Does A Balance Transfer Count As A Payment?

If you're making a balance transfer to a credit card and your monthly payment is also due on the card you are about to pay into, you may well wonder whether the balance transfer counts as a payment or if you need to make an additional separate payment instead.

A balance transfer counts as a payment on a credit card as long as it is received and cleared from the date on which a statement is generated to the payment due date and the amount of a balance transfer is at least equal to the minimum payment amount.

Read on to find out the details of when a balance transfer does and doesn't count as a payment and important details you should know.

How a balance transfer counts as a payment

A balance transfer counts as a payment by the receiving credit card company because of the way balance transfers work.

When you do a balance transfer, the credit card company you are moving the balance to will make a payment from their bank account to the bank account of the other credit card company with your credit card number as the reference.

This is exactly the same process that you would follow to make a payment and the receiving credit card company would receive both payments in exactly the same way.

Although the receiving credit card company could tell that the payment in fact arrived from another credit card company by checking the bank account from which the payment was made, the way it is processed and the net effect is exactly the same as if you made a payment yourself by doing a Faster Payment directly from your bank account.

The key is to make sure that the balance transfer takes place within the right time frame and by the payment due date.

When should you do the balance transfer for it to count as a payment?

In order for a balance transfer to count as a payment on your credit card, it needs to have cleared on or before the payment due date on your statement.

Depending on the credit card you are using to do the balance transfer and their processes, this can take some time so you will need to plan ahead.

In most cases, balance transfers will be processed on the next business day after you make them - if you do a balance transfer late in the evening, it may take 2 business days before it is processed.

But the receiving credit card company will only acknowledge the payment on the date this transaction clears which will in most cases be another working day later. This means that balance transfers may take as little as 2 days to fully clear or as long as 5 days if you have a credit card that is a little slower and you decide to go ahead late on Wednesday evening (the balance transfer may only actually go through fully on the Monday in this case).

Allow at least 5 days before your payment due date to make sure the balance transfer clears in time and counts as a payment.

Remember, also, that if your balance transfer arrives before the statement is generated, it will not count as a payment, so make sure you don't start the balance transfer process until you can see the statement in your online banking.

Can a balance transfer count for multiple payments?

Balance transfers are typically quite large transactions while the minimum monthly payment is only small so can you do one big balance transfer and it count for a few payments in a row?

The simple answer is no. No matter how much you pay, it only counts towards one monthly payment based on when the money is received by the credit card company.

Be extra careful to not make a balance transfer on, just before or just after your payment due date. If you do, your balance transfer will arrive in the short window between your due date from the previous statement and the date when the next statement is generated.

Although it will pay down your balance, it won't actually count towards the minimum payment on either the previous or the next statement which is mighty confusing but can put you in an awkward situation unless you're clearing the balance in full.

If you make more than one balance transfer (although there is little practical point in doing so and your fees might be higher if you're doing smaller balance transfers), they will still not count for multiple payments unless you're doing them with enough time between them for them to count towards different statements.

If you're planning to do one balance transfer, you may as well go and do it all in one go to count towards a payment on the earlier statement so that you reduce the amount of interest you have to pay.

How to make sure your balance transfer counts as a payment

The key to making sure your balance transfer counts as a payment is for it to arrive within the time window between your statement date and your payment due date.

If you want to make sure, do your balance transfer on the day or the day after your statement is generated, but never before you have actually seen the statement. That way it will definitely arrive before the payment due date regardless of how long your credit card gives you to pay.

Make sure your balance transfer is large enough to cover at least the minimum payment - if it does't you will have to make an additional payment to bring the total up to the required amount.

A balance transfer that is received in time will always count as a payment towards your credit card account.

Here's a curious thought - if your balance transfer completely clears your credit card balance and brings it to zero, then you wouldn't be able to make a payment even if you wanted to as that would put your credit card into credit. Hence balance transfers have to count as payments to prevent a situation where you miss a payment even though there is nothing due.

Should you do a balance transfer or make a payment to a credit card?

Although it might seem tempting when times are tough or you're doing some personal financial planning to do a balance transfer from one credit card to another, it may be a bad idea to do so.

Here's a few things you should consider when deciding if you should do a balance transfer or make a regular payment instead:

  1. A regular payment will be free whereas balance transfers will almost always charge a processing fee which is usually about 3% of the amount you're paying.
  2. A regular payment actually clears your credit card balance whereas a balance transfer simply shifts it from one card to another. If you have the means, it's always a good idea to pay your credit cards down. If you keep moving balances between credit cards, the fees and interest can build up quickly and you may get into a bad place with your debt.
  3. A balance transfer typically takes days and sometimes as long as 3 to 5 days to go through depending on which day of the week you do it and the companies involved. A faster payment can go through in seconds and in most cases within a few hours which is far more convenient and certain.
  4. If you don't already have another credit card, you'll need to go through an entire application process and add another credit card to your credit profile. While it's not a huge deal, it's a complex way of avoiding having to make a payment.
  5. Balance transfers begin incurring interest from the day you make them and unlike purchases do not have a grace window even if you repay your credit card in full. This means you'll have to pay interest on top of the balance transfer fee.
  6. If you're thinking of doing the balance transfer in order to get points or to bring your spend up to the next tier for some kind of a loyalty scheme, check the details for your credit card - most will not count balance transfers towards these schemes and it's often a bad idea to pay the fees and interest of a balance transfer just to get some slightly better perks from your credit card.

Sometimes doing a balance transfer is a better option than making a payment to your credit card.

If you have a credit card that gives you an attractive offer for a long term balance transfer at 0% interest and a low or no fee, you may decide that it's worth shifting the balance from a different credit card over to save on the interest. In this case, it makes sense to balance transfer the whole amount across instead of doing a part payment to make the most of the offer.

Photo credit: fizkes/