Are you currently carrying balances on multiple credit cards? A balance transfer may make your debt easier to manage. By consolidating your debt onto a single balance transfer card, you can focus on paying one bill, rather than many, each month.
In addition, if you're approved for a credit card with a 0 percent introductory APR on balance transfers, you may be able to pay down your debts more quickly by using the money saved on interest to pay down your balances.
Follow these five steps to make the most of a balance transfer offer.
1. Check your credit score.
Credit cards offering the best balance transfer terms typically require good or excellent credit to be approved. It's important to figure out whether you can qualify for the credit card before you apply, as the hard inquiry -- which typically occurs when a financial institution checks your credit report to make its lending decision -- may lower your credit score.
2. Know your current interest rates.
Before you apply, know the interest rates that you're currently paying on your credit card debt, and aim to transfer the balances with the highest interest rates so you can maximize your savings. The less money you pay in interest, the more money you can free up to pay down your debt.
3. Check for fees and restrictions.
Keep in mind that the credit limit on a new card may be less than the amount of debt you currently have on your other credit cards, which could prevent you from transferring as much as you'd like.
In addition, it's important to note that banks will often charge you a fee to transfer your balance -- typically 3 to 5 percent of the balance or a flat fee, often the higher of the two. When creating a plan to pay down debt, make sure you take into account any fees that you may need to pay. If you're looking to save some money on fees, consider Chase Slate®, which currently offers an introductory $0 fee for balances transferred within the first 60 days your account is open (then the fee for future balance transfers jumps to 5 percent of the amount transferred, with a minimum of $5).
4. Apply for a balance transfer card.
When applying for a balance transfer card, there will often be a section asking which balances you'd like to transfer.
You'll typically be asked to provide:
- The account numbers for your other credit cards
- The amount you'd like to transfer from each account
However, this section of the application is usually optional. Consider waiting to transfer your balances until you know the credit limit you've been approved for.
5. Continue to make your payments on time each month.
If you were unable to transfer all of your debt to the new credit card, continue to make your payments on the other balances. Make sure to pay at least the minimum amount due for each card on time every month.
For any credit cards that you've transferred balances from, check your account statements within a week to confirm that the debt was paid off by your new credit card. Even if these cards no longer have balances, consider keeping them open, as they may contribute to the length of your credit history and lower your credit utilization.
While your new balance transfer credit card may offer 0 percent APR, remember that this is an introductory offer typically ranging from six to 15 months. Carefully check the terms and conditions to see how long the introductory period lasts. You'll be on the hook for interest after the introductory period, so you'll want to stick to a repayment plan and try to eliminate the balance before the offer expires, if you can, as the APR after your introductory offer could end up being higher than your other credit cards' APRs. If you'd like more time, the Citi® Diamond Preferred® Card has a long 0% introductory APR period of 21 months for balance transfers (after that, the variable APR will be 13.99% to 23.99%).
Balance transfer cards can be great tools to help you pay down your debt more quickly and save money on interest, but there are many details and fees you'll need to watch out for. If you have questions, don't hesitate to ask the card issuer for further clarification before you apply.
If you're approved for a balance transfer card, do your best to practice positive credit habits -- paying your bill each month, on time, and contributing any additional money you can spare beyond the minimum payments to pay down your debt faster. In addition, try to avoid using your balance transfer card for new purchases so you're not adding to your existing debt load.
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