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When you move outstanding debt from one credit card or loan account to another credit card, this transaction is known as a balance transfer. Consumers usually look to transfer their balances from credit cards with high annual percentage rates (APRs) to credit cards that offer a 0% introductory APR for a set period of time. It is possible to utilize a balance transfer in order to pay off loans, despite the fact that balance transfers are most often used in order to pay off one credit card with another. Because of this, you will be able to save money on interest costs because, for the length of the introductory APR of 0%, all payments that you make will go directly toward the principal of the debt instead of both the principal and the interest charges together.
Once you have been approved for a balance transfer credit card, the issuer will place restrictions on how much debt you are able to transfer to the new card. In addition, the issuer will most likely charge a balance transfer fee on top of the debt that is being transferred. Before you apply for the balance transfer, it is a good idea to check with the issuer to find out what the terms are. Be mindful that an issuer won’t inform you how much your credit limit will be until after you’ve applied for the card. As a result, you run the risk of being given a credit limit that is insufficient to cover all of the debt you want to shift over to the new card. In this situation, you have two choices: you can either transfer as much of your debt as possible to the new card while working to pay off any remaining balance on the old card, or you can apply for another balance transfer card to cover any remaining debt on the old card.
After you apply for and are approved for a card, you must follow the card issuer’s instructions on how to execute the balance transfer. It’s important to note that issuers may place limits on how much you can transfer, so even if you’re authorized for a credit limit high enough to fit the amount you wish to transfer, you could find yourself at a limit.
You still have options if you are unable to transfer the entire balance. One option is to transfer as much as possible to the new card and leave the remaining balance on the old card, then focus on paying down the old card balance as fast as you can. Another alternative is to apply for a separate balance transfer card to cover any outstanding balance on the first.
You should also keep in mind that once you’ve been approved for a balance transfer card, you might only have a certain period of time to make your transfer. For example, the intro APR on your card may only apply to amounts that you transfer within 30 to 90 days.