The total amount of credit card debt Americans carry hit just over $1 trillion in 2019, with an average debt of $8,398 per household in the United States.
If you have credit card debt, you know what a burden it is. There are a couple of tactics that can ease the burden, like doing a balance transfer from a high interest credit card to one with an introductory zero percent APR. This can save you hundreds of dollars in interest while at the same time reducing your debt.
Let’s say you owe $5,000 on a credit card with an interest rate of 14.87 percent. According to Bankrate’s Credit Card Payoff Calculator, it’ll take you 24 months to pay off your balance if you make a payment of $250 each month. Over time, you’ll pay $781 in interest.
You can take that same balance and transfer it to a card like the Wells Fargo Platinum card, which has an introductory zero percent APR for 18 months on qualifying balance transfers (15.49 percent to 24.99 percent variable APR thereafter) and a balance transfer fee of 3 percent (minimum $5) for transfers made 120 days from account opening. In doing so, you can pay off your $5,000 in debt over 18 months (around $278 a month) without accruing additional fees in interest.
You’ll owe a balance transfer fee of $150 to utilize the zero percent APR offer — a small price to pay compared to the alternative scenario, which costs you $700-some dollars in interest.
Steps to complete a balance transfer with Wells Fargo
Transferring debt from one credit card to another is a relatively simple process. Here’s a step-by-step explanation of how to do so:
1. Qualify for a Wells Fargo balance transfer card
There are some restrictions on who can get a Wells Fargo credit card. In most cases, you need to have a good credit score (at least 670) and a debt-to-income ratio of less than 36 percent. It’s important to note you can’t transfer a balance from one Wells Fargo credit card to another, and if you already took advantage of a Wells Fargo welcome offer in the last 15 months — either a sign-up bonus or an introductory zero percent APR — you might not be eligible for an introductory APR offer on a new Wells Fargo card.
2. Transfer your balance in the first 120 days
All Wells Fargo balance transfer credit cards give the cardholder a discount on the balance transfer fee when they complete a transfer within the first 120 days (just under four months) from account opening. The balance transfer fee jumps from 3 percent to 5 percent ($5 minimum) after that period. You’ll also have less time to pay down debt, giving you even more reason to transfer your balance as soon as possible.
3. Calculate the balance transfer amount
First, you need to look at the interest rate you’re currently paying and compare it to the standard rate you’ll be charged by Wells Fargo after your new card’s introductory period is over. If the Wells Fargo rate is lower, it won’t necessarily hurt you if you don’t pay the balance in full by the end of the intro APR period. But if the rate is higher, you could end up losing a bit of money. This should be a factor in how much you decide to transfer.
Second, you need to figure out how much you’re going to pay each month. Ideally, this will be a fixed sum that reduces your balance to zero by the end of the introductory APR period. It’s worthwhile to set up a budget so you know exactly how much you can afford to pay each month.
4. Perform the transfer itself
Once you’re approved for a Wells Fargo balance transfer and create an account, you can complete your transfer online in a few simple steps:
- Log into your credit card account.
- Click “request balance transfer” from the drop-down account menu.
- Fill out the balance transfer form, including the name of your current credit card issuer, the account number and the amount you want to transfer.
If you prefer to handle your finances over the phone, you can also call Wells Fargo at 1-800-400-9423 and talk through your balance transfer with an agent.
Additional information you should know
One thing to keep in mind is that Wells Fargo doesn’t offer rewards for balance transfers. In other words, you won’t earn points, miles or cash for knocking out $5,000 in credit card debt.
Most importantly, make sure you don’t miss payments on your old credit card that may charge to your account while your balance transfer is processing. Your old issuer can still charge a late fee if you miss a payment, even if you’re transferring the entire balance over.
The bottom line
Balance transfer credits cards are a solid option for reducing credit card debt, but you must stick to a fixed payoff schedule and avoid digging yourself deeper into debt with unnecessary spending.