How to do a balance transfer in 7 steps

Is your credit card debt piling up? Are you worried that high interest rates are causing that debt to grow faster than you can pay it down? A credit card balance transfer might be a solution.

When you conduct a balance transfer, you take the debt from one or more credit cards and transfer it to a different card. The goal is to move your debt from credit cards with high interest rates to one with a far lower rate. Ideally, you’ll transfer that debt to a card that offers 0 percent interest for a limited period.

1. Check your current balance and APR

Before starting a balance transfer, it’s important to understand the extent of your debt. Check your most recent credit card statements to determine your total debt, then look at your cards’ APRs.

APR, which stands for annual percentage rate, is the price you pay for borrowing money with your credit card. The APR and interest rate on credit cards are basically the same.

Maybe you have three credit cards, all with an APR of 19 percent or higher. It might make financial sense to transfer that debt to a credit card that offers either a lower APR or an introductory period in which it won’t charge you any interest on your existing debt.

To see how much money you could save with a top balance transfer card, use our balance transfer calculator.

2. Decide if you should do a balance transfer

Generally, you need at least a good to excellent credit score, which is a 670 or higher on the FICO scoring model, to qualify for a balance transfer card. Before you start the application process, however, consider the potential drawbacks.

One of them is the balance transfer fee, which is usually 3 percent to 5 percent. Depending on how large your credit card debt, this fee can really eat into what you’ll save on interest charges. If your card debt is quite high, your fees could still be a fraction of what you’d save in interest, in which case doing a balance transfer would be a good idea.

Remember, a balance transfer isn’t a cure-all. Address the root cause of your credit card debt, such as lack of budgeting, overspending or loss of employment, before transferring. Before you apply for a new card, be sure you can pay your bills and that you aren’t going to end up back in debt.

3. Pick a balance transfer card that works for you

Choosing the right balance transfer credit card depends on several variables.

• New interest rate. Ideally, you’d want to transfer your high-interest-rate debt to a card that offers 0 percent interest, or at least a low interest rate, on balance transfers for a limited time.
• Length of intro offer. If you have a lot of debt, you might want to pick a balance transfer card with a 0 percent offer that lasts 18 months, or even 21 months, instead of the more common 12 months. Find out how long it’ll take to resolve your debt using our payoff calculator.
• Credit limit. If you are transferring a lot of existing credit card debt, choose a balance transfer card with a high credit limit. This way, you can transfer more or all of your existing debt to it. Otherwise, you may find it difficult to pay off your debt by the end of the intro period, or that you have to leave some of your balance on your old card.
• Balance transfer fees. Keep an eye out for these fees, and make sure you account for them when budgeting your payments. There are also a few credit cards with no balance transfer fees.
• Other card features. Some balance transfer cards also offer points or cash back bonuses that could be valuable if you plan on making new purchases. The debt you transfer to a new card, however, typically doesn’t earn any rewards.

If you need help narrowing down the choices, try CreditCards.com’s CardMatch tool to get personalized credit card recommendations based on your credit score.

4. Apply for a balance transfer card

When you apply for a credit card online, you’ll need to provide basic personal and financial information, including your name, address, Social Security number and annual income.

During the application process, you can also request a balance transfer by providing information to the new card issuer about your existing credit card debt. This means listing the credit cards from which you want to transfer and the amount of debt you’d like to transfer over. If not, you could always apply for your balance transfer — over the phone or online — after your application is approved.

Pro tip

Keep in mind that initiating a balance transfer can affect your credit score. Every time you apply for a new credit card, the provider of that card will check your credit. This is known as a hard inquiry, and each hard inquiry can cause your credit score to temporarily fall by five to 10 points, according to FICO. Fortunately, this is only a temporary hit. If you pay your bills on time each month and cut down on your existing credit card debt, your credit score should quickly recover from this small dip.

5. Understand the terms and conditions of your balance transfer

Rahkim Sabree, financial educator and author of “Financially Irresponsible,” recommended consumers always study the terms of a balance transfer offer before they initiate one. He said not understanding these could prove costly.

Some consumers might think that they always have at least 15 months to pay off the debt they’ve transferred before the 0 percent introductory offer expires. But that’s not always the case. Some cards might offer an introductory period of just six months. Consumers, then, might not put enough money toward their debt to pay it off before the 0 percent period ends, Sabree said.

Others forget about the costs associated with balance transfers.

Justin Zeidman, assistant vice president of open banking at Navy Federal Credit Union, said balance transfer fees can be costly. Assume that you are transferring $5,000 to a credit card that charges a transfer fee of 5 percent. The total amount for the transfer fee is $250.

“Depending on how much you are transferring, taking a balance transfer offer with a lower interest rate of 1.99 percent for 12 months might save you money over taking a 0 percent offer that comes with a 4 percent fee,” Zeidman said. “Consumers have to do the math on this.”

One important detail that many cardholders may not know about introductory APR offers: You may cut your APR period short if you don’t make at least the minimum payment every month. Many balance transfer cards detail in the fine print that an intro APR may be canceled if you miss a payment, so be sure to look for that when reading through your card’s terms and conditions.

6. Transfer your balance to the new card

If your balance transfer requests are approved, the provider of the new credit card pays off the debt on your existing cards. That debt is then charged on your new balance transfer card.

As noted, most card providers will charge a fee, often in the range of 3 percent to 5 percent of the amount of money you’ve transferred. The total amount you have to pay in fees will be added to the balance of your new credit card.

Depending on the credit limit of your new card, you might not be able to transfer all your existing credit card debt. If your new card comes with a credit limit of $10,000 and you have $15,000 in credit card debt, you’ll only be able to transfer over a portion of your debt.

Some card issuers also have a transfer limit that differs from the card’s total credit limit. When deciding how much to transfer to your new card, stay aware of your credit utilization — using 100 percent of the credit on your new balance transfer card will dramatically lower your credit score.

Finally, you won’t be able to transfer your debt between two cards issued by the same provider. For instance, you can’t close a balance transfer between a Citi® Double Cash Card and a Citi® Diamond Preferred® Card even though both cards offer balance transfer promotions.

7. Pay off your balance before the 0% APR period ends

While balance transfers can be useful tools for managing credit card debt, personal finance experts warn that consumers often misuse them.

The biggest mistake consumers make with balance transfers is not paying off the debt they transferred before the 0 percent introductory APR offer expires. Then, when their new credit card adjusts to its higher interest rate, their existing debt once again starts to grow quickly.

Others also make the mistake of adding new debt to the credit card they paid off with their balance transfer. Then, when the introductory offer expires, they’re left with a portion of their old debt and new debt, all at high interest rates. These cardholders are now in an even worse financial situation than they were in before they started their balance transfer.

“Now you are paying higher interest on the balance you transferred, and you are faced with new debt,” said Sabree. “You have to change your frame of mind when you do a balance transfer. You can no longer live beyond your means,” he said.

Fortunately, avoiding this mistake isn’t complicated. Zeidman said the best move consumers can make before starting a balance transfer is to create a household budget showing their monthly expenses and income. Once they’ve done this, they can determine exactly how much they can devote each month to paying down their credit card debt.

Zeidman recommends that consumers set up an automated monthly withdrawal from their checking accounts for this amount to pay down their transferred debt at a rate that they can afford.

“Budgeting is important. Autopay is important, too. It’s a way to keep you honest with your payments,” Zeidman said. “Set it and forget it, and then watch your credit card debt decrease month by month.”

How to transfer a balance with the major credit card issuers

Balance transfer processes and policies may differ among major issuers. Read more to find out how each credit card company handles balance transfers.

• How to transfer a balance to an American Express credit card
• How to transfer a balance to a Bank of America credit card
• How to transfer a balance to a Capital One credit card
• How to transfer a balance to a Chase credit card
• How to transfer a balance to a Citi credit card
• How to transfer a balance to a Discover credit card
• How to transfer a balance to an HSBC credit card
• How to transfer a balance to a U.S. Bank credit card
• How to transfer a balance to a Wells Fargo credit card

Bottom line

Transferring your existing debt to a card with a 0 percent introductory interest rate gives you an opportunity to pay it off without worrying about interest for a limited time. If you do it properly, a balance transfer can help you take control of your credit card debt.