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Key takeaways
- A balance transfer is a good way to eliminate existing credit card debt over a set number of months, usually at a lower interest rate.
- After completing your balance transfer, have a plan in place to pay off the balance comfortably within the introductory period.
- Creating a budget and setting up automatic payments can help ensure you stay on track and never miss a payment.
- Also, think twice before closing your old credit card, and try to limit your spending on any other cards you own to avoid racking up more debt.
Completing a balance transfer is a key step on your debt management journey. Now it’s time to explore what to do after making the transfer and enact your game plan for getting the most benefit out of this financial tool.
Your primary goal should be to pay off the transferred balance before the introductory offer ends. You can also use this time to master your budget, monitor the progress of your credit score and get serious about using your credit cards responsibly and strategically going forward.
Here are six tips for what to do after completing a balance transfer:
1. Decide what to do with your old credit card
Committing to a debt management plan may make you want to cut ties immediately with your old credit card — and there are some cases when that’s a good idea. However, the side effects of closing an old credit card might convince you to keep it open even if you’re not using it. Your length of credit history accounts for 15 percent of your FICO credit score. The older the active credit accounts on your report, the longer your credit history. A long history of accounts in good standing is a boost to your score and a positive signal to lenders.
As long as you’re not facing fees or the temptation to run up another balance, it’s a good idea to keep it open. If you keep the card without using it, here are the tips I used to keep my old card safe after a balance transfer:
- Lock the card through your online account
- Remove it from your wallets (both digital and physical)
- Store it somewhere secure
If you’re concerned about paying an annual fee to keep the account open, you could ask your card issuer to switch your card to a no-annual-fee credit card after completing your balance transfer.
2. Set a budget and stick to it
Look at the completion of your balance transfer as an opportunity to create and stick to a budget. Knowing exactly where your money is going means you can assess what costs to cut and how much you can afford to dedicate to paying down your balance each month. Creating a budget is also a good step as you embark on your debt management journey. Mastering the practice of budgeting can keep you on track to avoid high-interest debt in the future.
3. Align your payoff plan with your intro offer terms
The best way to maximize your balance transfer is to pay off the transferred debt within the introductory APR period. During this time, your new balance transfer card issuer won’t charge interest on the card’s balance. To calculate what monthly payment to aim for, use Bankrate’s credit card payoff calculator.
Adjust your spending to allot as much money as you can toward paying off your balance — doing so could save you from paying any interest at all. Don’t forget to factor your balance transfer fee into the new balance on your card. This fee can be anywhere from 3 percent to 5 percent of your transferred balance, depending on the card.
4. Set up automatic payments
One of the best tips to follow after a balance transfer is to set up automatic payments. This ensures you’re always paying down your balance and paying on time. Try to make these payments more than the minimum due. Doing so can help you pay down your debt faster. Issuers consider missing a payment a violation of your card’s terms and conditions and can void your intro APR grace period. In this case, the card’s regular, ongoing APR would kick in immediately.
Set up this recurring payment to come out as frequently as you can handle — either biweekly or monthly — on or before the payment due date. If you want to be sure your balance is paid in full by the time the intro period ends, divide your total balance owed by the length of your intro APR period. This calculation will give you the total amount you’d need to pay each month.
When I performed my balance transfer with the Citi Simplicity® Card* for $4,000, I had a balance transfer fee of $200 and an intro APR period of 21 months. So I divided $4,200 by 21 months and set up my monthly auto payment of $200.
5. Avoid using other credit cards after a balance transfer
If you have other credit cards you use on a regular basis, don’t overspend. If you can, avoid making new purchases on your balance transfer card. Some balance transfer cards have intro APR offers that apply to both purchases and balance transfers. Even if you open a balance transfer card with an intro offer that applies to both, whatever you spend will be added to the total balance you must pay before the intro APR period ends. You also run the risk of creating another large balance on a different card, which can negatively affect your credit. Focus on building good money management habits and paying off your transferred balance.
6. Keep a close eye on your credit score
Keeping your credit utilization low and making regular, on-time payments each month will give your credit score a steady boost. Use your credit score as a measure of success with your balance transfer. It’s easy to set up free credit monitoring with one of these services to get notified as your balance goes down and your score goes up:
After my balance transfer, I regularly received emails congratulating me on lowering my balance from Experian’s credit monitoring service. And seeing alerts that my credit score was rising kept me motivated to stick to the plan.
Checking your credit report also lets you catch and dispute any other credit concerns that may hinder your progress. One of the best parts of making an intentional change is being able to check your work, and your credit score is a tool to let you do just that.
The bottom line
By completing your balance transfer, you’ve taken a key step in managing your debt. Now, it’s time to use this tool to your advantage and save as much money as you can on interest. Set up your repayment plan immediately and stick to it. Figure out what you’ll need to pay each month to make sure your balance is completely paid off by the time your intro APR period ends. And, last but not least, create a budget that will keep you on track while you pay off your balance transfer and beyond.
*The information about the Citi Simplicity® Card has been collected independently by Bankrate.com. The card details have not been reviewed or approved by the issuer.
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