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What Is A Balance Transfer And How Does It Work?

Managing your finances isn’t just about how you spend or save money. It’s about fostering a healthy relationship with your money. Creating a financially secure life can feel like an impossible task that requires a banking expert’s skills, but we’re here to break it all down for you.

What is a balance transfer?

In a nutshell, a balance transfer is a transfer process that lets you move a balance or debt from one to another credit card. 

A balance transfer can save you money by allowing you to move existing debt on a higher-interest credit card to another one with a lower interest rate. If it’s used correctly it can save you money on interest.

NOTE: Be careful. Fees, interest rates, and more other details can vary.

How does a balance transfer work?

#1 New credit card

Apply for a new credit card or wait until after you’re approved. It’s the best way to start the process, and as soon as possible. You need to know the account number for your existing balance and the amount you wish to transfer.

#2 Do your research

If you chose to go the modern way and make the process by using your phone or computer, you’d need to be correctly informed about the debt details (the amount of debt, the issuer name, etc.)

#3 Be patient

Once your transfer has been approved, the issuer will pay off your previous account automatically. Every detail from your old account, such as balance information and transfer fee, will be shown in your new credit account.

#4 Time to pay the balance

As we told you before, once our balance has arrived at your new account, you will be responsible for paying down the balance, which means that you’ll be responsible for making monthly payments on your new account. 

NOTE: If you pay it down during the introductory 0% APR period, you can save a nice amount.

What type of debt can I transfer with a balance transfer?

Credit card debt isn’t the only type you can transfer. Most of the issuers also allow their customers to move many other types of debt, such as personal loans, auto loans, and more, to a credit card.

NOTE: You may not be able to transfer balances between credit accounts that you have with the same financial institution or credit card company.

What are the benefits of a balance transfer, and why do we use it?

You may be asking yourself “Why should I consider having a balance transfer?”. There are many cheerful facts about this transfer that you should know, and we listed them for you down below:

#1 Organize

Combine debts, organize them. This way, you will have fewer monthly payments to manage and track as you wish.

#2 Save

A balance transfer may save you money. How? By moving debt from a high-interest-rate account to a lower-interest-rate account.

#3 Promotional offers

A 0% interest introductory interest rate on balance transfers could help you pay down your debt quicker by reducing the amount of interest you’ll pay on the transferred balance. This process should allow you to complete the transfers with a significantly lower promotional interest rate and also has benefits, such as cash-back or coupons. 

NOTE: If you’re paying less interest and reducing the overall cost of what you owe, you could pay off your outstanding debt sooner, which can only be a good thing!

Can a balance transfer hurt my credit score?

Nobody likes when their balance is hurt; balance transfer has both negative and positive sides.

It can both hurt, and help your credit score. Balance transfers won’t hurt your credit score right away, while applying for a new card could affect your credit positively and negatively too. Applying for a new credit card to transfer your balance will result in a hard inquiry on your credit report. This inquiry will take away a few points of your score, and it will also most probably stay on your credit report for up to 1-3 years.

A balance transfer can hurt your credit score by increasing your single-card utilization, lowering credit history length, and adding a hard inquiry to your credit report. At the same time it can also raise/ boost your score by increasing your overall card utilization; it can help you pay off your debt faster.

How long will a balance transfer take?

We’re all searching for the best and fastest way to transfer our balances. In some cases, transfering a balance can take only a few days, while you will possibly wait much longer in others. We usually expect a balance transfer to take up to 2-3 weeks.

We will show you what you can expect from a few issuers and how long their service will take.

Capital One

3-14 days -depending on wheter you requested it by mail or online.

American Express

5-7 days

U.S. Bank 

Up to 13-14 days

Chase

Usually 7 days

Bank of America

5 days – new accounts may take longer (14 days).

Citi

2-21 days – depends on the transfer type, if it’s to a new or existing account, and the companies that are involved.

What card is the best balance transfer card?

Don’t worry; we did in-depth research on the best balance transfer cards for 2021 to save you some extra time; this way, you don’t have to search the web on your own and maybe even get confused with all the information.

As we all know, a b.t. card can be a powerful tool in your debt-area. By taking advantage of a 0% APR offer on a credit card, you will be able to save money by having all of your payments go towards pushing out the principal balance.

Most balance transfer cards charge a balance transfer fee, usually 3% to 5% of the transferred amount. Be prepared, calculate the amount you want to move + any balance transfer fees, along with the duration (months) you’ll need to pay off the debt to find the balance transfer card that’s the best for your particular circumstances.

Take a look at our list of the best balance transfer cards for 2021:

Intro 0% APR (up to 20 months)

U.S. Bank Visa ® Platinum Card

Intro 0% APR (up to 18 months)

Citi ® Double Cash Card

Citi ® Diamond Preferred Card

Citi Simplicity ® Card

Wells Fargo Platinum Card

Intro 0% APR (up to 15 months)

Wells Fargo Cash Wise Visa ® Card

Intro 0% APR (up to 6 months – best for fair credit)

Aspire Platinum Mastercard ®

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