- Transfer Balance From One Card To Another
- How A Balance Transfer Affects Your Credit Score
- Why It’s Going To Be Harder To Get A Top 0% Credit Card
- Best No Fee Balance Transfer Credit Cards Of November 2023
Transfer Balance From One Card To Another – Transferring outstanding debt from one credit card to another card—usually a new one—is a balance transfer. Credit card balance transfers are typically used by consumers who want to transfer debt to a credit card with significantly lower promotional interest rates and better perks, such as a rewards program for cash back or points for everyday spending.
What is a balance transfer credit card? Simply put, it’s a credit card that allows you to transfer a balance from another card, usually for a low introductory APR. You may pay a balance transfer fee (which typically ranges from 3% to 5% of the transfer amount), although some credit card companies may not apply these fees. The introductory rate can be as low as 0% and can last anywhere from six to 18 months.
Transfer Balance From One Card To Another
Challenge: Balance transfer means carrying a monthly balance, and the monthly balance (even with a 0% interest rate) still requires you to make at least the minimum transfer payments and any new purchases on time. Otherwise, you could lose your credit card’s introductory APR on transferred balances along with any grace period and incur high interest charges (and possible penalty APRs) on new purchases.
How A Balance Transfer Affects Your Credit Score
Careful, savvy consumers can take advantage of these incentives and avoid high interest rates when paying off debt, but you need to study these offers carefully.
Balance transfers can save you money. Let’s say you have a $5,000 balance on a credit card with a 20% annual percentage rate (APR). At that rate, maintaining that balance and paying $250 a month would take 24 months to pay off and cost $1,134 in interest. By securing a 12-month 0% balance transfer on a new credit card and transferring a $5,000 balance, the cardholder gets a year to pay it off with no interest and only a balance transfer fee.
However, there are many details and costs associated with these transfers. For example, after the transfer, you still have to pay the minimum monthly payment on the card before the due date to keep that 0% rate. And pay attention to the interest rate. Is the interest rate on the new card higher than the balance on the current card?
Similarly, non-compliance with any of the terms of the cardholder agreement, such as late payments, exceeding the credit limit, or returning a check, can result in a penalty of up to 29.99% interest. The 0% rate is usually valid for 12 or 18 months, sometimes longer. Can you pay off the transferred balance within that period? If not, what rate of interest occurs later? Asking these questions can help you make sure a balance transfer card is right for you.
Why It’s Going To Be Harder To Get A Top 0% Credit Card
Credit card companies don’t have to remind you when a promotion ends, so you could end up with unexpected interest charges if you’re not diligent.
For accounts using a new credit card, the terms require the cardholder to make a balance transfer within a certain period of time (usually within the first two months) to receive the promotional rate. The day after this window closes, normal interest rates begin. In addition, credit card companies do not allow existing customers to transfer balances to new accounts they also issue.
A history of late payments, a low credit score, or a cardholder filing for bankruptcy may also result in a transfer being declined.
A balance transfer in the absence of a 0% or low interest rate offer can be beneficial, but it’s important to do the math first. Let’s say you have a balance of $3,000 with an interest rate of 30%, which means $900 a year in interest. Transferring your balance to a card with a 27% APR and 3% transfer fee means you pay $810 in interest and a $90 balance transfer fee per year. You would even break only after a year.
How To Transfer Credit Card Balances To A New Card
To reach this example, you need a deal with an APR of less than 27%. A better plan might be to ask your existing card issuer to lower your interest rate to 27% or less, saving you a balance transfer fee.
If you’re struggling to pay off your credit card debt, consider calling your card issuer to discuss possible relief options, including rate reductions, deferred payments, or late fee waivers.
There are a variety of places to find balance transfer credit card offers, so it’s important to consider all options. Some places to look for balance transfer credit cards are:
If you visit a credit card comparison site, be aware that these sites typically charge credit card companies a referral fee when a customer applies for a card through the site and is approved. In addition, some credit card companies have influenced the information that websites publish about their cards, thereby distorting the picture of card costs.
Best No Fee Balance Transfer Credit Cards Of November 2023
You may only have to search your inbox or inbox to find balance transfer credit card offers. Credit card companies can send pre-approved offers to customers who match their ideal credit profile. Keep in mind that if you decide to apply for one of these offers, it may make your credit check difficult.
How do credit card balance transfers work? When you’re approved for a card with a 0% interest balance transfer offer, find out if the 0% rate is automatic or subject to a credit check. The next step is to determine which balances to transfer; cards with high interest rates should come first. (The balance does not have to be in the cardholder’s name to make a transfer.)
Then factor in the transfer fee, which is typically 3% to 5% ($30-$50 for every $1,000 transferred). Is there a fee limit? If not, it might be worth moving larger balances. Also, check the credit limit of the new card before starting the transfer. A requested balance transfer cannot exceed your available credit line, and balance transfer fees count toward that limit.
Although it’s called a balance transfer, one credit card is actually paying off another. There are different ways to make a balance transfer using a credit card.
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With this option, the new card issuer (or the issuer of the card to which the balance is transferred) issues checks to the cardholder. The cardholder bills the card company they want to pay. Some credit card companies will allow the cardholder to check out on their own, but make sure it won’t count as a cash advance.
In this case, the cardholder provides the account information and the amount to the credit card company to which they transfer the balance, and that company arranges a transfer of funds to pay the bill. For example, if you pay off a $5,000 balance on your high-interest Wells Fargo Visa card and transfer that balance to a Citi MasterCard with a 0% offer, give Citi your name, billing address, and account. Visa card number and indicate that you want to deposit $5,000 into that Visa account.
People who take advantage of these offers sometimes find themselves on the hook for unexpected interest rates. The problem is that transferring a balance means having a monthly balance. Carrying a monthly balance without making the minimum payment each month (even with a 0% interest rate) could mean you lose the card’s introductory APR, its grace period, and wind up paying unexpected interest on new purchases.
The grace period is the time between the end of the credit card billing cycle and the due date of the bill. During that period (at least 21 days by law, but more often 25 days), the cardholder does not have to pay interest on new purchases. However, the grace period only applies if the cardholder does not have a balance on the card. Many consumers don’t realize that a promotional balance transfer balance can affect the grace period if the minimum payments are not made each month.
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In addition to the grace period, interest charges increase when you purchase a new card after a balance transfer. One good change: from 2009 the Credit Card Accountability, Liability and Disclosure Act credit card companies can no longer apply payments to the lowest interest balances first; now they have to apply them to the highest interest balances first.
Still, the Consumer Financial Protection Bureau says many card issuers don’t make their terms clear in their promotional offers. Issuers must inform consumers how the grace period works in marketing materials, application materials and account statements, among other communications. Sometimes these claims don’t even appear in the credit card offer itself, but elsewhere on the credit card issuer’s website, such as in the help, FAQ, or customer service area.
Also, keep in mind that many offers state that the cardholder’s credit score determines the actual number of 0% balance transfer months during the introductory period.
If the terms of the grace period for purchases after the transfer are unclear, the offer can be transferred