As you begin dealing with more aspects of your financial journey, you may encounter a balance transfer. A lot of individuals have rarely heard the term, let alone understand what it all entails. That is why we created this article! We want to run over the basics of what a balance transfer is so that you can handle your finances with the confidence you deserve.
Understanding Balance Transfers
A balance transfer is when you move your debt from one account to another. You will typically see balance transfers in regards to your credit card. These transfers are a good option for individuals who want to reduce their credit card debt while paying it off as promptly as possible. This provides the opportunity to pay down old debt without having to pay interest.
Unfortunately, these transfers take time to process. Even though credit cards typically take little to no time to clear transactions on your account, you may be in for a surprise. Balance transfers could take up to a month to finalize, and even longer depending on the lender!
How long does it take to get approved for a balance transfer?
There is no detailed timeline of the approval period for this transfer. Some lenders offer tools that allow status checks of your balance transfer. Not every lender will have this option though. If you are eager to be able to track the process then you will need to keep that into consideration when deciding which lender you will go to.
How long does a balance transfer take?
Before deciding if a balance transfer is something you want to begin, you may have wondered, “How long does a balance transfer take?” These transfers do not happen overnight. That is why you need to have proper expectations when dealing with a credit card balance transfer. There is no clear-cut rule surrounding credit card balance transfers. This means you will come across a variety of processing times depending on the bank and lender.
The best rule of thumb is for you to confirm the processing time with your credit card company. Some major companies have pretty different time frames:
- American Express: Around 5 to 7 Business Days.
- Capital One: Roughly 10 Business Days.
- Chase: Up to 21 Days.
- Citi Bank: Usually up to 21 Days (Individual banks may take longer.)
- Discover: Typically 7 to 10 Days.
How to track the progress of your transfer?
If you are curious to know whether or not your transfer is complete, then you are in luck! You can easily check the status of your balance transfer by checking your credit card account. You may even find that your lender provides specialized tracking options.
Once your transfer is approved and completely processed, it will show as a debit on the card you transferred the balance to. For example, if you transferred a $1,000 balance from your Citi bank transfer credit card to your Chase bank transfer credit card, you will know it is complete when that $1,000 is debited from your old card to your new. You may see some balance transfer fees. These fees vary depending on the lender but are usually no more than 5% of the total amount transferred.
When checking the status of your transfer online you may see aspects of the process “pending.” If that’s the case then you know that your balance transfer is in progress but is not completely processed.
Once you see the money debited to your new balance transfer credit card account, you should verify that there is no additional balance on the original card account. The reason you want to check this a few days after your balance transfer is finalized is because of posted transactions. Some people may not realize there are posted transactions that took time to process so be sure that the balance is what you expect on the original card!
Why is my balance transfer taking so long?
If you suspect that the balance transfer process is taking longer than expected, don’t panic. You can contact the customer support services of your credit card company. You can either call the customer support team of the card you are transferring from or the card you are transferring to. It is important to remember that these transfers can take a long time. You should call if there is no update for around a month.
It is also a good practice to make sure you are still submitting payments on the original card until the balance transfer process is finalized. This will be sure that you do not deal with late fees and do not impact your score.
Do balance transfers hurt your credit?
A balance transfer will not directly negatively impact your credit score. However, if you apply for a new balance transfer credit card in order to transfer your balance; then you may see both a positive and a negative impact on your score.
If you apply for a new card in order to initiate a bank transfer then you definitely can negatively impact your score. When applying for a new credit card, you will have a hard inquiry pulled on your credit. A hard inquiry is an authorized request to check your credit. These are typically done in order to be approved for a financial decision like taking out a loan or submitting a credit card application. These hard inquiries can lower your credit score by a few points. Not only can they reduce your score, but they will stay on your credit report for about two years. Luckily, they stop being impactful at about a year, but it is still something you should be mindful of.
Not only can the hard inquiry impact your score, but so can the approval! Not the approval itself, but if you are approved for a new credit card then your credit’s average age can reduce as well. This reduction can lead to your credit score decreasing even more. The more lines of credit you have, the less impact you will see on your credit score. If you do not have multiple lines of credit, then you could see more of a decrease in your score. Luckily, your credit will not only deal with negative impacts when initiating a balance transfer, you could also help your credit score!
While the actual transfer balance itself will not directly affect your score for better or worse, the implications can help you more than you may realize. If you take this balance transfer as an opportunity to properly manage your debts, then you could help your score in the long run. You also save money by avoiding some steep interest rates if you qualify for applicable introductory offers.
Can you be denied a balance transfer?
Sadly, you can be denied a balance transfer. There are numerous reasons that people can get denied. Some common reasons for denied transfers include:
- Having a low credit score.
- Not enough income.
- Applying for the balance transfer between cards from the same lender.
- Submitting an application that exceeds your credit limit.
Regardless of the reason, there is hope if you are denied. The first step would be to have a conversation with your credit card company. Once you find out why you were denied, you can focus your energies on fixing the issue. There are also some ways you can prepare for your balance transfer request to increase your odds of approval.
Some tips to follow when considering increasing your balance are:
- Checking your credit report for errors. To the surprise of many, credit card reporting errors are not that rare. That means there may be some errors on your credit report that could potentially cause you to get denied. Review your report for mistakes and file a dispute if you need it before beginning your balance transfer process.
- Make sure to understand balance transfer details before beginning the process. You can either speak to customer support or read information online. You want to make sure that you understand what the terms are so that you do not potentially pull a hard inquiry on your report just to be denied.
- Review your credit limit on the card you want to transfer to so that you know it not only can handle the additional balance but will not hurt your score more. It is recommended that you keep your credit utilization no more than 30%.
Tips on doing a balance transfer
It is important to remember that no two balance transfers will be the same. That is why it is so important to contact your lender in order to verify what the process will typically look like. Generally, lenders provide the option for card users to either deal with the balance transfer process over the phone or online. There are some tips that you can consider throughout the balance transfer process that can make it easier to go through!
Read Online Reviews
See if you can find any reviews online! Other consumers that share their first-hand experiences can provide you some insight into your credit card issuer. If you find that the company you are interested in receives a lot of negative reviews, especially in regards to balance transfers, then you know you may want to look at other options.
Do Not Wait
The faster you begin the transfer balance process then the more opportunity you have for benefits. This is especially true for introductory rates that you may be able to claim. Oftentimes lenders will provide incentives to consumers with introductory rates that are 0% APR. If you have the opportunity to receive one of these offers then it is best to reap the benefits as soon as you can so you can get the most bang for your buck.
Stay Ahead of the Game
Since all lenders vary, so do their guidelines. Some lenders allow you to start the process of your balance transfer during the application process. You want to be sure to ask your potential lender if they do this!
Stay on Top of Your Bills
Since balance transfers do not happen in the blink of an eye, you may find additional balances that need paying off. In order to avoid any late payments or penalty fees, you want to keep paying any balance on your old card. You want to triple-check that your old card has a $0 balance with no pending transactions before you completely end your payments.
If you need months to pay off some of your high-interest debt, then you definitely should consider a balance transfer. You should also consider a balance transfer if you have good enough credit to qualify for some of the 0% APR introductory rates that issuers offer. Proper balance transfers are a helpful tool that can help you save on interest.
If you are someone that has the ability to pay off your credit card debt in three months or sooner then a balance transfer may not be the right alternative for you. A balance transfer also may not be the best choice for your financial management if you do not qualify for a quality introductory offer.
If you do not know what a good option would be for your financial situation then that’s okay too! You can speak to a professional at your banking institution and get some help. They can provide you insight as to what may work for you and what you should avoid. As long as you take your time to research available options, making an educated decision will be the best thing you can do for your finances!