Key Takeaway: Balance transfer cards allow you to consolidate credit card debt onto one card, typically with a low or 0% intro APR. The intro period can last over a year, depending on the card but it also comes with a balance transfer fee. If you don’t pay off your balance by the end of the intro period, you’ll start accruing interest at the regular balance transfer APR.
A balance transfer could give you a break from high credit card interest while you pay off debt. A balance transfer works by moving debt from one credit card to another — typically a card with a low or 0% introductory APR — so more of your payment goes toward the balance instead of interest.
A balance transfer isn’t right for everyone, though. Before you apply for a new credit card, here’s what you need to know about what a balance transfer is, how to do one, the pros and cons, whether it’s a good fit and a few alternatives if it’s not.
- What is a balance transfer on a credit card?
- How do I transfer a credit card balance?
- What are the pros and cons of balance transfers?
- Is a balance transfer a good idea?
- What are alternatives to balance transfers?
- FAQs about how credit card balance transfers work
What is a balance transfer on a credit card?
A balance transfer is when you move debt from one credit card — or sometimes a loan — onto a new card, usually with a low or 0% introductory APR. The goal is to pay less in interest while you pay off what you owe.
Most offers carry an introductory APR for a set promotional period, commonly between 12 and 21 months. After that, the card’s regular APR applies to any balance you have left. Balance transfer credit cards typically charge a balance transfer fee, which can range from 3% to 5% of the transfer amount. There’s often a flat minimum of $5 to $10.
What kind of debt can you transfer?
You can typically transfer balances from other credit cards, and some issuers also let you move debt such as personal loans, auto loans or student loans.
That said, you generally can’t transfer between two cards from the same issuer, and your new card’s credit limit determines how much you can move.
How do I transfer a credit card balance?
To transfer a credit card balance, you apply for a card with a balance transfer offer, request the transfer and keep paying your old card until the balance moves over. Here’s how it works:
- Check your credit. Balance transfer cards usually call for good credit, so checking your credit scores first is crucial to knowing where you stand. You can check your free Vantage 3.0 scores on Credit Karma from TransUnion and Equifax.
- Compare your options. As you shop for the best balance transfer cards, weigh the intro APR period, the balance transfer fee, the regular APR and the credit limit. A balance transfer calculator can help you estimate your savings.
- Apply for the card. You can typically apply online, over the phone or in person. Your approval odds and your credit limit will depend on your creditworthiness.
- Request the transfer. Depending on the card issuer, you may be able to request a transfer during the application process or shortly after you’re approved. You’ll need the account details for the debt you want to transfer and the amount you want to move.
- Keep paying your old card. Balance transfers can take anywhere from a couple of days to several weeks, so it’s important to keep paying at least the minimum amount due on the old card until the transaction is completed.
- Pay down the balance. Ideally, you’ll pay off the balance in full before the promotional period ends. But if you can’t, pay off as much as you can before the intro period ends and the regular APR kicks in.
What are the pros and cons of balance transfers?
A balance transfer credit card can help you save money and accelerate your payoff plan, but there are some pros and cons of balance transfers to consider before you get started.
Pros
- You could pay less in interest. A low or 0% intro APR means more of each payment chips away at your balance instead of going toward interest charges, which can make a real difference on high-interest debt.
- You can simplify your payments. Combining several balances onto one card replaces a handful of due dates with a single monthly payment to keep track of.
- You may pay off debt faster. With less interest piling up each month, more of what you pay goes toward the principal, giving you a clearer path to paying off the balance.
- 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 utilization 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
- You’ll likely need good credit. The most competitive intro offers generally go to applicants with good to excellent credit, so approval and a useful credit limit aren’t guaranteed.
- You’ll likely pay a balance transfer fee. This is often 3% to 5% of the amount you move, so it’s worth running the math on a card’s balance transfer fee before deciding whether the interest savings are worth it.
- The intro rate doesn’t last forever. Once the promotional period ends, the regular APR applies to whatever balance is left, so a transfer works best when you can pay off the debt within that window.
- 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, although timelines can vary. The transfer amount plus fees can’t exceed your credit line, and some issuers limit transfer amounts to a percentage of your credit limit or a specific dollar amount.
Is a balance transfer a good idea?
A balance transfer can be a good idea if you have high-interest credit card debt that you can realistically pay off during the intro APR period and avoid new charges in the meantime. Here are a few questions to ask yourself to determine whether it’s the right fit:
- Can you pay off the balance before the intro period ends? If you can’t pay off the debt before the promotional periods ends, the regular APR kicks in on whatever’s left, which can eat into what you saved on interest previously.
- Will your interest savings outweigh the balance transfer fee? Adding up the fee and weighing it against the interest you’d avoid tells you whether a balance transfer actually makes sense. A balance transfer calculator can help you estimate your savings and weigh which card may save you the most.
- Can you avoid new purchases while you pay down the balance? Anything you put on the original card and don’t pay off adds to your debt, meaning it’ll take even longer to pay off. If you’re not careful, your debt situation could spiral out of control.
- Are you confident you can pay on time? A single missed payment could cost you the intro offer and leave you paying the regular APR sooner than you planned.
What are alternatives to balance transfers?
If a balance transfer doesn’t feel like the right fit, or you simply want to evaluate all of your options first, here are a few alternatives to consider.
Debt consolidation loan
A debt consolidation loan rolls multiple debts into one loan with a single monthly payment, often at a fixed rate that could be lower than what your cards charge.
Because the rate is locked in, you get a set payoff timeline instead of a promotional window that eventually expires. This option can also cover debts beyond credit cards, such as medical bills or other personal loans.
Debt management plan
A debt management plan, usually set up through a nonprofit credit counseling agency, combines your debts into one monthly payment and may come with reduced interest rates or waived fees negotiated on your behalf.
You make a single payment to the agency each month, and it distributes the money to your creditors. These plans typically run three to five years, and you may have to close the cards involved while you’re enrolled.
Accelerated payoff methods
If you’d rather pay down debt on your own, the debt snowball and avalanche methods are two popular strategies. The snowball method tackles your smallest balance first for quick, motivating wins, while the avalanche method targets your highest-interest debt first to save the most on interest overall.
With either one, you keep making minimum payments on your other balances, then roll that freed-up money toward the next debt once one is paid off.
What’s next?
If a balance transfer sounds like it could help, check where your credit stands. From there, you can compare cards, use a balance transfer calculator to see whether your interest savings would outweigh the fee, and sketch out a payoff plan that clears the balance before the intro rate ends.
If a balance transfer doesn’t look like the right fit, it’s worth taking a closer look at a personal loan, a debt management plan or a payoff method like the snowball or avalanche to find the approach that works for your situation.
FAQs about how credit card balance transfers work
Applying for a new card triggers a hard inquiry that could temporarily lower your scores, and the new account lowers your average account age. On the plus side, shifting debt to a higher-limit card could lower your credit utilization, which may help your credit.
It comes down to your debt and goals. A balance transfer may be better if you are able to pay the entire balance off during the 0% intro APR period, while a personal loan’s fixed rate may be better for larger amounts or for people who want a set repayment schedule.
Your old card stays open unless you close it, with the old account at zero if you transferred the full balance. Keeping it open could help your credit by maintaining your available credit and account history.
Most balance transfers charge a fee, often 3% to 5% of the amount you move, sometimes with a flat minimum, ranging from $5 to $10. So, transferring $5,000 at a 3% fee would cost $150. Beyond that, you generally won’t incur charges during the intro APR period unless you miss a payment.
A balance transfer usually takes a couple of days to several weeks, depending on the issuer. Until it goes through, keep paying at least the minimum on your old card to avoid late fees or added interest.