Credit card balance transfers can be a great tool to get out of high-interest debt faster BUT they are not always the best option.

A balance transfer to a card with a much lower interest rate, ideally 0% APR, means that your payment will be going mostly or totally toward paying off principal. Instead of most of it going toward interest.

We had around $12k of credit card debt and the interest rate was 18.99%. We knew with interest it would take us a lot longer to tackle that amount.

It was my husband’s credit card so we had to make sure he would be approved for a good balance transfer card based on his credit score (thankfully he was).

We were able to transfer around $4k to the Chase Slate card for 0% interest for 15 months plus 0% balance transfer fee. This was a no brainer decision for us.

We tackled the rest of the American Express credit card first. Then we paid off the Chase Slate (balance transfer) before the 15 months so we never paid any interest.

Just a note: The no balance transfer fee was on transfers made within 60 days of account opening.

How Do Balance Transfer Work?

To keep it really simple, a balance transfer is paying off one card with another.

Here are some steps to take if you want to do a balance transfer

1. Check your credit score: It is important to know what cards you most likely will be approved for (and what cards you won’t). If you have a good credit score, you probably can get approved for a card with 0% balance transfer fee.

2. Apply for a card: Research different balance transfer cards to see which is best for you based on your credit score and current credit cards. When choosing a card you want to try to find a card that gives you:
   1. A 0% introductory APR offer for balance transfers.
   2. A $0 annual fee.
   3. A 0% balance transfer fee (or a way to avoid paying such a fee)

If you can’t find a card that gives you all three or you won’t be approved, you want to make sure you get one with 0% introductory APR for at least 12 months (most range from 6-18 months). Interest charges add up quickly and usually cost more in the end than a one-time 3% to 5% balance transfer fee. 

3. Initiate the Transfer: You can usually do this online but you can call if you want. You’ll need to provide information about the debt you’re looking to move. This usually includes the issuer name, the amount of debt, and the account information. Once the balance transfer is approved, which could take a few weeks, the issuer will generally pay off your old account directly. That old balance plus the balance transfer fee (if applicable) will show up in your new account.

4. Pay it Off: If possible, you want to pay off the entire balance during the introductory period. It is important to remember you will have to make a monthly minimum payment so don’t ignore this account completely.

Should You Do a Balance Transfer?

It might not be worth the balance transfer fee and hassle, if your credit card balance is going to be paid off in a few months. If you have a high interest rate, a lot of credit card debt, and it is going to take you a while then this could help you save a ton of money.

It is important to ask yourself the following questions before deciding if this is a good idea:

1. Are you 100% committed to getting out of credit card debt and staying out of debt?
2. Will you do this balance transfer and then continue to add to your credit card debt?
3. Can you pay off the balance transfer within the introductory period?
4. What is your credit score? Will you get approved?
5. Do you have a repayment plan?

Balance Transfer Tips

1. Minimum Payments: I said this before but I wanted to say it again. Don’t forget you still have to pay the minimum payment each month or you lose the 0% introductory rate.

2. Future APR: If you won’t be able to pay off the balance within the introductory period, make sure you know what the APR will be. If it is higher than your current credit card, you might not want to do the balance transfer.

3. Keep Track of Date: Write down the date the introductory period ends because they won’t remind you. You need to keep track of the date.

4. Existing Customer: Credit card companies do not allow existing customers to transfer balances to new accounts that they also issue. For example, if you have a credit card with Citi, you cannot do a balance transfer to another Citi card. We transferred from American Express to Chase.

5. Fine Print: It is important to read the fine print on the credit card offer, so that you are aware of any fees or other downsides of the deal.

6. Balance Approval: The approved credit limit on the card could be lower than the amount you want to transfer. This is what happened to us. Most issuers won’t allow you to know what credit limit they will give you on a new balance transfer card before you apply. You will have to apply for the card first.

7. Credit Score Effect: A balance transfer can hurt your score by lowering your average length of credit history, increasing your credit utilization (potentially), and adding a hard inquiry to your credit report.It can also boost your score by lowering your overall credit utilization and help you pay off debt faster (which will also help your credit utilization). Need help with your credit score (and understanding credit cards)? Check out my course Master Your Credit (It is only $27!)

If you decide to do a balance transfer, you have to be 100% committed to paying off your credit card debt. Don’t transfer it if you are just going to let the balance sit there and not pay it off (or mostly off) before the end of the introductory period. Use this as motivation to get rid of credit card debt faster and become debt free!

Have you done a balance transfer before? Let me know in the comments!

Need help paying off debt faster? Or even creating a plan for multiple goals? Check out my 5 episode podcast series Making Money Moves.