How To Transfer a Balance To Your Credit Card

  • 6 min read

One of the most useful financial tools that credit cards offer consumers today is the ability to transfer a balance. This allows you to be able to move a debt from a high interest credit card to a lower interest card. With new cards offering long-term promotional rates of up to 24 months with interest rates as low as 0%, it is an excellent way to save sometimes thousands on an existing debt! You must be able to know how to transfer a balance in order to take advantage of this opportunity.

Here are the most common ways that you can make this happen in the next few minutes.

The Most Common Method: A Direct Transfer
For many credit cards that are offering a balance transfer promotion, all you need to do is put in the information for your existing high interest credit card during the application process. There will be a box on the application that asks you about the holder of the debt you wish to transfer and the amount. You do need to be aware that some promotional APR credit cards do charge a transfer fee on the amount of the debt being moved, sometimes as high as 5%.

Another Common Method: Transfer Cheques
If you didn’t have the opportunity to directly transfer a balance during the application process, then you may still be able to take advantage of a low promotional APR through the use of a transfer cheque. These cheques are issued by your newly approved credit card and work just like a cheque from your bank account would work. You write the total balance that is due to the high interest APR credit card and this lender will cash the cheque, clear the account, and you’ll see the debt appear on your new credit card with the low APR.

What Else Can Be Done?
If transfer cheques are not an option and you didn’t see or have a chance to fill out the information during the application, then you can still transfer a balance by speaking directly with a representative about your debt. You will want to contact all of the credit cards that are involved with the transfer you wish to initiate.

This will initiate a process where the work is done behind the scenes after you’ve initiated. You may need to approve specific amounts or processes during this time for the balance transfer to go through.

If none of these opportunities are working for you, then you may be able to contact your high APR credit card and directly charge the amount you wish to transfer to the new credit card. Think of it like an online transaction where you plug in your account numbers and the expiry date as a method of payment. You will then need to follow up with the new credit card so that this charge is applied to the promotional APR appropriately.

Transferring balances is an excellent way to save money, especially if you have a large balance on a high interest credit card.

Balance Transfer Promotions

Consumers usually apply for credit cards with good intentions to pay of the balance in full each month. As life gets in the way, for some people this can become a lost practice and the result can be a high outstanding balance.

One common option credit card companies offer consumers is the ability to make a balance transfer to a another credit card with zero interest rate for a defined period of time. This is an option for a consumer to pay off debt and experience interest relief.

A balance transfer is when a consumer transfers an outstanding balance from one credit card to another. Balance transfers are treated similar to cash advances and no grace period is offered. In other words interest is charged from the date of the transaction. Many credit card companies offer promotions that allow for zero percent interest to be charged on balance transfers for a defined amount of time, usually anywhere from 6 to 12 months.

A credit card user that would best benefit from such a promotion would be someone who has a high outstanding balance on a credit card that holds a high interest rate.

The maximum benefit received by consumer under these types of promotions, are when the consumer pays of the entire balance before the end of the promotional period. If a consumer is able to repay the full amount they have successfully achieved an interest free loan.

The risk associated with balance transfers is that the entire amount transferred will not be paid off within the promotional grace period and high interest rates will then be applied to the balance.

To ensure that the balance is fully repaid a consumer should create a repayment plan. A successful repayment plan will have the entire balance pay off before the promotional period ends. A consumer should create a schedule that details the monthly amount that will be required for repayment. The monthly amount should be a reasonable amount that the consumer is able pay. This will ensure the plan is executed as desired.

If the monthly amount is set to high the consumer can find they fall short and in risk of taking on high interest rates. Service fees can also be incurred when performing a balance transfer and this should be considered by the consumer prior to transferring the balance to a new credit card.

Consumers should avoid hopping from one balance transfer promotion to another, while only paying minimum payment under each new card. This cycle can be hard to manage and puts consumers at high risk of fracturing their credit score. Additionally, the consumer must ensure that the minimum monthly payment is paid on time to ensure that the promotional rate is not retracted.

Zero percent on balance transfer is essentially free cash and a way to utilize debt. If a consumer can minimize risk by having a concrete repayment plan and full knowledge of terms and conditions that apply with the zero percent promotion, these credit cards are a great option.

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Christopher - BSc, MBA

With over two decades of combined Big 5 Banking and Agency experience, Christopher launched Underbanked® to cut through the noise and complexity of financial information. Christopher has an MBA degree from McMaster University and BSc. from Western University in Canada.