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Balance Transfers

Should I Make a Balance Transfer?

Have you been chipping away at a pile of high interest credit card debt? Consider making a balance transfer to a new card to drop your interest rate and save some money over time.

Balance transfers work by allowing consumers to move all or some of their existing credit card debt onto a new card—often one with a much lower annual percentage rate (APR)—helping them save on interest. When deciding whether to make a balance transfer, consider these important factors: how much you're currently paying in interest, how quickly you'll be able to pay off your transferred balance, and what your credit score is.

If you're considering a balance transfer, it's crucial to know what your current APRs are on your existing cards so you can compare rates. Also take a close look at how quickly you'll be able to pay off the balance once you make the transfer so you don't end up with the same debt issues once your balance transfer card's promotional interest rate period ends. Finally, some valuable promotional card offers are restricted to people with good credit, so knowing your credit scores will help you understand what you might get approved for.

Find balance transfer credit cards in Experian CreditMatch.

If you're thinking about applying for a new balance transfer card, check out this guide to see whether a balance transfer is right for you.

Is a Balance Transfer Good for Me?

Balance transfers are especially effective if you have a good enough credit score to qualify for a new card that comes with a low or 0% introductory APR. Typically, balance transfer cards offer low APRs for set introductory periods—0% APR for 18 months, for example—for people with good credit scores.

Because the main objective of transferring a balance is to save money on interest over time, the lower your new APR, the better. And while you may be able to get approved for a balance transfer card with fair or poor credit, the APR you end up with may not make the transfer so worth it.

Before applying for a balance transfer card, get a free copy of your credit reports and scores so you understand what types of cards you may have better chances of getting approved for.

When considering whether a balance transfer to a new card is a good idea for you, also think about whether you'll be able to pay off the transferred balance before the low APR introductory period ends. If you're pretty sure you'll continue to carry a sizable balance once that promotion ends—and the interest rate increases—a balance transfer may not be the best way to deal with your existing credit card debt. If you have a plan to pay off all or most of your debt during the introductory period, however, a balance transfer card could save you quite a bit in interest charges.

What to Consider Before Making a Balance Transfer

While the basics of balance transfer cards are simple, some of the finer details aren't. Let's say your card has an introductory APR of 0% for 12 months on transferred balances. This means that any balances you transfer to the new card will be charged 0% APR for 12 months. Simple, right? Yes, if you only plan to use the card to transfer a balance and pay down your debt.

When you dive into the fine print, however, you may find that some cards have different APRs for new purchases. Certain cards also stipulate that if you make any new purchases, you'll have to pay your balance in full each month—including the transferred balance—to avoid incurring interest.

When you look at the fine print of the Citi® Double Cash Card - 18 month BT offer, for example, which offers an introductory 0% APR for 18 months, you'll see this stipulation: "If you transfer a balance, interest will be charged on your purchases unless you pay your entire balance (including balance transfers) by the due date each month." With this card, purchases outside of the balance transfers are charged a variable APR based on your creditworthiness—and that rate is much higher than the 0% introductory balance transfer rate.

Also consider the fees and other details associated with transferring a balance to certain cards. Balance transfer cards typically charge a fee of 3% to 5% on the transfer amount, with some stipulating a minimum charge, such as $20. Some cards also have clauses that strip you of your introductory APR if you make any of your payments late.

Because the objective of transferring a balance is to save money over time, researching the fees and costs associated with the specific cards you're considering is crucial to making the transfer worth it. Read through each card's fine print, and make sure you know all the specific details before sending in any card applications.

How Do I Get a Balance Transfer Credit Card?

Getting a balance transfer credit card is as simple as getting any other card: Once you pick the one you want, just apply. But before you do, there are a few things you can do to understand which card is right for you.

First, figure out what your current APRs are on your existing credit card debt. You want to make sure your new APR is lower than what you're already paying. Then take a look at your credit reports and scores to see what type of cards you may get approved for. Elite credit cards with valuable rewards are geared toward people with good credit, so knowing where you stand will help you avoid denials and choose the card that's right for you.

Find balance transfer credit cards in Experian CreditMatch.

Consider using Experian CreditMatch™, a tool that uses your FICO® Score* to help you find credit cards that are right for you. You can also browse through Experian's credit card marketplace to get details on balance transfer cards from our partners.

What to Do After Getting a Balance Transfer Credit Card

Congrats! You got approved and just received your balance transfer card. The first thing you should do is start transferring any balances you have. Each card will have a unique process you'll need to follow to transfer balances, so call your card issuer for instructions.

Transfer your balances early rather than later. If you have an introductory APR, you'll get the most value if you utilize it for as long as you need. Remember that once the introductory period is over, your APR will jump to a higher rate and your remaining balance will start accruing interest. Plan to pay as much as possible toward your debt during that introductory period to avoid high interest charges once it ends.

Also plan how you will use the card. If you are using the card for the sole purpose of getting rid of your existing debt, then consider not using this card for new purchases. Remember that new purchases are often not included in the promotional APR and can sometimes result in you losing your promotional rate.

Will a Balance Transfer Impact My Credit Score?

If used properly, a balance transfer card will help you pay down your existing debt—which should lower your credit utilization ratio and may help boost your credit scores.

Keep in mind, however, any time you apply for new credit, a hard inquiry is recorded in your credit file and will remain there for up to two years. Depending on what's in your credit file, and how many recent inquiries you've had, applying for a new credit card could have a temporary negative impact on your scores. If you don't know how many recent inquiries you've had, check your credit reports and scores to see what has been recorded in your credit file. You can get a free copy of your credit reports and scores from Experian.

In addition, applying for new credit may impact your credit scores if you already have a balance transfer card and still have a balance once the introductory period is up.

Finally, make sure once you have the balance transfer card, you make all your payments on time. Payment history is the biggest factor in your credit scores, so any late payments can have a negative impact on your scores.

If you decide a balance transfer card is a good option for you, be sure to find the right card for your needs, make all your payments on time, and work to pay off your debt as quickly as possible. With the right strategy, your balance transfer could put a lot more money in your pocket.

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