Credit card debt is the most common type of consumer debt in the United States. Credit cards are a useful tool but if you don’t pay off the balance each month, debt can easily add up. It’s best financial practice to pay balances off quickly and with as little interest as you can!
A great strategy to keep your credit card debt manageable and save money at the same time is a balance transfer. We’ll cover a detailed rundown on how to do a balance transfer and how they work.
What Is a Balance Transfer?
A balance transfer is moving the balance of one credit card to another. The goal is to save money on interest while you try to pay off the current balance. You’re simply paying off a current credit card with a separate new card. The transfers are easy to complete. All you need to do is fill out an application or give us a call to start the process!
How a Balance Transfer Works
To maximize the full benefit of a balance transfer, you want to make sure your new credit card has a lower interest rate than your existing card.
For example, you might currently have three different cards totaling $10,000 all at different interest rates. With a balance transfer, you can move the balances from each of your three credit cards to a new card with a lower, more competitive interest rate.
Now you only have to keep up with making one monthly payment instead of three. Plus, your interest rate is much lower, allowing you to significantly save on interest each month.
At Bowater Credit Union, our credit cards offer you savings with no annual or balance transfer fees. In addition to lower rates and savings on fees, some additional benefits of transfers include rewards programs to earn cash back.
How to Do a Balance Transfer
After you’ve applied and been approved for your new credit card, you’ll need to contact us to request the transfer. Make sure you have both your old and new card account numbers available and your ID ready.
Once approved, your balance transfer could take up to three weeks to go through. It’s important to keep making timely payments on your old credit card during that time. If you forget your old card, you may miss payments and hurt your credit score or incur late payment fees.
Depending on your lender, you may get a lower APR for an introductory period or you may get a fixed low rate for an indefinite period. If you choose an introductory APR offer, try to pay off your balance completely within the introductory period as your rate may jump when it’s finished.
Does a Balance Transfer Affect Credit Score?
Your credit score will take a small temporary dip when opening a new credit card. This happens because 10% of your overall score is based on new credit applications. Your credit score will recover once you’ve established a good payment history on the new card
A balance transfer may also help your credit in two ways. Your new card may boost your total available credit, which affects 30% of your credit score. In addition, if you keep your old credit card account open with a zero balance, you can keep extending your length of credit history, which is 15% of your score.
Consolidating your debt into one card shows your existing accounts are paid in full. Plus, the money you save on interest can help you pay off your new balance even faster leading to an overall credit score boost!
What Happens to Old Credit Cards After a Balance Transfer?
Transferring your balance to a new credit card doesn’t automatically close your old accounts. Even if the outstanding balance is paid in full, it’s up to you to decide whether the account remains active.
If you decide to keep it active, you could set up autopay to cover a low-cost subscription service or monthly recurring charge. This allows for a small amount of activity to continue and build good credit history. But if your old cards have high annual fees to pay, you might decide to close the account for good.
How Long Does a Balance Transfer Take From One Card to Another?
Most balance transfers take between five to seven business days to complete the process. If more information is needed from your application, you should allow up to three weeks. Again, you’ll want to continue making payments on your existing account to avoid late fees.
How Will I Know If the Full Balance Is Transferred?
We’ll let you know whether or not the full balance of your old card will be transferred, or only part of your balance. At Bowater, we don’t have a credit limit on how much can be transferred. Once the transfer is complete, you can check the full amount of the transfer with our free Online Banking!
What Are Some Benefits of a Balance Transfer?
One of the major benefits of a balance transfer is being able to take advantage of a lower interest rate and save money. The lower rate is especially beneficial if you currently have a high interest rate on your existing loan or credit card.
Since you’ll have a lower interest rate with a balance transfer, more of your monthly payment will go toward reducing your credit card balance, instead of towards interest. You will also feel less stressed making one monthly payment instead of juggling many payments.
Choosing Your Bowater Visa Card
Now that you know how to do a balance transfer and how it works, what are your next steps?
It’s time to decide which Bowater Credit Card best suits your current financial situation! Click below to see our options with competitive rates, spending perks, and the best local service.