everything you need to know about credit card balance transfers


Woman shopping with her credit card.

When was the last time you checked your credit card’s interest rate? Odds are, depending on when you got the card, your interest rate could be drastically lower! This depends on the state of the economy, local rates, as well as your current credit score. It could be time for you to investigate a credit card balance transfer for a lower rate to save you money.

what is a balance transfer?

A balance transfer is the transfer of the total balance of debt – often on your credit card to another account or card at another financial institution. Often this is done to help an individual pay off debt quicker at a lower interest rate.

why should you do a balance transfer?

To save money! A higher interest rate may result in more time before your debt is completely paid off and more money being paid toward your loan. If you find that you can do a balance transfer to another financial institution and score a lower rate, this will save you money down the road.

For example, BlueOx Credit Union offers an introductory rate of 0% APR* for the first six months on balance transfers for credit cards. That’s six months of paying down your debt interest-free! Talk about a financial life hack!

what is an interest rate, and why does it matter?

Your interest rate is the amount the lender charges you, the borrower, in addition to your regular monthly payment. It's a percentage of the principal – the total amount borrowed. The interest rate on your loan on an annual basis is known as the annual percentage rate (APR).

Why does your interest rate or APR matter? Simply put, the lower your rate, the more you will save, especially if you are consistently carrying a balance on your credit card. Also, a lower rate means more of your payments will go towards paying off the balance vs. the finance charge.

does a balance transfer affect your credit score?

Moving your credit card debt with a balance transfer will not directly affect your credit score in a positive or negative way. However, doing so does have the capability to substantially improve or impair your score. It’s all about how you move forward after the transfer. Take advantage of a balance transfer that offers an interest-free introductory period, and you’re well on your way to improving your credit score!

top tip: Credit scores can be confusing, but don’t fret! We’re here to help explain. Read our blog on Five Ways to Establish Good Credit to learn good habits that will help you build better credit.

when it helps…

The main goal of doing a balance transfer is to help you pay off the debt in a more manageable way. Maybe your current credit card rate makes it difficult for you to make even the minimum payment on time – which will hurt your credit score. By getting a lower rate, these payments could be more manageable, and when you show that you can make minimum payments – if not more – to your debt, your credit score will improve.

Another way it can help is by minimizing your credit utilization ratio. When you transfer the balance from one card to another, the initial account does not close out. And you don’t necessarily want it to. Closing lines of credit can negatively impact your score as it lowers the average age of credit accounts on your report. Lenders want to see a history of good credit. When you close out a card, it essentially erases that history. When that account stays open at a zero balance, your percentage of available credit goes up, and the percentage of credit utilization goes down. A good rule of thumb is to keep your credit utilization at 30% or lower.

top tip: The tricky part now is to not rack up a new balance on the card you just transferred from – that would defeat the whole purpose! While closing out the card may be damaging to your credit score, cutting the card up won’t hurt it one bit. If you can’t trust yourself not to rack up a new balance on the old card, hide it or cut it up to eliminate the possibility of creating even more debt.

when it hurts…

To do a balance transfer, you'll need to apply for a new credit card, and any time you apply for a new line of credit, the lender has to pull a hard inquiry on your credit report. Any hard inquiry on your credit report will result in your score dropping a few points. However, when you show that you can use this new credit responsibly, your score will rise again.

top tip: Be patient! It usually takes about six months of good payment history for your credit report to catch up and raise your score.

get started today!

Are you ready for a balance transfer? If it sounds like a balance transfer will end up saving you money, then let’s get started!

0% APR* on balance transfers for the first 6 months

Open a new BlueOx Visa® Platinum Rewards Credit Card and take advantage of 0% APR* for the first 6 months on balance transfers and enjoy no balance transfer or cash advance fees.

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*APR=Annual Percentage Rate. After the six-month introductory period, the rate is the same as the purchase rate. There are no Balance Transfer or Cash Advance fees. All rates are variable, based on Prime Rate. Actual APR based on credit history. Subject to credit approval. Rates are subject to change without notice.

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