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A balance transfer is the process of moving debt from one or more debts to another, typically with a lower interest rate. This strategy can reduce the interest you pay, potentially saving you money and consolidating multiple payments into one. The most popular balance transfer method is using a balance transfer credit card.
While some cards offer a 0% introductory APR for a set period, others provide a low ongoing rate. Be aware that balance transfers usually incur a fee, often around 3% to 5%.
A balance transfer credit card is a type of credit card that allows you to transfer debts from one or more existing credit cards to this new card. You take what you owe from one card and put it on another, usually because the new card has better terms - a low or even no interest rate for 6 to 18 months.
While a lot of credit cards offer balance transfers, the best ones typically have the following:
Low or 0% Introductory APR
Get a credit card with a low or 0% introductory APR, ideally with a promotional period of 12 to 18 months, to help pay down debt without accruing significant interest.
Low Balance Transfer Fee
Consider the balance transfer fee, usually 3% to 5% of the transferred amount, and ensure the savings from the lower interest rate outweigh this cost. Check the terms and conditions since some cards offer a lower fee when a balance transfer is completed within a certain period after opening an account.
High Credit Limit
Check the credit limit of the new card to ensure it covers the amount of debt you wish to transfer. Also, be sure to read the fine print, as some cards limit the amount you transfer regardless of your available credit.
Low Post-Introductory Interest Rates
Check the variable APR that comes after the introductory period. You can get a low post-introductory APR if you have a higher credit score. This is especially important if you still carry a balance after the promotional period.
Some cards added perks such as earning cash back or points or 0% intro APR offer on new purchases. This can be useful if you also plan to use your credit card to pay for daily necessities or an upcoming big purchase. However, to get the best balance transfer credit card offers, you need a credit rating of good to excellent or a credit score of 670 and above.
Discover your potential savings from a balance transfer by using this calculator. This resource is designed to help you easily calculate the financial benefits of switching to a balance transfer credit card.
Think of a balance transfer as a way for you to pay off your debt faster. It helps you cut down on how much interest you pay and lets you put more money towards the actual debt. When you have a lower interest rate, more of your payment goes towards the debt itself, not just the interest. This makes paying off your debt easier and quicker.
The process usually starts by comparing cards offering balance transfers and selecting one that fits your needs. Once you’ve narrowed down your selection, you can proceed with the balance transfer by doing the following:
Call the card issuer to apply or send your application online. Approval will depend on your credit score and history. Ensure you meet the card issuer's criteria before applying.
Note that applying for a balance transfer card involves a hard inquiry on your credit report, which can temporarily lower your credit score. However, if managed wisely (e.g., by reducing overall debt and credit utilization), it can have a positive long-term impact.
Decide how much of your existing debt you want to transfer to the new card. This amount should not exceed the credit limit of your new card plus the balance transfer fee. Note that some cards don’t allow you to request for a credit limit.
After your application is approved, initiate the balance transfer. This usually involves providing details of your old debts, like account numbers and the amounts you wish to transfer. The new credit card company will then pay these amounts to your old creditors. Note that you cannot transfer debts between the same card issuer or affiliates.
Your focus should now shift to paying off the balance on the new credit card. Ideally, you should aim to pay off the entire transferred balance within the promotional low or zero-interest period to maximize savings on interest costs.
During the promotional period, you will still need to make regular payments. Failure to make minimum payments can result in the loss of the promotional interest rate. Avoid accumulating new debt on the card after transferring a balance.
You can decide whether to keep or close your old credit card accounts. Closing accounts can impact your credit score by lowering your total available credit and reducing the average age of your credit. If your old credit card does not charge an annual fee, consider keeping it.
Card | Balance Transfer Offer |
|---|---|
0% intro APR on balance transfers for 21 months and purchases for 12 months (then 17.99% - 28.74% variable APR) | |
0% intro APR on balance transfers and purchases for 18 months (then 20.24% - 28.99% variable APR) | |
0% intro APR on eligible balance transfers and purchases for 18 billing cycles (then 19.49% - 29.49% variable APR) | |
0% intro APR on balance transfers and purchases for 15 months (then 19.99% - 29.99% variable APR) | |
0% intro APR on eligible balance transfers for 18 months (then 18.99% - 28.99% variable APR) | |
0% intro APR on balance transfers and purchases for 15 months (then 19.99% - 29.99% variable APR) | |
0% intro APR on balance transfers for 21 months and purchases for 12 months (then 18.99% - 29.74% variable APR) |
Doing a balance transfer using a balance transfer credit card can work wonders. Applying for a balance transfer is easy and it can help you consolidate payments. But, if you’re still on the edge if a balance transfer is right for you, ask the following questions:
Are you carrying high-interest credit card debt? Balance transfers are especially useful if you have high-interest debts. If you do a balance transfer, you get break from paying high-interest rates That means more money goes to paying the principal amount, making paying off your balance faster.
Can you pay off the balance within the introductory period? Post-introductory interest can be high, usually around 15% to 30% annually. If you’re carrying a balance after the intro period ends, you’ll start accruing interest.
Are the balance transfer fees worth it? Balance transfers often come with fees. Calculate whether the cost of the transfer fee is less than the amount you'd save on interest to avoid unnecessary fees.
Are you disciplined in your spending habits? A balance transfer can be a helpful tool, but it requires self-discipline. It's important to resist the temptation to rack up more debt on the old card once it's been paid off.
If you’ve answered yes to all questions, then doing a balance transfer is the right move. Otherwise, balance transfer may not be worth it, especially if you can’t get a 0% introductory rate, a longer introductory period, or a longer time to pay off your debt.
If, crunching the numbers and weighing the pros and cons, you decide that a balance transfer is not for you, there are other options to consider to help you manage your debt. Each has its pros and cons, so be sure to review your options before choosing the best move forward:
Debt Consolidation Loan: This is when personal loans that consolidate multiple debts, like credit card balances, are in one fixed monthly payment. This is beneficial if the loan's interest rate is lower than that of your current credit cards.
Debt Management Plan: Offered by non-profit credit counseling agencies, these plans consolidate your debts into a single payment. The agency works to lower your interest rates and waive fees through negotiations with creditors.
Hardship Program for Credit Cards: Some card issuers provide programs for cardholders facing financial difficulties. These may include reduced interest rates, lowered minimum payments, or a temporary halt on payments.
Budget Tightening for Debt Repayment: By reducing unnecessary expenses, you can allocate more funds to clear credit card debt. This not only saves on interest costs but also accelerates debt elimination.
We’ve answered some of the most common questions readers ask to help you learn more about balance transfers.
Balance transfer credit cards offer a low or 0% interest rate for a promotional period to transfer high-interest credit card debt. Balance transfer checks, provided by credit card companies, can pay off other card balances or loans and transfer that amount to the card issuing the check, often with similar promotional rates.
Typically, a balance transfer takes 2 days to 6 weeks. Continue payments on your old card until the transfer is complete to avoid penalties.
After completing a balance transfer, the debt shifts to the new balance transfer card. Make regular payments, especially during the promotional period, to avoid high interest on remaining balances. Check and manage your old account accordingly.
No, you can’t transfer balances between cards issued by the same bank or financial institution.
Besides credit card debt, you might be able to transfer debts like personal loans, student loans, or car loans, depending on the credit card issuer's policies.
No, a balance transfer doesn't automatically close your old account. You'll need to decide whether to keep it open or close it, considering the potential impact on your credit score.
A balance transfer can impact your credit utilization ratio, a key factor in your credit score. Getting a new credit card will increase your total credit limit, therefore, lowering your credit utilization ratio.
Generally, balance transfers don't earn credit card rewards, points, or cash back. However, some cards, like the Citi Custom Cash Card let you earn cash back on new purchases.
This depends on the issuer's policy and your credit limit. Some cards allow multiple transfers, but you must stay within your credit limit, including fees.
About Doug Milnes, CFA
Doug Milnes is a CFA charter holder with over 10 years of experience in corporate finance and the Head of Credit Cards at MoneyGeek. Formerly, he performed valuations for Duff and Phelps and financial planning and analysis for various companies. His analysis has been cited by U.S. News and World Report, The Hill, the Los Angeles Times, The New York Times and many other outlets.
Milnes holds a master’s degree in data science from Northwestern University. He geeks out on helping people feel on top of their credit card use, from managing debt to optimizing rewards.
