5 tips to make a successful balance transfer

May 23, 2021

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Credit cards can help us save money with cash back, unlock amazing travel experiences and more. But they can also lead to debt and financial stress when you end up carrying a balance.

TPG encourages cardholders to always pay off their bills in full each month, but we understand that it’s not always feasible — especially during times of financial hardship. If you find yourself with credit card debt that you know will take months to pay off, a balance transfer could be a viable option to help you save on interest and pay down debt faster.

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What is a balance transfer?

A balance transfer is when you move the balance from one or more credit cards onto a single card. Essentially, it’s using one credit card to pay off expensive debt on other credit cards that have high interest rates. As a result of a transfer, you’ll only be paying off one card rather than juggling multiple cards with different APRs and due dates.

Credit cards will often offer a 0% APR intro period for balance transfers. These offers will give cardholders a specific timeframe at 0% interest to pay off a balance transfer. If you can realistically budget to pay off your full debt within the balance transfer intro period (generally between 12 and 18 months, depending on the card), you could save hundreds or even thousands of dollars in interest.

Balance transfer vs. personal loan

A personal loan is another common option for paying down debt. The loan process is similar to a balance transfer — you use a personal loan to pay off your credit card debt, essentially combining your debt into one low-interest payment. Generally, there aren’t any 0% interest offers on a personal loan, but the standard interest rate for personal loans is often significantly lower than a credit card’s regular APR.

For this reason, those who have a significant amount of credit card debt that realistically can’t be paid off within the 0% interest period on a credit card should consider a personal loan that might save them more money long-term.

Tips to complete a successful balance transfer

Choose the right balance-transfer card

It is usually possible to do a balance transfer to an existing credit card account, but most people apply for a specific credit card to make a transfer. Applying for a new balance transfer card will likely give you the best 0% APR intro period. When shopping for the best balance transfer card, here are a few things to look out for:

  • 0% intro APR offer — This is arguably the most important aspect of a balance transfer card. The larger your debt (or smaller your monthly budget), the longer you’ll want that intro offer to last. There are cards such as the Citi Simplicity® Card that offer as long as 21 months to pay off a qualifying balance transfer with no interest (then a variable APR of 15.49% to 25.49% applies). Balance transfers must be completed within the first four months of account opening.
  • Balance transfer fee — Balance transfers almost always come with a small fee. This generally ranges from 3% to 5% of the amount being transferred. A 2% difference may not seem like a lot, but it can add up when you’re transferring large balances. Plus, you’ll want to factor in the fee when budgeting to pay off your balance. Some cards do waive the balance transfer fee if you make the transfer within a certain timeframe, so look for those types of offers as well.
  • Regular APR If you are at all concerned that you may not be able to pay off the full balance within the intro period, make sure you are choosing a card with a low regular APR.
  • Rewards — Some rewards credit cards also come with balance transfer intro offers. You won’t earn rewards on your balance transfer, but having a card that comes with a solid rewards structure makes it more attractive to hold long-term. For example, the Citi® Double Cash Card offers 18 months of 0% intro APR on balance transfers made within the first four months of account opening (then a variable APR of 14.74% to 24.74% applies), on top of 2% cash back on every purchase (1% when you buy and 1% when you pay your bill). There is an intro balance transfer fee of 3% of each transfer (minimum $5) completed within the first 4 months of account opening. After that, your fee will be 5% of each transfer (minimum $5).
  • So, you could use the card to pay off debt, and then continue to keep the card for everyday expenses.

Related: Best balance transfer cards

(Photo by Orli Friedman / The Points Guy)
Choosing the right credit card could help you make the most of your balance transfer. (Photo by Orli Friedman / The Points Guy)

Know the terms of the balance transfer

Each balance transfer card will have its own set of terms: how long you have to make an eligible balance transfer, intro offer length, regular APR once the offer ends, balance transfer fee and balance transfer limit. You’ll want to know all of these things before making a transfer.

Different credit cards have different rules about how long you have from account opening to make a balance transfer in order to take advantage of a 0% intro offer. From there, the intro offer length will tell you how much you’ll need to pay each month in order to avoid interest payments. The longer the intro period, the lower your monthly payment will need to be.

Related: From debt to over 20 credit cards: the story of my personal finance journey

When it comes to transfer limits, credit cards will allow you to transfer up to your credit limit (which will vary from person to person) — including fees. This means that you’ll want to factor the balance transfer fee into your overall balance so you don’t go over your limit. For example, if your balance transfer credit card has a $10,000 balance transfer limit and a 3% balance transfer fee, you’ll only be able to actually transfer $9,700.

Continue paying the balance on your other cards until the transfer goes through

It should only take a few minutes to complete the paperwork for a balance transfer, but it could take much longer for your balances to actually be shifted to the new card. The exact timeline will vary from issuer to issuer, but you can expect up to a 10-day wait.

In the meantime, continue to pay any balances due on your existing cards until the transfer is complete. Until you receive official confirmation that the balance transfer has gone through, those balances are still technically on the old cards. You don’t want to get hit with late fees or have missed payments on your credit report.

Related: Best apps for money management

(Photo by Hero Images/Getty Images.)
Your balance transfer could take weeks to officially go through. Make sure you don’t miss payments in the meantime. (Photo by Hero Images/Getty Images.)

Beware the grace period on new purchases

Credit cards offer what’s called a grace period between the end of a credit card billing statement and the due date of a bill. By law, that period must be at least 21 days. That helps cardholders avoid paying interest and holding a balance for new purchases. However, that grace period only applies if a cardholder doesn’t have a balance.

Related: Important dates for your credit cards

A balance transfer offer will eliminate that grace period, which means you could get stuck paying interest on new purchases even if you are still within the 0% APR period for your balance transfer.

Budget to pay off the balance before the 0% intro period ends

Once the 0% APR intro period ends, you’ll be subject to the credit card’s regular APR. When planning out your balance transfer, make sure you’ll pay off the full balance before that offer period ends or you’ll get hit with interest charges. I suggest budgeting to pay off your balance at least a month before the intro offer ends.

According to Experian’s 2020 consumer credit review, the average American had credit card balances totaling $5,315. Let’s say you get a Citi Double Cash and plan to take advantage of the 18-month 0% APR intro offer on balance transfers (then a variable APR of 14.74% to 24.74% applies). It has an intro 3% balance transfer fee (then an ongoing fee of 5%; $5 minimum), so you’ll need to pay off a total of $5,474.45 within the intro period to avoid interest charges. Assuming you budget for a 16-month payoff date to give yourself some wiggle room, that means a monthly payment of $343.

Related: What budgeting technique is right for you?

Bottom line

For those with credit card debt, a balance transfer can help you consolidate payments and save on interest payments. Make sure you know the terms and conditions of the balance transfer before you apply and budget to pay off your full balance before the intro period ends.

If you follow these tips, you can start to become debt-free.

Featured image by Stevica Mrdja/EyeEm/Getty Images. 

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Regular APR
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Annual Fee
Balance Transfer Fee
Either $5 or 5% of the amount of each transfer, whichever is greater.
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