What Is a Balance Transfer Card and Tips for Using One

Recent studies reveal Americans collectively owe more than $1 trillion in credit card debt. Credit card debt can seem overwhelming, especially for those facing high interest rates. Some consumers use balance transfer cards to help them overcome this debt by reducing their interest rates—at least for a set period. Before choosing this option, it’s important to understand how these credit cards work and how to transfer a credit card balance.

This article digs deeper into the topic of balance transfer credit cards, how they work, and how to determine if this is the right option for you.

What Are Balance Transfer Cards?

Balance transfer cards are a type of credit card that includes a special offer for those wishing to transfer their current credit card balance. For example, the credit card might include a special 0% APR rate during the introductory period, which typically lasts anywhere from six to 18 months.

Let’s say you have a $4,000 balance on your current credit card. Once approved, you transfer this balance to a new balance transfer card with a 12-month APR. This allows you to work toward paying down your debt for a year without worrying about incurring more interest.

How to Transfer Credit Card Balance

Before you can transfer your credit card balance to a new card, you must first be approved for a balance transfer credit card. As with all credit cards, the lender checks your credit history and credit score when determining approval. Typically, you must have good or excellent credit to get a balance transfer credit card.

Once you’re approved for the credit card, you can transfer your balance almost immediately. There are three common ways to transfer your balance:

  • By phone. After receiving your card, you can contact your credit card company directly. Be sure to have all the necessary information about the card you want to transfer the balance from as well as your new account information. Customer service agents should be able to help you with the process and answer any questions you may have.
  • Online. Most credit card companies have an online app that allows you to handle many transactions instantly, including transferring balances. It’s likely your credit card offers these services, making it easy for you to transfer your balance as soon as you receive your new credit card.
  • Convenience checks. Many balance transfer credit cards provide new cardholders with convenience checks to make the transfer process as seamless as possible. If you have these checks, you can use them to pay off your current credit card and the amount will automatically transfer to your new card. Be careful—these checks can come with additional fees and may be treated as a cash advance rather than a balance transfer. Always read the terms and conditions before using these checks.

Keep in mind that you may incur a one-time balance transfer fee for making this transfer. Reading the terms and conditions of your credit card can help you better understand these fees.

Is a Balance Transfer Card Right for You?

There are several reasons obtaining a balance transfer card may be the right option for you, such as:

  • To pay down debt. If you’re struggling to pay off your current credit card balance due to high interest rates or you have multiple cards, transferring this outstanding debt to a balance transfer card may be the right choice. It can give you time to pay down your debt while taking advantage of the 0% APR introductory period.
  • To receive lower interest rates. When looking for a balance transfer credit card, be sure to shop around for one with lower standard interest rates than your current card. This ensures you receive ongoing savings as you continue to use your card.
  • To improve your credit. A balance transfer credit card may help you improve your credit by lowering your credit utilization rate. As you continue to make on-time payments to pay down this debt and manage your credit responsibly, your credit will likely keep improving.

Tips for Making the Most of Your Balance Transfer Card

Using balance transfer credit cards correctly helps you get the most out of them. Here are some tips for maximizing those benefits:

  • Look for an introductory 0% APR. If you can get 0% on your balance transfer for six to 18 months, you may be able to pay off credit card debt faster. Best of all, you’ll pay less interest. The longer the introductory offer, the better your chances of paying off the debt and avoiding high interest. When shopping for a balance transfer credit card, be sure to factor in the length of the intro period.
  • Don’t automatically close current accounts. Keeping an old credit card account open can improve your credit utilizationcredit age, and credit mix. All these factors can have a positive impact on your credit health. Consider keeping your old accounts open, but be careful not to run the debt too high.
  • Avoid late or missed payments. Many balance transfer credit cards come with a stipulation that could void the 0% APR intro period. For example, if you miss a payment or make a late payment, it may be enough to void the special offer. This means you’ll end up paying interest on the remaining balance. Be sure to read the fine print when getting any new credit card.

Mistakes to Avoid When Using Balance Transfer Cards

There are some negative aspects to balance transfer cards, especially if you don’t know how to transfer a credit card balance or how these cards work. Without this understanding, these types of cards might end up costing you more in fees. Below is a look at some common mistakes you want to avoid when using balance transfer cards.

  • Jumping at the first offer. Don’t apply for the first balance transfer credit card you see. Instead, shop around to find a card that best fits your specific needs. Be sure to compare options, such as the length of the intro rate, balance transfer fees, regular APRs, and other relevant fees.
  • Not transferring your balance soon enough. Most balance transfer cards have a short window for taking advantage of low interest rates on balance transfers. This period typically ranges from one to two months.
  • Failing to pay more off during the intro period. If your goal for obtaining a balance transfer card is to pay down your debt, be sure to have a plan in place. Create a realistic budget that determines how much you can pay each month. Make sure you stick to this plan so you pay as much off as possible before the rates increase.

Can You Do a Balance Transfer Twice?

It’s possible to transfer your credit card balance twice. First, you must qualify for another balance transfer credit card. If you qualify, you may be able to stretch out the time you have to pay off your debt interest-free.

Keep in mind that most credit cards charge a balance transfer fee. Be sure to compare these costs before getting another car.

The Bottom Line on Balance Transfers

Balance transfer credit cards can be a good option for those facing high interest rates or who want to pay down their debt faster. The first step is to check your credit with Credit.com’s Free Credit Report Card to see what type of card you may qualify for. If you’re not quite ready for a balance transfer credit card, you can get a credit building card first. Over time, you can work toward building your credit score so you can qualify for a balance transfer card.

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