Are balance transfers worth it? Pros and cons

Melanie Lockert Written by:
Headshot of Rachel Ziemer, Content Coordinator at Intuit Credit Karma Edited by:
Updated
•7 min read
Woman using laptop considers balance transfer pros and cons.Image: Woman using laptop considers balance transfer pros and cons.
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Key Takeaway: A balance transfer credit card can help you save on interest and pay down debt faster when you move money from a card with a high interest rate to one with a lower rate. But you have to pay a fee, and it could result in more debt if you don’t have a solid repayment plan.

If your credit card balances are headed in the wrong direction, a balance transfer may help you accelerate your repayment timeline with a lower interest rate and simplified payments. Over time, you may even see your credit scores improve as you chip away at what you owe. 

But it won’t erase your debt, and there are limits to the amount you can transfer. Because you generally need good or excellent credit to qualify, balance transfers aren’t available to everyone.

Before applying, weigh the pros and cons of a balance transfer credit card to determine whether it’s the best option for managing your debt.

What are the pros and cons of a balance transfer?

A balance transfer can streamline your monthly debt payments and help you save on credit card interest, but it comes with a cost, and you may not be able to transfer all your debt to a single card. Before moving forward, consider these benefits and drawbacks.

Pros of a balance transfer

  • You could save money on interest. Balance transfer cards often offer low or 0% APR introductory offers, which minimize the amount of interest you pay after a transfer.
  • You may pay off your debt faster. Because your balance accrues less interest, it grows more slowly. With fewer interest charges, more of your monthly payment goes toward the principal, allowing you to repay what you owe more quickly.
  • You can consolidate multiple payments into one. A balance transfer lets you combine multiple credit card balances into one, simplifying your monthly payments and making your finances easier to manage.
  • It may improve your credit score over time. Your credit utilization rate is the amount of revolving credit you use compared to the total amount you have available. A low rate generally has a favorable impact on your credit scores, while getting too close to your credit limit can hurt your scores. Getting a new credit card increases your available credit, and as you pay down your debt, the amount you owe decreases, both of which reduce your credit utilization.

Cons of a balance transfer

  • You’ll probably have to pay a balance transfer fee. Credit card companies charge a fee when you transfer a balance. Fees generally range from 3% to 5% of the transfer amount with a minimum of $5 to $10. For example, if you transfer $5,000 to a new card, the issuer may charge a fee of $150 to $250.
  • The low rate is only temporary. Introductory offers usually last six to 21 months, depending on the card. If you don’t pay off the amount you transfer before the promotional period ends, the remaining balance will accrue interest at the card’s regular balance transfer rate. Missing a payment or paying less than the minimum due may cancel the promotional rate and trigger a penalty APR.
  • You need good to excellent credit to qualify. Balance transfer cards with low introductory rates are typically only available to people with good credit scores. That generally means having a FICO Score 8 or FICO Score 9 of 670+ or VantageScore 3.0 or VantageScore 4.0 of 661+. You can check your VantageScore 3.0 credit scores from Equifax and TransUnion on Credit Karma for free.
  • It could lead to more debt if you’re not careful. To get the most out of a balance transfer, make a plan to repay the transfer amount before the promotional period expires and limit credit card spending until your debt is paid off. Otherwise, you may end up shuffling your debt around without saving money and may rack up even more debt.
  • Balance transfers have limitations. To qualify for the introductory rate, you generally must complete the transfer within 60 days of opening the card, though timelines can vary. The transfer amount plus fees can’t exceed your credit limit, and some issuers limit transfer amounts to a percentage of your credit limit or a specific dollar amount.  

How do you decide if a balance transfer is right for you?

A balance transfer can be an effective way to pay down debt and improve your financial health. It could be a good option if the interest savings will offset the balance transfer fee, your credit is solid, and you have the discipline and financial resources to repay the transfer amount before the promotional period ends.

But it isn’t always the right move. An alternate debt repayment method might be a better option if your credit isn’t in great shape or opening a new card would tempt you to overspend. A balance transfer also doesn’t make sense if you can barely make the minimum payments each month since you wouldn’t be able to pay off the balance before the promotional period ends.

If your balance is small, transferring it to another card probably isn’t worth it. Instead, work on paying it off as quickly as possible. A balance transfer calculator can help you figure out if a balance transfer card is right for you.

What are alternatives to balance transfers?

A balance transfer isn’t the only way you can pay off credit card debt. Here are a few other options to consider.

  • Debt consolidation loan: Personal loans for debt consolidation offer longer repayment timelines, fixed interest rates and predictable monthly payments that make it easy to budget. But you may have to pay fees, and there’s no guarantee the rate will be lower than what you’re paying on your credit card, especially if you don’t have a stellar credit profile. Compare the cost of carrying a credit card balance with the cost of a personal loan to decide if it makes financial sense.
  • Debt management plan: You must work with a credit counselor to participate in a DMP. With a debt management plan, you make a single monthly payment to the credit counseling organization, and it disburses the funds to your creditors each month. It doesn’t reduce the amount you owe, but your credit counselor may be able to negotiate lower interest rates or get fees waived, which can make your payments more manageable.
  • Keep paying off your existing cards: You don’t need to consolidate your credit card balances to pay them off. You can use one of two common credit card payment methods — snowball or avalanche — to pay down your debt. With the snowball method, you make the minimum payments on all your accounts and put extra money you have toward the smallest balance first. Focusing on the smallest debt gives you a quick win, helps you gain momentum and provides motivation to stick with your repayment plan. If you opt for the avalanche method, you put extra funds toward the account with the highest interest rate to minimize interest charges and get out of debt faster. 

Next steps

A balance transfer can be an effective way to consolidate multiple credit card debts, save money on interest and pay off your balance faster. But it comes with a cost and may result in more debt if you don’t have a solid repayment plan and limit spending until you pay off your debt. 

Before applying for a balance transfer, review your credit reports to make sure there are no errors, and check your credit scores to see how likely you are to qualify.

If your credit isn’t good enough or the transfer will cost you more than leaving your balances where they are, it probably doesn’t make sense to apply for a balance transfer card. Instead, select a different repayment method that aligns with your credit profile and won’t increase the amount you owe.

FAQs about balance transfer credit cards

When you apply for a balance transfer credit card, it generates a hard inquiry and reduces your average account age, which can temporarily reduce your scores. But if you’re approved, it may reduce your credit utilization, which generally has a positive impact on your credit scores.

Balance transfers typically have a fee of 3% to 5% of the transfer amount with a $5 or $10 minimum, depending on the card. Check the terms and conditions of any card you’re thinking about applying for, so you know what to expect if you’re approved.

You typically need good or excellent credit to qualify for a balance transfer card, which generally means having a FICO Score 8 or FICO Score 9 of 670+ or VantageScore 3.0 or VantageScore 4.0 of 661+. But each issuer has different credit criteria, so qualifications may vary.

It can take anywhere from two days to six weeks to process a balance transfer. Timelines vary by card issuer. Until it processes, keep paying off your old card to avoid late fees or additional interest.

You can’t usually transfer balances between cards issued by the same bank, but you should check with the card issuer to find out for sure. If you’re considering a balance transfer, look for cards from issuers that are different from the cards you already have.