Americans had a collective credit card debt in the amount of $13.16 billion at the end of the fourth quarter of 2017, according to the Federal Reserve. If your household is included in that figure, you might consider taking advantage of a balance transfer credit card to pay off your debt at a faster rate. What is a balance transfer? A balance transfer occurs when you move the balance of one or more cards onto a different card that has a lower APR. The money you save on interest can be used toward your principal balance.
For example, QuicksilverOne from Capital One has a variable 24.74% APR. It would be better to take the balance of this high-interest card and move it to one like the Chase balance transfer card, which has a 0 percent introductory APR for 15 months and then a 16.24% to 24.99% APR thereafter.
Here’s how to do a credit card balance transfer:
1. Assess Your Financial Situation
The first thing you’ll want to do is decide whether a balance is beneficial to your specific situation. A balance transfer card works by getting you out from under credit cards that have high-interest rates and allowing you to move your debt to cards with lower rates, or cards with 0 percent introductory APRs for a specified time period.
Individuals who would benefit from balance transfer cards include anyone:
- Paying a high-interest rate
- Interested in debt consolidation
- Interested in paying off debt more quickly
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2. Choose a Balance Transfer Card
Once you’ve determined that rolling your credit card balance onto a new balance transfer card is best, you’ll need to select a card. When doing this, you want to figure out a few key factors. To choose the right card, ask the following questions before committing to transferring your credit card balance:
- What is the introductory offer and how long is it in effect? You want a low to 0 percent APR with as long of a term as possible. It’s easy to find cards that will give you over a year with little to no interest.
- What is the APR after the introductory offer has expired? You don’t want your new card to put you back in the same situation you were in before you got the card. Make sure the APR after the introductory period has ended is lower than what you were originally paying.
- Are there any balance transfer fees? You’ll need to look at the fine print to see whether the balance transfer offer charges any balance transfer fees. Some cards don’t charge a fee, whereas others offer the first balance transfer at no cost with a charge on every transfer thereafter. Some cards charge a balance transfer fee upfront. Discover lists the typical balance transfer fee as 3 percent.
- What is the credit limit? Know what the balance transfer card’s credit limit is so you know whether it is enough to cover the balance you owe on your high-interest card. For example, if the transfer credit limit is $10,000, but you owe $12,000, then $2,000 won’t be transferable.
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3. Apply for the Credit Card Balance Transfer
Select the balance credit transfer offer you’d like to accept and fill out the requested information. To have the lender determine your creditworthiness, you’ll typically need to provide your:
- Social Security number
- Date of birth
- Income information
Next, you’ll need to let the company know:
- Which credit card you want to pay off
- Your account number
- The total amount you’d like to transfer
4. Wait for Balance Transfer Approval
From the time of your application, it can take up to two weeks for the approval and balance transfer to be complete. During this time, continue to make any minimum payments that are due on the credit cards from which you’re transferring balances. Otherwise, you risk having late fees added on to your total debt.
5. Attack Your Credit Card Debt
The final step is to look at your budget and create a payment plan that will allow you to attack your debt at a more aggressive pace. You might even want to set a goal of having the balance paid off before your introductory rate comes to an end. It’s also a good time to review spending habits so you don’t continue to use the credit card for items you might not need.
Keep Reading: The Best Ways to Pay Off Every Kind of Debt
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