How to Pay Off Debt With a Credit Card Balance Transfer

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What You Need to Know About Credit Card Balance Transfers

Reiterating the earlier definition of a balance transfer, it is the act of transferring an outstanding balance from one credit card to another. Sounds counterintuitive at first, right?

But this method is seen as a way to save debtors from high-interest debts. Moving that balance to a zero-interest (or low interest) card can save you a lot of money, given that you comply within a certain period of time.

That is essentially the credit card balance transfer meaning. To make things clearer, here is an example. If you are paying off a $45,000 debt on a credit card with 18% monthly interest, you need to pay $8,100 a month to stay ahead. This can really cripple your purchasing power and might lead to another set of debts in paying.

Thus, it is advisable for you to move this outstanding debt to a zero-interest balance transfer, or at least one with a lower interest rate. This can save you from the trouble of paying too much in interests.

Most balance transfer cards charge a 3-5% transfer fee. This is a very meager amount as compared to the rate you originally have to pay without a balance transfer.

The amount of balance you can transfer usually depends on what you and the card issuer have negotiated. Limits often correspond to the maximum amount of balance of the new card. For this, you will need to look for another financial institution as transfers are generally prohibited within the same creditors. Also, note that there are only certain types of debts that are transferrable.

How Do Credit Balance Transfers Work?

Now you might wonder, “how do I make a balance transfer?” To maximize the benefits of balance transfers, you need to familiarize yourself with how they work. It is the intricate and little details of this process that can make or break your debt situation.

Browse for Good Balance Transfer Cards

1 Try to look for several available transfer card options. Choose one that fits your financial goals and needs by looking at their annual percentage rate (APR) and additional perks that they offer. Some offer a longer period of zero interest, with amazing benefits like cashback.

Get a Credit Balance Transfer Approval

2 With a potential transfer card in mind, you then have to request to do a credit balance transfer and gain approval from the card issuer to which you are transferring debt to.

In doing so, you are to provide an explanation and information regarding the debt that you want to be transferred.

There are certain provisions depending on what type of credit you are permitted to move. Some financial institutions do not approve moving debt to another card that is also issued by them, so take note of that.

Here are some of the common ways to do this:

• Personal consultation – You can set a face-to-face meeting with a representative of the institution that would issue your balance transfer. This way, it would be easier to plead your case and more probable for it to be approved. You can also immediately ask for clarifications or clarify the specifics of your request.
• Online- This is a more convenient method of requesting a bank transfer. Cards have their respective mechanics, but generally, you just have to log into your account on the online portal of your prospective creditor. Fill in the required information, including but not limited to your issuer’s name, the amount of balance, and other pertinent account information.
• Phone- This is similar to the first option; the only difference is you simply have to call your issuer through your mobile phone for a balance transfer. As with any of the other options, ensure that you have all the information you need to answer queries from your issuer. If you’re lucky, you might be able to simply skip this procedure through a convenience check from issuers. This is mailed by some issuers and can be considered as balance transfers already. Though, make sure to read the terms first to know if this is a viable and beneficial option to take.

Wait for Confirmation

3 Now, you just have to wait for your request to be processed. If you are lucky, it might only take you two weeks at most. But if not, it might take a while, and you might have to pay another monthly debt payment in the previous card you are trying to transfer from.

In typical instances, balance transfer issuers directly settle your debt with your previous creditor. Debt is paid, depending on the amount you requested. That paid amount, including a balance transfer fee ranging from 3-5%, will be the initial balance of your new credit account.

In some circumstances, the new card issuer will provide the cardholder with credit card balance transfer checks. Cardholder then proceeds in checking out to the card institution they want to make payments in. Simply ensure that this is not received as a cash advance.

Most do not usually receive notifications once their transfer request pushes through. It is recommended that you check your account regularly and ensure that transactions are made on time.

Make the Necessary Payments

4 Now that all prior steps are accomplished, it is time to pay off your outstanding debt on your new credit card. When doing balance transfers, you should take note of the promotional period of your transfer card. This is the time span in which you can pay your debt without interest.

Most cards offer 0% APR for 18 months at the longest, while the commonplace is at 15 months. After this period, you will revert to regular payments with interest. The difference is that you get to pay lower for interests compared to your previous credit account.

Is it okay to do more than one balance transfer? You can, but the transfer fee of 3-5% might make it unsustainable. Additionally, the key to really benefit from this is that you have to ensure timely payments within the promotional period.

Perks of Applying for a Balance Transfer

Are you still mulling over whether or not balance transfer can really help you out? Well, to be fair, it has its own perks and pitfalls. Here are some of the instances when balance transfer can be handy:

Capitalizing on Zero or Lower Interest Rates

1 This is the main selling point of balance transfer credit cards. You can enjoy months of zero or low-interest debt repayments, depending on the APR and promotional period of your chosen balance transfer card. Some even offer a stellar 36-month balance transfer that can really help you save up all the money that would have been allotted to paying interests.

This is especially useful for those who already incur high-interest payments on their existing credit cards. Transferring an outstanding balance to a new card can allow you to pay at a lower interest rate. This way, a major portion of your money can already be dedicated to paying your principal credit card balance.

Who knows, you may be able to complete your debt repayment even before the introductory period ends!

Paying on Better Terms

2 Assess the existing terms of your current card with the new card you are planning to transfer the balance to. You might spot some terms within your new potential card that are way better than your existing one – for example, expensive rates at shorter grace periods.

Certainly, it would be wise to move and use a more affordable and wallet-friendly option. Good balance transfer terms include a considerably lengthy introductory period, low transfer fees, preferably no annual fees, and extra bonuses and perks in typical spending like food, gas, and shopping.

Debt Consolidation

3 Using a new credit card in which you can consolidate debt can save you from the trouble of making multiple and financially draining interest payments. This is especially beneficial for those who already have a high-interest balance across multiple cards.

Eliminate the hassle of different payments by consolidating all your balances in a single credit card. Why make things difficult for yourself, right?

Some Drawbacks to Watch Out For

While those were some promising benefits you can get out of balance transfer, there are still pitfalls that you might need to consider.

Danger of Higher Interest

1 But wait! You can only end up with higher interest payments if you fail to pay up before the promotional period ends. So, it is imperative that you check the interest rates that will apply once this introductory period is over.

To prevent this from happening, you have to go for a balance transfer card that offers a low-interest rate. Also, look for cards with amazing benefits like welcome offers and cashback systems that can aid you in repaying.

There is no need to be threatened by this. You just have to be careful and wise in discerning which option is the most advantageous. Not entirely sure how to do this? Book an appointment with us today!

Some Balance Transfers Do Not Come Cheap

2 The affordability of balance transfers really ends once the introductory period is over. The transfer fee, annual fee, and late fees can be a great financial burden to bear and comply with.

Hence, before proceeding with a transfer, estimate the costs that you will incur within a certain transfer card. Some cards make you pay for about $95 in annual fees, while some cards do not obligate you to pay any annual fee at all.

Your Debt May Grow

3 Transferring balance to a new account increases your credit limit, and that can pose a great threat to you as a consumer. Well, it really depends if you have enough self-discipline to prioritize paying debt obligations first before indulging in wants and luxuries.

Before doing balance transfer methods, develop self-discipline and the practice of efficiently and effectively managing your finances. The point here is to make you debt-free. But the lack of self-discipline may make this counterproductive. You might end up with more debt.

Negative Credit Score Implications

4 Always remember that your credit score ebbs every time you transfer a balance that is beyond 30% of the indicated credit limit. To avoid hurting your credit score in balance transfers, make sure that the debt to be moved will not exceed the limited amount.

Ensure that your transfer card has enough available credit to accommodate another debt. This will prevent the possibility of your credit score going down.

You can also overcome the worry of lost points. Points can be recovered by reducing your outstanding balance with punctual payments every month. The solution is still within you! A more detailed discussion on how balance transfers influence your credit score is explained below.

Can Balance Transfers Affect My Credit?

One of the major hesitations people have before doing balance transfers is how it would affect their credit. Many fear that this would deal a negative blow towards their credit scores.

Well, depending on your credit history, a balance transfer can be good or bad for your score. But overall, it could help you get out of credit card debt if done. Here are some of the effects balance transfer might have on your credit:

• Upon your application, you will undergo a thorough inquiry as to why you needed another credit account. This may go against your credit standing and lower your scores slightly.
• A lower average age of accounts stems from opening a new credit card and can lead to a lower credit score.
• Acquiring a new credit card can increase your credit limit. This can, in turn, lower your credit utilization and positively impact your credit scores.
• Transferring debts to new accounts can lower the number of accounts you have debts, which can be pretty good for your credit score.

Is a Balance Transfer Really Suitable for Your Financial Situation?

Now that you know the basics of how a balance transfer credit card works, the next question would be whether you should get one. The answer depends on your financial capability and goals. If your goal is to be debt-free by a certain period of time, and you have the money for it, then why not? But the efforts of applying for a balance transfer will be wasted if it is not the financial option suited for you.

Here are some of the boxes you have to tick to really determine whether you should get a transfer card.

You Are Financially Capable

1 Consider if you have a source of employment or at least a steady flow of income. This would guarantee timely payments and prevent the threat of larger debts due to late fees. Transferring a balance may defeat its purpose if you will not be able to make payments on time.

Being financially stable can also ensure that you can continue repaying once the promotional period wears off.

High-Interest Rate on Your Current Card

2 The whole mission in transferring a credit balance is to pay at a much lower interest rate. Make sure that you have high-interest rates on your existing credit card to make the 3% fee of the new one worth it. You might make the mistake of proceeding with a balance transfer when you can easily pay off your remaining balance on the same card.

Along with estimating the cost of the transfer fee, try to calculate the accumulated fees that you will have to pay on your transfer card. Again, make sure that this does not exceed what you originally have to pay on your original account.

Evaluate Your Credibility

3 Assess your performance and determine if you are still qualified or eligible to apply for a new credit card. Here are some general rules of thumb to guide you:

• Having a credit history for more than two to five years will increase your credibility.
• Making punctual payments will also improve your odds.
• Make sure your credit card is not maxed out.
• A FICO score of 720 and above is a good sign that you can apply for another credit card.
• A score ranging between 660-720 is still a big maybe.
• And a score of 660 below means you have to look for another option.

If not, then it is not the end of the world for you! There are still many alternatives for debt repayment and settlements. DebtQuest USA is the one to call. Do not hesitate to consult with us today to finally free yourself off Credit Card debt burdens and obligations.

Manageable Credit Limit

4 Note that you may not be permitted to transfer your entire balance to a new account. As is stated above, credit cards have limitations. Just ensure that, in transferring your balance, the credit limit allows it. If not, then you might wind up paying two separate interests at the same time.

Some Considerations When It Comes to Balance Transfers

Making rash decisions can make your credit debt pile up and greatly hurt your finances. Before engaging with balance transfers, you must take note of several aspects to ensure that you can gain more benefits than potential disadvantages.

APR Introductory Period

1 For many, the best transfer card would be the one with the longest introductory period or timespan in which you can pay 0 percent credit card debt interest. Assess your financial capability and determine whether you are able to maintain regular payments within that specified time.

Lagging behind on payments for transferred balances can just double up your credit burdens, and this can defeat the whole purpose of moving your outstanding debt to another account.

Rate of Fees

2 Once promotional periods end, what fees kick in afterward? Are these fees lower than what you used to pay for? Do the perks outweigh or at least make these fees worth it?

Common fees are transfer fees, annual fees, and late fees. If you have a very rocky and unstable financial status, late fees and regular interests might be too much for you already. Make sure to check corresponding fees before proceeding with a balance transfer.

Where to Look for Great Balance Transfer Deals

3 Perhaps it is at this point where you begin to search for credit cards to transfer balances with bad credit. You can refer to sites of credit card issuers that allow for balance transfers. Try to compare the fees and introductory periods for each one. Also, weigh the benefits that they entail.

Financial blogs can also serve as good references. However, note that some credit companies pay website posts for promotion and advertising.

Ultimately, the most credible option would be to consult a debt settlement company. DebtQuest USA can help you assess and evaluate your current financial status to craft solutions that best fit your financial needs and goals. We also offer debt consolidation and relief services that can much lessen your debt repayments.

Some of the Best Balance Transfer Cards

It is best to find low balance transfer cards with high-yielding benefits. This could help you ease your financial obligations, and at the same time, lessen the burden of credit debt settlement. Here are some of the most practical transfer issuers to choose from:

Citi Simplicity Card: Longest Introductory 0% APR Period*

Best for: Late payers

• APR: 0% on balance transfers for 21 months and purchases for 12 months
• Transfer fee: 5%
• Annual fee: none
• Late fees: none
• Perks and Bonuses: none

*all balance transfers must be made within four months

Citi Double Cash: All-Around Rewards

Best for: Frequent Travelers

• APR: 0% for both balance transfers and purchases for 18 months
• Transfer fee: 3%
• Annual fee: none
• Perks and Bonuses: 2% cashback on everything; Citi points can be converted to Travel Partners

AmEx Blue Cash Everyday: Points for Everyday Spending

Best for: Typical Spender

• APR: 0% for both balance transfers and purchases for 15 months
• Welcome Offers: $150 Welcome Offer with $1000 spend in 3 months
• Transfer fee: 3%
• Annual fee: none
• Perks and Bonuses: 2% cashback at US Gas Stations and Select US Department Stores, 1% cash back for everything else

AmEx Blue Cash Preferred: Highest Welcome Offer

Best for: Starters without Cash Reserves

• APR: 0% for both balance transfers and purchases for 12 months
• Welcome Offers: $250 Welcome Offer with $1000 spend in 3 months
• Transfer fee: 3%
• Annual fee: 95%
• Perks and Bonuses: -6% cashback on first $6,000 of Purchases at U.S. Supermarkets Per Year, 6% Cashback on Select U.S. Streaming Subscriptions, 3% Cashback on Transit Purchases including Uber, Lyft, Parking, Tolls, Train, 3% cashback at U.S. gas stations, 1% Cashback on Everything else

Capital One SavorOne Cash Rewards Credit Card: Dining Rewards

Best for: Foodies

• APR: 0% for both balance transfers and purchases for 12 months
• Welcome Offers: $150 Welcome Offer with $500 spend in 3 months
• Transfer fee: 3%
• Annual fee: none
• Perks and Bonuses: 3% cashback on dining and entertainment, -2% cashback on grocery, 1% on everything else

Chase Freedom: Rotating Rewards

Best for: Online Shoppers

• APR: 0% for both balance transfers and purchases for 15 months
• Welcome Offers: $150 Welcome Offer with $500 spend in 3 months
• Transfer fee: 3%
• Annual fee: none
• Perks and Bonuses: 5% Cashback on up to $1,500 spend in bonus categories that update every quarter. Historical bonus includes Grocery Stores, Gas Stations, Uber, Lyft, Restaurants, PayPal, Amazon, and Target. 1% cashback on everything else

What if a Balance Transfer Is Not for Me?

If, upon learning all the information above, you realized that a balance transfer credit card is not a feasible and practical option for you, there are still several ways to ease your repayment burdens. While this method can really help, it can be unsustainable in the long run.

Financial instability, threats of unemployment, and fluctuations in income make this option a double-edged dagger for your finances. It can help you or bury you into another pile of debts due to high interests after the promotional period.

Do not fret, for there are still tons of alternatives for balance transfers that are beginner-friendly and more secured if you do not have adequate cash reserves.

Summary

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How to Pay Off Debt With a Credit Card Balance Transfer

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The continuous increase in the cost of living without developments in employment, financial aid, and social equity has lead millions of Americans to incur debts - both personal and in credit. If you are growing more and more anxious about how you will relieve yourself of credit debts, you are certainly not alone!

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DebtQuest USA

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DebtQuest USA

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