How to transfer balance between credit cards?

Transfer balance between credit cards can make a lot of financial sense if you save on interest and do it for the right reasons.

While the process itself is fairly simple and straightforward, there are several considerations behind it. Here's what you need to know before taking this action.

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$10k limit and other considerations.

Our personal finance experts indicate that a balance transfer can be most effective if the debt is less than $10K. It does not matter if one or more cards are involved. This amount is usually the credit limit most people have. If you exceed this debt, there are two options:

• Transfer as much as you can to a new card (one debt only).
• Prioritize the balance transfer for the card that generates more interest (several debts).

Old or new credit card?

Balance transfer makes financial sense when you save money and the annualized interest offered is spread out as much as possible. You do little to apply for a new credit card if you already have an APR of 3-4%. Only if you're being charged 15% or more should you consider looking for new plastic.

Credit Score

New plastic offers the best terms for this transaction, but you're going to need a good credit history. The best rated cards usually require a FICO score of 670 (good) to 850 (excellent). When you have a score lower than this, the grace period is shortened. Be sure to check your score to see what you can qualify for.

The fine print on balance transfers between cards

The most important thing about balance transfers is the conditions stipulated by each issuer. Usually, you must complete this process within the first 60-90 days of activating the card, make a minimum monthly payment, pay on time and show a decent credit history.

Any default voids the 0% introductory rate and you will be charged the normal APR.

How to transfer balance between credit cards?

Once you are clear on the aspects we have mentioned, you can move on to action. If you applied for a new credit card with 0% down, you need to find out if the interest rate is applied automatically or requires a credit check.

We suggest you run the balance with the highest interest rate first (it doesn't matter if it is in your name or not).

This is followed by the calculation of the transfer fee, which is usually between $30 and $50 for every thousand dollars you transfer. If there is no limit on the amount, consider transferring a larger amount and check the credit limit before executing the transaction. Remember that the balance requested for transfer cannot exceed the amount of the credit line.

Balance Transfer Request

Although referred to as a balance transfer, one credit card actually pays the other. Here's how it works:

• Transfer online or by phone. You must provide your account information and the amount to the issuer who will receive the balance. The issuer arranges to pay the balance on the other credit card. For example, if you have a MasterCard and are going to use a Chase Visa, you must provide your name, payment address, MasterCard account number and indicate that you want to pay a certain amount into that account.
• Checks for balance transfer. The issuer to which you are transferring the balance usually gives you checks for this process. As the cardholder, you write a check payable to the company that holds the balance you want to pay off. In some cases, these companies will let you endorse the check as being for yourself, but you must make sure it is not a cash advance.

Best credit cards to use for balance transfers

If you are thinking of applying for a new credit card, you can use Busconomico's database to learn about the best products available. As a suggestion, focus on the following:

• Transfer fee. Most credit cards that facilitate this operation charge from 3 to 5% of the balance to be transferred. There are cards without this charge, but they have a shorter grace period.
• Term of the initial APR. The time with 0% interest can extend from 12 to 18 months or more. The longer the better. Don't forget to check what interest rate you'll receive after the interest-free term ends.
• Types of transferable debt. Usually, you transfer what you owe from one card to another. However, there are banks that allow you to transfer debts from multiple cards. It is also possible to transfer balances related to other types of credit accounts and loans (student, vehicle, etc.), although the latter is less common. The conditions will tell you which plastic is more convenient for you.

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