Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.
Updated on Monday, April 22, 2019
Now that you’ve been approved for a balance transfer card and completed your transfer, you’re on your way to becoming debt-free. The lingering debt you had on another credit card will no longer be charged high interest rates during the 0% intro APR period on your new card. However, you won’t rid yourself of debt by simply transferring your balance — there’s much more you’ll need to do.
Your journey to becoming debt free has just begun. By following the steps below, you can soon be on your way to a healthier financial life.
5 things you need to do once your balance transfer is complete:
1. Cut up your new card.
New purchases will only push you back into debt. While it may be tempting to use your new card for purchases, resist the urge. Charging new purchases to your balance transfer card has the potential to further increase your debt.
Purchases may not qualify for that 0% intro APR. New purchases will often be charged the card’s standard interest rate, unless your new balance transfer card also offers a 0% intro APR period for purchases.
Payments made on your new card may not go fully towards new purchases. Credit card issuers have the freedom to allocate your minimum payment towards whatever debt you have. This means that your minimum payment may go towards your balance with the 0% intro APR, not your newest charges. This may lead you to rack up interest charges from your new purchase balance.
What if you need to charge new purchases to a credit card after a balance transfer? First, take a real hard look at the expense and whether it’s actually necessary. If you’re already looking to rack up new credit debt so soon after completing a balance transfer, there may be a bigger spending issue at play here.
Try to pay for the item in cash, so you won’t have to worry about racking up additional debt.
As a last resort, we’d suggest using your old credit card to pay for new purchases. All payments you make will go towards your balance — no need to worry about where the payment goes. Beware if you carry a balance you will be charged the standard purchase APR. So, any charges that you do make on your old card should be paid in full before the statement due date.
2. Don’t close your old credit card.
You could hurt your credit score if you do. You may be tempted to close the card you transferred debt from, but cancelling an old card can do more damage than good. It’s more beneficial to keep your old card open, since the average length of your credit history is a big factor of your credit score — and the longer your credit history, the better.
While opening a new card lowers your average length of credit history, it doesn’t lower it as much as closing your old card would. For example, if your old card has been open for 10 years, and you open a new balance transfer card, the average length of your credit history will be five years. But, if you closed your old account, it would drop to less than a year — which is a big difference.
Closing your old card would also hurt your utilization rate. This is an even bigger factor in your credit score. Utilization is the amount of your total credit limit you use — so, if you spend $2,000 a month across two credit cards with a combined limit of $8,000, your utilization would be 25%.
3. Set up autopay — and pay more than the minimum due.
Autopay is a great feature that can prevent you from missing payments and incurring late fees. It’s also a helpful way to set up automatic payments that are greater than the minimum due — which can lead to a significant reduction in your debt, since paying only the minimum due isn’t enough to rid yourself of debt.
Once you figure out how much you can afford to put towards your debt each month, set up autopay for that amount — like, say, $200 — and watch your debt decrease. You can always adjust your autopay settings to higher or lower amounts, as needed.
4. Set a calendar reminder for two months before your balance transfer expires.
If you don’t pay off your balance before the intro period ends, any balance remaining will be charged the standard interest rate. Some cards may also charge you all the interest you accrued and didn’t pay during the intro period — called deferred interest. Though this is uncommon with cards from major credit card issuers, it’s something to keep in mind if you think you may continue to carry a balance post intro period.
We understand you may not be able to pay off your balance during the intro period, and that’s okay. You still have options to avoid accruing interest. One option is to apply for a new balance transfer card, so you can take advantage of another 0% intro APR period. Just remember that balances can’t be transferred between cards from the same issuer.
The other option is to take out a personal loan. You can consolidate debt from your credit card by taking out a personal loan that often has lower interest rates and more flexible credit requirements than balance transfer credit cards. Compare personal loan offers here.
5. Start budgeting.
You just completed a balance transfer, so the odds are you may not have the best financial management skills — but that’s okay. You can still take steps towards managing your finances by creating a budget, and it can be as simple or as detailed as you like. There are several different types of budgets that you can do, like the penny tracker or the “leftovers” spender, that can help you take control of your spending — and there are plenty of free budgeting apps that you can compare here.