How to Transfer a Balance

Many credit cards offer a low introductory rate in an attempt to entice customers to switch from their current credit card provider. The idea is that you’ll shift a credit card balance where you are paying a higher interest rate to one where a lower interest rate is offered.

For example, let’s say you are carrying a $600 balance on a credit card. The interest rate is 19.99%. Another card is has a deal. They are offering a 0% interest rate for 12 months on balance transfers. This means if you transfer your $600 to that card, you have 12 months to pay it off at no interest.

Balance Transfer Procedure

You want to coordinate the transfer with the old and new cards. A step-by-step procedure might go like this:

  • Keep making at least minimum payments to the old company
  • Apply for and receive the new card
  • Complete the balance transfer form on the new card
  • Receive notice that the balance transaction has been successful on the new card
  • Verify the zero balance on the old card
  • Cancel the old card. Also, ask the company to place a note on your credit report that the account was closed at your request.

Completing the Pay-Off

When you receive the particulars of the balance transfer information from the new card provider, read the contract and the fine print three times!

Some questions you want to ask are:

  • Is there an annual fee?
  • Are there balance transfer fees? (Note: In some cases these could be as high as 4% of the balance.)
  • Does the introductory rate also apply to purchases?
  • What are the late and over-the-limit fees?
  • Are balance transfers treated like cash advances?
  • What is the annual percentage rate (APR) after the introductory rate is over?

Make your payments on time. For example, say you have a $600 balance that you transfer to a 0% for 12 month credit card. If you plan on paying monthly, it would be $50 per month for 12 months. If you are late, you could be subject to not only an over-the-limit fee, but the interest rate might revert to the regular rate immediately instead of after one year.

There are many offers out there to select from. In addition to balance transfer deals, there may be additional enticements that appeal to you. So, make sure you shop around for the balance transfer credit card that best fits your situation.