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How Do I Make a Balance Transfer?

Oct. 16, 2013
Credit Cards
How Do I Make a Balance Transfer?
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The basics of a balance transfer are simple: Take debt you owe on an existing credit card and transfer it to one with a lower interest rate. Done correctly, this can save you money by helping reduce your monthly payments and paying off your balance quicker. But while the idea sounds easy, the process can be confusing.

How do you actually do a balance transfer? To make it easier, we’ve broken it down into a few steps (if you already know what to look for in a balance transfer card)

1. Sign up for your new card

Once you’ve identified a card that makes sense for you, read through its terms and agreements thoroughly — noting the length of the low-interest period and what the balance transfer fee will be. The Consumer Financial Protection Bureau keeps a handy database of credit card agreements that can help you compare terms for different cards. If it all adds up, sign up for you new lower interest credit card, which you plan to transfer your balance to.

2. Transfer your balance

Each card issuer can work slightly differently, whether by phone, in-person or online. Whatever you do, make sure you get written confirmation of any step. If they don’t provide you a written copy, ask for one. You’ll definitely need to have your account or card number on hand and know how much you’ll want to transfer. Keep in mind that most credit cards include fees that are a percentage of the balance you plan to transfer and can take a chunk out of your savings.

3. Continue to make payments on your old card

This is important: Until you have written confirmation from your old credit card company that the transfer has cleared and you receive a billing statement that shows you’re not carrying a balance, continue to pay the minimum on your old card. The last thing you want is to be hit with late fees for falling behind on a card you want to scrap.

4. Wait for notice of successful transfer

Even after you’ve received confirmation of a successful transfer, contact your bank or card issuer to confirm that your balance has been transferred. You can’t be too careful. A balance transfer is a significant move and, in case anything goes wrong, you want to make sure you have all of your bases covered and the necessary documentation to show the credit card company you were following procedure.

5. Look for a billing statement with zero balance

This should be the final confirmation that you no longer have to worry about your old card. You don’t want to end up like Alyssa, profiled in The Consumerist, who took at 200-point hit to her credit score after a missed payment built up over months without warning.

6. Stash your card, but don’t close your account

While it may be tempting to cut up your card and close out your account in one final, cathartic ceremony, closing a paid off account can actually damage your credit score. You’re better off paying down the balance on your card and keeping it in a drawer for safekeeping.