What is a balance transfer, and how can I go about doing one?A balance transfer, at its core, is a means of lowering the cost of your debt. In theory, you can transfer the remaining balance on any loan or line of credit to a balance transfer credit card and thereby pay it down while incurring interest at a lower rate. While you can transfer balances to most credit cards, certain cards are branded as being “balance transfer credit cards” because of their low balance transfer rates or lack of balance transfer fees.
There are essentially two ways in which you can approach a credit card balance transfer. First, you can transfer your debt to a credit card you already have but do not revolve a monthly balance on. Alternatively, you can open a new credit card with the express intent of transferring a balance to it. There are advantages and disadvantages to both courses of action. By transferring your debt to a currently held credit card, the process will be quicker, but you probably won’t get the best balance transfer deal. If you open a new card you’ll be able to compare balance transfer credit card offers from a lot of different issuers but will have to wait for your application to be processed.
While you’re nailing down the logistics of your credit card balance transfer, it’s worth it to call the credit card company to which you are indebted and say that you plan on doing a balance transfer, unless you are given a significant interest rate reduction. Your rate won’t be reduced to 0%, but even a slight APR reduction will help you save during the time it takes for your 0% transfer to be approved and processed.