How to Do a Balance Transfer the Smart Way

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The right balance transfer promotion can help you get your debts under control. You'll consolidate multiple balances into just one, which makes managing your bills easier. Plus, it can save you a considerable amount in interest payments when done correctly.

On the other hand, a poorly planned balance transfer can waste money and further complicate your finances.

Follow these steps to smoothly transfer your high-interest debt onto a low-interest credit card, allowing you to save money and work your way out of debt!

Step 1: Find the Best Deal

It's something of a numbers game to find the right balance transfer promotion.

The constellation of fees and interest rates can be confusing, so you should always shop around and compare different balance transfer credit cards.

Key factors to consider include:

• Annual fee: A new card’s annual fee can eat into your savings.
• Promotion length: Most balance transfer promotions last from 12 to 21 months.
• Promotional APR: This generally ranges from 0% to 1%. 
• Regular (or “go-to”) APR: When the promotion period ends, your transferred balance will be subject to a new, higher variable APR. This APR will depend on your credit score. 

What are balance transfer fees?

A balance transfer fee is a one-time charge that you pay for each transfer you make.

Depending on the card issuer, it will be either 3% or 5% of the amount, with a $5 or $10 minimum. Some cards may not charge a balance transfer fee at all.

Many balance transfer cards with 0% interest rates offer long promotional periods, which is good for large balance transfers.

But for a small-balance transfer, you might save more by going with a card that has a shorter promotional period but no transfer fee. 

For example, say you have a credit card balance of $4,000 at a current interest rate of 21%. If you pay $334 per month, it would take 14 months, and you'd pay $528 in interest.

However, if you take advantage of a 0% intro APR for 12 months with a 3% fee, you would pay $120. If you pay $334 per month, you could pay off the balance before the promotional period ends. This saves you $408, which is over 10% of your original balance.

You can use a balance transfer calculator like this one to figure out which card promotion will help you save the most.

Best balance transfer credit cards

Card	Features	Balance Transfer
Chase Freedom Unlimited® Learn More	Rewards rate: 5% cashback on travel purchased through Chase Travel℠; 3% cashback on drugstore purchases, restaurants, takeout, and eligible delivery services; 1.5% on all other purchases Welcome offer: Earn a $200 Bonus after you spend $500 on purchases in your first 3 months from account opening Annual fee: $0	0% Intro APR for 15 months from account opening on purchases and balance transfers, then a variable APR of 18.49%-27.99%.
Blue Cash Everyday® Card from American Express Learn More	Rewards rate: 3% cashback at U.S. supermarkets, U.S. gas stations, and U.S. online retailers up to $6,000 in purchases per calendar year in each category; 1% on all other purchases Welcome offer: Earn a $200 statement credit after spending $2,000 on purchases within the first 6 months Annual fee: $0 (rates and fees)	0% intro APR on purchases and balance transfers for 15 months from the date of account opening. After that, 19.74% to 28.74% variable APR.
Blue Cash Preferred® Card from American Express Learn More	Rewards rate: 6% cashback on purchases at U.S. supermarkets (up to $6,000 per year, then 1%) and on select U.S. streaming services; 3% on U.S. gas station and transit purchases (including taxis/rideshare, parking, tolls, trains, buses and more); 1% on all other spending Welcome offer: Earn $250 statement credit after spending $3,000 in the first six months Annual fee: $0 intro annual fee for the first year, then $95 (rates and fees)	0% intro APR on purchases and balance transfers for 12 months from the date of account opening. After that, your APR will be a variable APR of 19.74% - 28.74%.

Step 2: Prepare to Apply

After you’ve chosen the best card for you, make a list of your existing balances and order them by their respective interest rates.

If your new credit limit isn't high enough to pay off all the debts on your list, prioritizing the balances helps ensure that the highest-interest debts are paid off first. 

Along with the amount of each balance and rate, write down:

• Each account number
• The lender’s name
• The lender's mailing address

You’ll need these details when you do the balance transfer request.

You'll also need to gather the same information that you would need when applying for any new credit card:

• Name, date of birth, and Social Security number
• Street and mailing addresses
• Phone number and email address
• Annual income
• Employment status (employed, self-employed, unemployed, or retired)
• Gross annual income
• Monthly rent/mortgage payment

What debts can be transferred?

Note that certain balances may not be transferable. Some credit card issuers have flexible policies that allow you to pay down mortgages, car loans, student loans, business loans, or personal loans. Others are more strict and only permit the transfer of a credit card balance.

However, even the most flexible card issuer is unlikely to allow you to transfer a balance from one of its own cards to another of its cards at an introductory APR.

Step 3: Transfer the Balance

You can typically apply for a balance transfer credit card online, over the phone, or in person at a branch.

If you come prepared with the information detailed above, the card application itself should only take a few minutes. However, the transfer itself may take up to three weeks to process.

How does a balance transfer work?

Some promotions require that you request your balance transfer at the time you apply for the new card. Others may give you a window of time, typically between 60 and 120 days.

The latter option is preferable, as you can wait to see what your new card limit will be and then plan your transfer accordingly. 

Your new card will likely pay off your balances directly by mailing a check to the previous lenders.

Make sure that you continue to make your minimum payments on the old account while you wait for the transfer to go through.

If you stop making minimum payments prematurely, you could be charged a late or missed payment fee, and your credit score could take a hit.

What happens to your old account?

After your balance transfer is processed, double-check your old accounts to ensure that their balances have been reduced to $0.

Some residual interest charges (called trailing interest) may have accrued in the accounts during the time between application and payoff.

For the sake of your credit score, it's best to keep paid-off credit cards and lines of credit open. But you can cancel the card if it has an annual fee that you’d rather not pay.

While paying off your consolidated balance, keep old credit cards out of sight and reach — not in your wallet.

RELATED: How Many Credit Cards Should I Have?

Step 4: Aggressively Pay off Your Debt

Your transferred balance will have a minimum payment amount that you need to make each month.

Depending on the card’s terms, a late payment may result in the promotional APR period ending prematurely, so make sure it's on your calendar!

If you were approved for a lower credit limit and are unable to transfer all of your debt, you may be left with some debts dangling at your old APRs. In that case, you’ll have to prioritize which balances to pay off first: 

• Some personal finance gurus advocate the debt snowball method. You make minimum payments and then allocate extra cash toward paying off your smallest balance first, regardless of its APR.
• An alternative approach is the avalanche method, in which you’d pay off the balance with the highest APR first. 

Try to seize your low-interest lifeline by paying more than the monthly minimum during the promotional period.

If you don’t make a big dent while you have the luxury of paying little to no interest on it, you might end up in a worse spot than before once the regular APR kicks in.

Plus, you’re out whatever amount of money you paid for the balance transfer fee. 

RELATED: How to Pay Off Credit Card Debt

FAQs

TL;DR: Reduce Debt With a Balance Transfer

Balance transfers let you move high-interest debt to a card with a low or 0% APR. Shop around for the best deal — look at promotional periods, transfer fees, and what the regular APR jumps to afterward.

The transfer takes a few weeks to process, so keep making minimum payments on your old cards to avoid late fees and credit score hits.

A balance transfer can be a smart money move if you're strategic about it. Pay off as much as possible during that promotional period before the higher interest rate kicks in.

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Disclosure: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.