The Right Way to Do a Credit Card Balance Transfer

What is a balance transfer?

It sounds like a question with a simple answer and. And, for the most part, it is. You’re transferring a balance from one credit card to another with a lower APR.

What gets more complicated is the question of what makes a good balance transfer? Do it right and you’ll save money. Do it wrong and it could end up costing you more than if you never bothered with the transfer at all.

What is a balance transfer and is it worth it?

You probably receive a lot of offers in the mail about balance transfers and you’re looking for more information on what is a balance transfer offer that you should take advantage of.

If you want to transfer your credit card balance to save some money and pay off your debt faster, follow these seven steps.

1. Find out your credit score

The better your credit score, the more likely you’ll qualify for a credit card that will make a balance transfer worth it. For instance, you need Good to Excellent credit to qualify for a 0% introductory APR.

That’s not to say a lower credit score couldn’t qualify you for an APR lower than the one you already have. But you need to know which of the credit score ranges you fall into so you know which credit cards to apply for.

The last thing you want to do is apply for cards requiring Excellent credit if yours is only Fair. You’ll most certainly be denied.

And every time you have to apply for another credit card, it will be listed as a hard inquiry on your credit report. That alone can put a ding in your credit score.

2. Look at you FICO credit score

FICO credit scores are the most widely used by lenders. Those are the ones you most want to see. Beware, though, of free FICO score offers, as they usually require some sort of paid subscription service.

There are, however, free FICO scores offered by credit card issuers to their customers. Call your credit card issuer to see if you can get one. If not, your best bet is going straight to the source – myFICO.com.

Keep in mind that each of the three major credit reporting bureaus has a different FICO credit score on you. Since you’re never going to know which one creditors are going to use, it’s important to see all three.

If the cost of purchasing your FICO scores is too steep for you, there are educational credit scores you can see. These are offered for free through credit monitoring sites like Credit Karma, Quizzle, and Credit Sesame.

They may not be the exact numbers lenders see, but they’ll at least give you some idea of your credit range.

3. Compare the best balance transfer offers

Before applying for a new balance transfer credit card, do your homework first.

Look at multiple balance transfer offers and see what is a balance transfer that you should sign up for.

A few things to keep in mind when comparing balance transfers

  • Balance transfer fee
  • Introductory APR
  • Regular APR once the introductory offer expires
  • How long the introductory APR lasts
  • Whether new purchases are covered by the introductory APR, and for how long
  • Level of credit you need to qualify for the card

4. Do the math with a balance transfer calculator

Just because the APR on a new card is lower than the one you already have doesn’t necessarily mean it will save you money.

Transfer fees and carrying a balance beyond the introductory APR could actually end up costing you more money in the long run. In other words, you must do the math. When you’re figuring out what is a balance transfer offer worth considering, the numbers won’t lie.

Fortunately, there are plenty of online calculators that will do the math for you. Just be prepared to know the following specifics of both your current card and the new one(s) you are considering.

Current card details

  • Balance
  • Interest rate
  • Annual fee
  • Amount of your monthly payment

New card details

  • Transfer fee
  • Introductory APR
  • Length of introductory APR
  • Regular APR
  • Annual fee
  • Amount you plan to pay every month

5. Consider your current cards

Once you know what transferring to a new credit card could do for you, compare that to what you could do with the cards you already have.

This will be especially important to you if your credit doesn’t qualify you for a 0% or low APR.

Here are a few things you can do with the credit cards you already own.

Ask for a lower interest rate from your current issuer

Your credit card issuer is under no obligation to lower your interest rate. But, it can happen. Especially if the following is true:

  • Your account has been in good standing for at least a year
  • Your credit score has improved since you first applied for the card
  • You tell them about lower interest rate offers you have from other credit card issuers
  • You ask politely

Transfer to another card that already has a lower interest rate

What are the interest rates on your other credit cards? If there’s room for it, why not transfer the balance there? Are those interest rates even higher, or about the same?

There’s nothing stopping you from asking your current credit card issuers for a lower APR using the same approach described above.

If you’re not thrilled with the results of these possibilities, go ahead and apply for a new card.

6. Pay off the balance before the introductory period ends

If you’ve done the math, you know exactly how much you need to pay on the transferred balance every month in order to pay it off before the introductory APR ends. Stick to it!

Giving yourself a free pass to pay just the minimum one month makes it easier to do the same the next month. Before you know it, you’re too far behind on your credit card balance and won’t get it paid off in time.

7. Avoid using the new card for new purchases

New purchases may not be covered by the introductory APR. And even if they are, isn’t that kind of defeating the purpose?

Your goal should be paying down the transferred balance as soon as possible, not piling on more debt.

That’s not to say you shouldn’t be using your credit cards. Just use a different credit card for new transactions, maybe the one from which you transferred the balance.

Do yourself one big favor: pay off the balance every month on your new credit card. You’ll avoid major interest charges. And, you’ll avoid the risk of racking up a bunch of new debt and needing to do yet another balance transfer down the line.

If one of the new transactions you’re thinking about making are student loan payments, think again. While it may be possible to pay your student loans with a credit card under some circumstances, that doesn’t mean it’s a good idea.

A note of caution about returning your card to zero balance

If you’re concerned about transferring a balance to a new card – leaving all that credit available to you on the old card – cut up the old card and close it.

Despite the hit your credit utilization ratio might take, it may be worth it say goodbye to your old card altogether. Or, forget the balance transfer. Just keep chipping away at the debt on your current credit card until it’s paid off.

What is a balance transfer? Done right, a balance transfer can help make a dent in your credit card debt. Done wrong, and it can hurt you way more in the long-run.

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