8 Steps to a Successful Balance Transfer

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They can ensure your balance transfer helps you retire your debt.

If you have high-interest credit card debt, paying off what you owe can be a huge challenge. The higher the interest rate is, the less each payment reduces your balance -- not much money goes to principal when you have to cover hefty finance charges.

The good news is that there's a simple option that could make repaying credit cards easier and cheaper: a balance transfer. Follow these eight steps to do it right.

1. Decide what debt you want to transfer

First, figure out what credit card debts you want to transfer to another card. This helps you see how large your balance transfer credit line needs to be. If you hope to transfer debt from two cards with a $1,500 balance and a $1,000 balance, you need a credit line of at least $2,500 on your balance transfer card.

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2. Explore balance transfer credit cards

There are many balance transfer cards on the market. Research your options and look for cards offering 0% introductory promotional rates. Pay attention to qualifying requirements, what credit lines the card issuers generally offer to new customers, and any transfer fees.

3. Compare offers

Once you've compiled a list of balance transfer credit cards, see which one provides you with the best deal. For example, one card may have a 3% balance transfer fee and offer you 12 months at 0%, while another has a 4% fee, but offers you 15 months at 0%. If it will take you a little bit longer to pay off what you owe, you may prefer the second card, even with the slightly higher up-front cost.

Learn more: Balance Transfer Calculator

4. Have a repayment plan

Be sure you can pay off the balance before the promotional 0% rate ends. Otherwise, you could get stuck with a high interest rate on any remaining balance. And don't assume you can just transfer the balance again. Make a payoff plan and see what, if any, balance will remain to make sure a balance transfer is worthwhile.

For example, say you want to transfer $5,000 worth of debt to your balance transfer card and will have 12 months to pay it off before your 0% rate expires. You want a payoff plan in which you pay $416 per month so your balance goes to $0 before you're charged interest.

If you can only pay $50 per month, you'd have a $4,400 balance at 12 months. If the balance transfer card has a higher interest rate than your old one did and you pay that higher rate on a $4,400 balance for a long time, you may be better off not transferring the balance. You might instead look into debt-refinancing alternatives such as a personal loan that offers a longer repayment timeline.

5. Apply for a new card

Once you have a payoff plan and are confident a balance transfer makes sense, apply for the credit card offering the best rates and terms. You can likely submit your application online and get an answer almost instantly.

6. Transfer your balance within the required time frame

Typically, you're eligible for a 0% promotional rate only for balances transferred within a short time after opening your account, such as within 30 to 90 days. Get the balance transferred over in time. Your card company will provide details on the process.

7. Automate your payments

Once you've transferred the balance, set up automatic monthly payments for the amount necessary to pay down your debt before the 0% rate expires (or the amount you decided you could afford). That way, you're sure to stay on track.

8. Use your old cards carefully

Finally, once you've freed up your credit on the old cards by transferring the balance, try to avoid creating new debt with them. You ideally shouldn't charge more than you can pay off at the end of the month.

Follow these eight steps, and hopefully your balance transfer can go a long way toward helping you become debt-free soon.

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