A balance transfer is a popular debt relief strategy to help you get on top of outstanding balances. By moving your debts to a new credit card with a zero percent introductory APR period, you can give yourself the breathing room you need to pay off your debt once and for all, or at least knock off a good chunk of it.
Since you can’t actually know the credit limit you’ll have for a card until you get approved, you could go through the whole application process only to find yourself with a new balance transfer card that can’t accommodate all the debt you want to transfer. This means it’s easy to get stuck in the cycle of transferring a lingering balance to a new card every one to two years.
If you’re in a pattern of moving your debt from one card to another, it’s likely you’re actually dragging out your journey to becoming debt-free. Cycling balances through multiple accounts over time can be a kicking-the-can situation — debt is being moved, but not exactly being paid off.
But there are some steps you can take to set yourself up for a successful balance transfer and ensure you get just the right limit to manage your debt.
High limit balance transfer cards
For cases where you’re looking to move a large balance, look for a card with a high credit limit and an extended introductory zero percent APR period to give yourself time to pay off your debt before interest charges come into play. Here are a couple of our top picks:
Featuring a 21-month zero percent APR period (13.74 percent – 23.74 percent variable APR thereafter) on balance transfers upon opening an account, this card gives you ample time to pay down your debt. You’ll need a solid credit score to be eligible, but a high credit limit is attainable with the Citi® Diamond Preferred®. This card also gives you access to Citi Entertainment as well as free access to your FICO Score.
Another top option in the world of balance transfers, this card comes with a 15-month zero percent APR period on balance transfers and purchases when opening your account (15.49 to 25.49 percent variable APR thereafter). New cardholders will also be welcomed with the opportunity to earn a $150 bonus when spending $500 in their first three months. Being a well-rounded card with great rewards, this card will require proven creditworthiness to be approved. If so, cardholders will have the opportunity for a high credit limit to efficiently maneuver their balance transfer.
How much debt can you transfer?
The exact amount you’re able to transfer will depend on your card, but there are a couple of general rules of thumb. Credit card providers typically determine the amount of debt you can move in relation to your credit limit.
Many issuers are generous, giving cardholders the ability to transfer their full credit limit. In some cases, your transfer limit will be capped at 75 percent of your credit limit. Your monthly income, credit score and outstanding debt will be weighed when deciding your credit limit. In order to get a top end credit limit to increase your transfer capabilities, you’ll likely need a good or excellent credit score for an upper-tier card. Improving your credit score ahead of time may be in your best interest before applying.
It’s important to note that your fee is often considered a part of your transferable balance, making your ‘true’ limit slightly lower than you may have expected. Read through your credit card agreement or talk to your credit card issuer in order to find your limit and start strategizing.
How many credit card accounts can you consolidate?
Depending on your provider, you may be able to transfer debt from two to three accounts over to your new balance transfer card. However, if you have widespread debt don’t try to open up multiple balance transfer cards to circumvent this limit; doing so will cause multiple hard inquiries and hurt your credit score.
In most cases, you’ll only be able to transfer credit card debt when executing a balance transfer. Some options are more flexible, offering ways to consolidate auto loans and other categories of debt.
Is a balance transfer right for you?
To truly determine whether a balance transfer is right for you, understand the fees and limits that will go into moving the balance, prepare a budget to pay off your transferred amount and decide whether the cost of executing your plan is worth it in the end. As is with all credit cards, routine, sufficient payments are a must and fundamental to a well-executed balance transfer. If an attainable card offers a generous interest-free welcome period and a credit limit that fits your transfer needs, a balance transfer may be your ticket to financial freedom.
Ideal balance transfer candidates would likely have just one credit card debt to move in the $1,000 to $10,000 range. With these lesser amounts, you’re more likely to be able to move the entire balance and maintain simplicity on your repayment path. Executing a balance transfer for less than your full debt amount can be effective, but a proper budget to attack the outstanding balance on your previous card is a must.
Timing is key when deciding whether to do a balance transfer; consider whether you’re in a good place at your current job and have the opportunity to lower your debt in the near future. If your credit score isn’t in the good to excellent range, you also may want to take the time to improve it before applying for a card. A good balance transfer card can make a world of difference — leaving you enough time to pay off your debt, a workable transfer limit, and in certain scenarios, even offering travel or cashback rewards.
Alternatives to a balance transfer card
Before initiating a balance transfer, it’s vital to consider your other debt relief options. If you’re looking to do away with a larger debt amount, a personal loan or other debt relief method may better suit your needs.
To stay away from continuously transferring your debt and cycling through card accounts, you can seek debt counseling or debt management services for debt situations that may call for something a little more intensive than a balance transfer. If you were to pursue one of these routes, you’ll be coached and set up with a repayment plan to rid yourself of your outstanding balance.
In the most severe cases of financial distress, debt consolidation and bankruptcy are viable (though not always recommended) options.