According to The Ascent, Americans have an average credit card debt of $5,525. If you’re dealing with an ongoing credit card balance, it’s safe to say that you’re in good company.
But of course, none of that answers the question:
How can you pay off your credit card in less time?
Credit card balance transfers make it possible for you to pay less interest and cut down on debt without jumping through hoops for a bank loan.
If that sounds good, then you’ll want to read this. We’ll show you how to do a credit card balance transfer and we’re going to go a little deeper than standard Finance 101 questions like “What is a credit card?”. Grab a pen and paper, prepare a warm drink, and get comfortable — we’re about to tell you everything you need to know.
Here’s How Credit Card Balance Transfers Work
Before we start explaining this, we’re going to have to give you a short Debt Repayment for Beginners lesson.
For many Americans who are dealing with debts from multiple sources, there’s a financial tool available to people with strong credit called a debt consolidation loan. Essentially if you have a balance owing on Card A, Card B, and Line of Credit C, you can take out a low-interest consolidation loan to pay off those other creditors and instead pay a single lump sum to the bank.
Credit card balance transfers are like the credit card-exclusive version of a debt consolidation loan. If you’ve got a credit card that you’re paying down at a 17 percent APR, you can transfer the balance to another credit card that will let you pay down the debt at significantly lower interest.
Of course, this strategy does have its pitfalls. To make this work, you’ll generally need:
- A solid credit score
- The ability to pay the debt off quickly
- No history of bankruptcy or late payments
All of that being said, if you can handle the payments and you’re confident that you can get approved by a second credit card issuer, a credit card balance transfer could save you several hundred or several thousand dollars.
Your Credit Card Balance Transfer Guide
Okay. You’ve reviewed the requirements and then you’ve slept on it. And now you’re totally convinced that a credit card balance transfer is the way to go.
Here’s how you can lower your credit card interest while repaying your debt in one fell swoop:
- Review Your Balance and Your Current APR
The whole point of doing a credit card balance transfer is to take advantage of low-interest promotional rates and reduced interest. As such, there are few things worse than going to the trouble of making the transfer only to discover that your second card will have you paying more money on an annual basis than your first one.
Some of the information you’ll need includes:
- Your current outstanding balance
- The dollar amount of your interest payments
- Your minimum payment amounts
Once you have a solid grasp of where you stand financially, you’ll be in a better position to assess your credit card balance transfer options.
- Find the Right Credit Card Balance Transfer Card and Apply for It
Believe it or not, there’s an art to finding and applying for the right credit card balance transfer card. This is the case for two reasons:
For starters, hard credit inquiries can temporarily sink your credit score. Normally, this isn’t a huge deal because the hit usually doesn’t last too long. But because lower credit scores can reduce your credit limit, affect your offered interest rate, and potentially lead to a credit card rejection, you don’t want to be applying for too many cards at once.
Secondly, credit card applications can be time-consuming and it’s way more efficient to look for cards that are loaded with features you can use. The Aeroplan TD credit card, for instance, offers 20,000 Aeroplan points with your first purchase. If you’re the type of person who travels a lot for work or for pleasure, this is a card that deserves a second look.
Once you’ve identified the right card, you’ll want to fill in your information with as much accuracy and precision as possible. Some responses will come right away while others may take a few business days. Either way, you’ll want to wait before sending the next round of applications.
- Request Your Credit Card Balance Transfer
We’re going to let you in on a little secret here:
Credit card balance transfers typically don’t look the same as a standard bill payment or deposit setup. You have to contact your new credit card company to request the transfer.
The new company will want to know details like your current balance and your account numbers. And once that’s been provided, you may have to wait for a while before the transfer will be processed and completed.
Some credit card balance transfers will involve you writing cheques to the old credit card company. Others will involve approving the transfer either online or over the phone. Your new credit card company will walk you through their process in order to ensure that there are no missteps.
- Pay Off Your Debt
At this point, you’ve been approved and your balance has been transferred successfully. All you have to do now is continue to pay off your debt.
Some faster debt repayment strategies include:
- Eating in and spending less on groceries
- Picking up a side hustle
- Canceling subscriptions you don’t use
Low-interest promotional periods don’t last forever. That’s why fast repayment is one of the most common credit card balance transfer tips that you’ll hear.
Learn How to Do a Credit Card Balance Transfer the Easy Way
Credit card balance transfers can be tricky. Unlike an Amazon purchase or a subscription account, there’s no easy payment form that you can fill in. Fortunately, it’s not only possible to quickly learn how to do a credit balance transfer – you can get one done in only four steps. While you’ll want to do your research and financial planning ahead of time, credit card balance transfers can help you put more money towards the principal amount owing while saving money on interest.
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