Frequently Asked Questions about Balance Transfers
Read our balance transfer FAQs to learn everything you need to know about this effective method of tackling your debt.
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If you have debt piling up on a high-interest credit card you might have considered a balance transfer to a lower interest account. Still wondering exactly how a balance transfer works and if it’s right for you? Below we answered some commonly asked questions to give you the best information possible before you embark on a balance transfer.
“How do I know if a balance transfer is right for me?”
If you have a high-interest credit card racking up debt and want to move this amount to a lower-interest card, consider a balance transfer for debt consolidation. Balance transfers are a helpful tool for anyone able to pay off this balance quickly and within the promotional period before interest rates rise. If you feel you might not be able to pay off your balance quickly once it’s transferred, you should consider another method to cut your debt.
“How do I know how much I should transfer?”
You can’t transfer more debt than your new card has in available credit. You want to keep your credit utilization ratio at about 30% for all lines of credit, so only move a balance smaller than the credit line on your new card. It’s imperative to know the credit limit on your new card before a balance transfer. Many companies will accept your inquiry and then charge you a fee for transferring a balance over your credit limit. Other companies may transfer only a portion of the balance up to your credit limit and also charge you the balance transfer fee.
“Will I actually save money?”
Many credit websites offer free balance transfer calculators. Once you know how the interest rate you are currently paying on a balance and how much a bank will charge in fees and interest for a balance transfer you can figure out your potential savings. If the amount is insignificant, it might not be worth going through the process of a balance transfer.
“Where can I find the best balance transfer deals?”
Shop around! The internet is a great asset for comparing offers all in one place. Many credit card companies offer promotional deals on balance transfers if you qualify. This is not the standard offer.
“Will a balance transfer hurt my credit score?”
Too many balance transfers can make it appear to creditors that you can’t pay your bills and are just shuffling high-interest debts to lower interest cards without the intention of paying off these balances quickly.
“How long does it take to process a balance transfer?”
Most balance transfers are processed between 7 to 10 days, but there’s no guarantee yours will be handled in that timeframe.1 If the creditor you’re transferring debt from needs to be paid by check rather than electronically, your request could take longer to process. Consider submitting your balance transfer application online to ensure all information is correct and that your request will take the least amount of time.
“How can I make sure I’m getting the most from my balance transfer?”
If you have decided on a balance transfer and accepted an offer, in order to get the most benefit from your balance transfer, your next step is to develop a repayment plan that will enable you to pay your balance within the low or 0% APR promotional rate period. Create a payment schedule and stick to this, cutting out any unnecessary monthly expenses that may deter a swift repayment.
“How many times can I transfer a balance?”
If you find yourself transferring the same balance multiple times, there may be a larger issue than the high interest rate on your credit card. Moving your debt around may give you the illusion of progress, when really you are just shuffling your debt from one card to another.
Pay Off Debt Faster with a Balance Transfer.
“How long will it take me to pay off the balance?”
It depends on the balance you’ve transferred as well as the amount you’re able to pay each month and how your credit issuer applies your payments to your purchase and balance transfer balances. If you are only paying the minimum amount each month, you may not be able to repay this balance before the introductory period, which is a recipe for further debt. The point of a good balance transfer offer is to aid you in repaying your debt on a lower interest card, rather than just moving your debt from card to card.
If you are still interested in a balance transfer to lower your debt, make sure that you’ll be able to repay your balance within six months to a year, or whenever your promotional APR expires. If you feel confident that you can better repay your debts with a balance transfer, make sure you shop around for the best offer to fit your needs.