Balance transfers on your credit card

A balance transfer is when you move debt from one credit card to another, or from several cards on to one single card.

If you owe money on one credit card, or across several, then moving that debt on to a different card with a lower rate could help you save on repayments. Many credit card companies offer incentives to new customers, such as a 0% period on balance transfers or lower interest rates, which could help you save on repayments and pay off your balance more quickly. Some companies also offer rewards.

Another benefit of a balance transfer is that it can help you to organise your finances. If you owe money over several credit cards, then combining those monthly payments into one could make them easier to keep track of, and even potentially lower your outgoings, according to The Money Advice Service.

Your bank or credit card company can offer information on how to transfer your balance – the process is quite straightforward, and can often be done online. Financial lenders may charge a fee for balance transfers, which will vary based on the amount to be moved and the duration of the 0% period. Credit card providers tend to allow customers to transfer up to 90 to 95% of their available credit limit. They do this to allow for the addition of the balance transfer fee within the customer's agreed credit limit.

Let's take 'Mrs Smith' as an example.

  • She has a balance of £1,000 on a credit card with an APR (annual percentage rate) of 16%.
  • She wants to transfer her balance on to a new credit card that's offering 0% on balance transfers for 12 months. The new card provider will allow Mrs Smith to transfer up to 95% of her agreed credit limit.
  • Mrs Smith asks the new card provider to transfer her existing balance. The provider pays £1,000 to the old card provider, which in this instance incurs a balance transfer fee of 2.9%. When the balance transfer is completed, the balance transfer fee will be added on to the balance of Mrs Smith's credit card.
  • Her old card is now debt-free, as the balance has been transferred to the new card. Mrs Smith now owes £1,000 to her new provider, plus the fee for transferring her balance to the new card, but at a cheaper interest rate of 0%. Mrs Smith can then make payments towards her account, and payments will automatically go towards paying off the fee first, before clearing the balance.

What are the limitations of a balance transfer?

You can spend on a credit card that you've made a balance transfer to. However if you want to make new purchases with your card, it means that you'll be adding to the balance, rather than paying it off.

It also is important to meet the monthly minimum payments – if you fail to make a payment then you could forfeit your 0% deal.

How to Do a Balance Transfer with Capital One

What is balance transfer

Capital One is a financial services company that offers a wide range of consumer financial services including credit cards. It is the third largest credit card issuer with thirteen different credit cards including the Venture Rewards card and the Quicksilver Rewards card. Capital One also offers balance transfer credit cards for new and existing cardholders which can be helpful for anyone currently carrying a credit card balance.

A balance transfer involves opening a new credit card with a presumably lower interest rate and moving the balance from an older, higher-interest credit card to the new low-rate card. It enables a person who may be struggling with high interest payments to start paying down that balance at a much lower interest rate.

Technically speaking, when debt is transferred to a new card, the new card provider pays off the debt to the old card issuer, leaving the consumer indebted to a new card provider.

In many cases, a balance transfer credit card offers a 0 percent introductory APR for a year or even longer. Transitioning high-interest credit card debt to a card such as this can save a person a significant amount of money. The main motivation involves paying off debt sooner than usual by taking advantage of the lower APR and lower interest payments.

How Does It Work with Capital One?

To transfer credit card debt to a Capital One credit card, the process is fairly simple and should only take a few minutes. It can be completed over the phone or through Capital One’s website.

To start, you will need some information about the credit card account involved with the balance transfer such as the account number and debt value. The old account is considered the “transfer from” account while the new Capital One account will be the “transfer to” account.

Next, if you choose to call, you can call the customer service number located on the back of a Capital One credit card (it can also be found online). The customer service representative will walk you through the process of signing you up for a new credit card. He or she will also likely verify the “transfer from” account information.

After confirmation, the balance will transfer, but this step can take up to three weeks to process. With that in mind, you may want to send the minimum payment to your credit card company to ensure that you are not charged for missing a payment.

If you complete the balance transfer online, you can log in through the Capital One website, but you must have a pre-existing account to do this. On the “My Accounts” page, choose “Transfer a Balance.” You can then select an offer by choosing from a range of introductory offers.

Next, input the “transfer from” account information including the amount that you want to transfer. Review and accept the terms of the offer, and you can finish submitting the balance transfer request.

Keep in mind that you must have an account of some sort with Capital One to follow these steps, so you may need a bank account or credit card with them already. If you don’t, then you may need to outright apply for a balance transfer credit card from Capital One, then request a transfer after being approved for the card itself.

Transferring Debt Away from Capital One

To transfer a Capital One credit card balance to a different credit card company, you would follow the same process — except that the Capital One card would be the “transfer from” account. Simply call or log into the new credit card company’s website, and provide information about the Capital One account that you want to transfer to the new credit card.

If you don’t have an account with the new company, then you would essentially have to apply for a new credit card, presumably a balance transfer option. After approval for the new card, then you would have to request the balance transfer.

The terms and conditions of each balance transfer offer will vary significantly. Most credit card companies will offer low introductory Annual Percentage Rates (APRs) for balance transfers, and these introductory periods can last anywhere from six months to over 18 months. After the period is over, you would have to deal with a standard balance transfer APR.

Most credit cards change a balance transfer fee on top of the APR. Many options charge a three percent balance transfer fee, but there are other common fees to consider. In many cases, credit cards may charge either three or 5 percent on a balance transfer balance, but they also may charge a flat rate of either $5 or $10. There are two different rates, but the option that generates the most revenue for the card issuer is chosen each time.

If you are contemplating a balance transfer, be sure to carefully examine the terms and conditions, including the APR, length of introductory offers, and the balance transfer fees.

A balance transfer can be a smart way to pay off credit card debt. Make sure that you carefully review the terms and conditions before you sign up, and that you stay on top of your payments to pay off your debt before the introductory period ends.