Requesting a Balance Transfer

Putting all your debt on one card requires some planning.

Putting all your debt on one card requires some planning.

Many credit card holders get special offers in the mail advertising low interest rates if they transfer balances from one card to another. If you get such an offer in the mail, you're not automatically eligible for the transfer. You have to request it and get approved. Make sure you understand the process before you ask for a balance transfer. Also, make sure the transfer actually saves you money over the long term. Many offers are for a low- or no-interest introductory rate that lasts only a certain amount of time before you have to pay a higher rate. Read the fine print of the offer to ensure you don't wind up paying more for your credit card debt than you did before making the transfer.

Qualifying

You have to apply for a balance transfer just like you would for a credit card. In fact, you actually are applying for a credit card with the new company. On the application, you list all of the balances you want to transfer, as well as the account number for each balance. The new company decides if your credit rating justifies giving you enough credit to transfer the entire balance you have requested. You might qualify for a partial transfer. That means you will get the new card statement and find that only part of your balance transfer request was approved. You will have to carry the remaining balance on the old card until you pay it off.

Fees

Your balance transfer isn't free, even if the new card company offers you a zero percent interest rate. Card companies typically charge 3 percent to 5 percent of the transfer amount as a fee, though you might be able to negotiate a lower fee with the company. Though this is a one-time fee, you need to know that it will be added to your new card, so you will actually owe more than the amount you transferred.

Types of Transfers

You don't have to limit your transfers to credit card balances. Once you are approved for the original transfer, you will receive checks from your new card company if you still haven't reached your credit limit. You can use those checks to pay off car loans, furniture loans and any other type of monthly installment debt you have. This method transfers the balances to the new card.

Understanding Penalties

If you miss a payment on your new credit card, you won't get the low interest rate you were offered. You forfeit all the advantages of transferring the money. In addition, you will pay a late fee for a missed payment. You can't reverse this penalty, and you only get one chance. When transferring balances, make sure you keep up with the minimum payment on the new card. Also, make sure the balance on your old cards have been transferred before you stop paying on them. Missing payments on the old cards will result in penalty fees.

About the Author

Kevin Johnston writes for Ameriprise Financial, the Rutgers University MBA Program and Evan Carmichael. He has written about business, marketing, finance, sales and investing for publications such as "The New York Daily News," "Business Age" and "Nation's Business." He is an instructional designer with credits for companies such as ADP, Standard and Poor's and Bank of America.

Photo Credits

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