options to see what solution and which provider will benefit you the most.
Once you’ve found a card that you’d like to transfer your debt to it’s time to get the process going. To start a balance transfer you’ll need to gather your current account information, including the amounts you want to transfer, the bank name, routing number and account number.
You’ll give the information you’ve gathered to the new credit card provider and the transfer will get started. During the time of the transfer you’ll have to continue making your regular monthly payments. Transfers can take anywhere from a few business days to a few weeks depending on all parties involved.
Is a balance transfer right for me?
Several factors may influence whether or not you would benefit from a balance transfer card.
- Interest rates. When interest rates are high enough to make it nearly impossible to pay down your principal a balance transfer may be a good idea to get a better rate.
- Amount of debt. To transfer the whole balance from one or more accounts you’ll have to qualify for a high enough credit limit.
- Introductory period. Some balance transfer cards offer a low or 0% APR for a certain length of time when you first transfer. Promotional periods can range from 6 months to 18, which can give you time to pay down your newly-transferred balance.
- Overall savings. Balance transfers can come with fees. Usually they range from 3–5% of the amount being transferred. Aside from the fee the APR, introductory period and your budget should be considered when you’re calculating potential savings.
- Spending habits. Keeping your old cards open will make for a lot of freed up credit. Temptation can build, so take your self control and shopping proclivities in mind.
- Where your debt is. Open balances in multiple locations can potentially get consolidated into one place and make repayments easier to manage.
- Credit score. Your ability to qualify for the card is also something to keep in mind. Getting another card with a high interest rate may not be the best solution.
What should I consider when conducting a balance transfer?
How much can you transfer?
Some banks will allow a minimum of $100, some $500. In terms of maximums, it depends on the institution. Some institutions don’t put a maximum on how much you can transfer, though this can sometimes sit between 75%-100% of your approved credit limit.
Confirm what the minimum and maximum transfer amounts are by checking your relevant product disclosure statement. Generally speaking you can transfer up to 90% of your approved credit limit.
Compare balance transfer credit cards
Which banks can’t I balance transfer to?
You generally can’t transfer your debt from a balance with the same bank. There are also some institutions that you can’t transfer between, this is generally because the providers are owned by the same institution. Check who you can and can’t transfer between using the link below.
Which banks am I able to transfer my balance to and from?
What is the revert rate of my balance transfer?
Your low or 0% balance transfer rate will only last for the length of the promotional period, after which it will revert to either the much higher interest or cash advance rate.
Usually the cash advance rate is higher, but you should check regardless because you could stand to collect around 20% in interest on your remaining balance. To confirm what your provider will revert the rate to, please click the link below.
What rate does my balance transfer revert to?
Do interest free days apply?
Many credit cards that you just transferred your balance to will not have any interest free days until you’ve paid off the full balance. This means that you shouldn’t really use it unless you’re prepared to pay a higher interest rate.
If your old credit card has a reasonable purchase rate, it might be worthwhile to use that one instead and pay it off as quickly as you can. However it’s important to focus on paying the balance you’ve just transferred first.
How long does a balance transfer take?
This depends on the financial institutions involved. It usually takes about two weeks to complete, but as soon as the deal is approved by the bank your balance transfer period begins. When you’ve received your new credit card in the mail, assume that the balance transfer period has started a week beforehand.
It’s important to remember that your balance transfer period doesn’t start from the date you receive the credit card. It’s important to start repaying your debt as soon as possible, because the promotional period starts from the moment your balance transfer is completed, so you’ll want to take advantage of the full offer if possible.
Do late payments affect the promotional balance transfer rate?
The promotional rate is effective for the entire period offered and is not usually affected by other rates on the credit card (e.g. late payments, cash advances etc). Check with your provider if you’re unsure.
Should I cancel my old credit card?
An annual fee and no intention to use the card indicate that it may be a good time to close it. Any open balances on your old credit cards should be paid off as soon as possible and they should be cancelled to eliminate the chances of any other fees or charges. In the event that you keep the card as a backup for purchases, make sure it has a low purchase rate and you can repay it in full each month to avoid building up debt again.
However, it is good for your credit score to have a long relationship with a card. Only keep the card open if there’s no annual fee and you aren’t tempted to use it.
How much you can get out of a balance transfer card depends on your specific financial situation. Be sure to take your time while researching companies and solutions to find the one that best meets your needs. Getting out of debt can feel like an endless cycle, but you may be able to take great strides forward with planning and patience.