How do balance transfers work?

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In a Nutshell

A credit card balance transfer involves moving debt from one credit card to another. It’s a strategy that can help you save money and pay off debt faster — if you’re careful about details like fees, interest rates and restrictions on transfer amounts.
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A balance transfer can save you money by allowing you to move existing debt on a higher-interest credit card to a credit card with a lower interest rate.

Transferring a balance doesn’t eliminate the debt — instead, moving the balance to a lower-interest credit card can help you save on interest and even pay off the debt more quickly. Transferring multiple credit card balances to a single, lower-interest card may also simplify your payments.

But watch out — fees, interest rates and other details (such as how much you can transfer and how long a balance transfer takes) can vary. Here’s how a balance transfer works.

How do balance transfers work?

A balance transfer lets you transfer debt from one credit card — or even a qualifying loan — to another credit card. The debt still needs to be paid off, but depending on the balance transfer card you choose, you can get a lower interest rate. Or some cards offer a 0% APR introductory period where no interest accrues. Balance transfers are also limited to the credit limit of your card so you consider how much debt you need to consolidate before using a balance transfer.

What to consider before deciding on a balance transfer

A balance transfer isn’t a get-out-of-debt-free card. Balance transfers typically come with fees, and you’ll likely have to pay interest on whatever balance you transfer. Here are some things to keep in mind before opting to use a balance transfer card.

  • Balance transfer fee — Credit cards may charge you a balance transfer fee. This fee is typically between 3% and 5% of the amount you transfer.
  • Promotional period — Some card issuers will offer an introductory 0% APR on balance transfers for a specified period of time to encourage balance transfers.
  • APR interest — If you transfer a balance and are still carrying a balance when the 0% intro APR period ends, you will have to start paying interest on the remaining balance. If you want to avoid this, make a plan to pay off your credit card balance during the no-interest intro period.

How much can you transfer?

A balance transfer and any fees charged for it usually count toward your credit card limit. And many issuers will only let you transfer a balance up to a certain percentage of that limit.

For example, let’s say your balance transfer credit card has an introductory 0% APR on balance transfers and a credit limit of $10,000. If that card only allows you to transfer a balance of up to 75% of the credit limit, including a 5% fee for the transfer, what’s the most you could transfer?

At first, you might think you could transfer $7,500, which is 75% of $10,000. But add in the balance transfer fee, which would equal $375 — and it pushes you over the transfer limit. So you’d have to subtract that fee from the limit first, which in this scenario would leave you transferring $7,125.

What should I do if I don’t get a high enough credit limit to transfer all my credit card debt?

You may get approved for a balance transfer credit card only to find out the credit limit is lower than you’d hoped. In this case, we recommend transferring what you can — but plan for how you’re going to pay down the debt remaining on your high-interest card, in addition to the balance you transferred. After making regular, on-time payments on the new card, you might be able to ask for a higher limit. Alternatively, if you don’t think you’ll be approved for a card with a high enough credit limit, you may want to consider a personal loan.

5 tips for smart balance transfers

You probably want to transfer a balance to save money — not spend more. Balance transfers can be a good way to pay down your debt fast or take advantage of a lower interest rate. Here are some tips to save on fees and interest on a balance transfer.

1. Pick a card that waives the balance transfer fee

Consider a balance transfer card that has an intro $0 balance transfer fee for a certain time frame or waives the fee altogether. Pay attention to when you’ll need to request the balance transfers to take advantage of the intro $0 balance transfer fee offer — it’s typically within the first couple of months.

2. Pay attention to different APRs

Look into cards that offer a 0% introductory interest rate period on balance transfers (intro offers typically range from 12 months to 21 months). But be aware that you’ll get a different APR on balance transfers after the intro period ends.

For example, say your card offers an intro 0% APR on balance transfers for 18 months from account opening. But after 18 months, your balance transfer APR changes to a variable 16% APR on balance transfers. You’ll want to make sure to pay off your balance transfer before the intro period ends, otherwise that 16% APR will kick in for any remaining balance. This could negate the savings from transferring your balance if you don’t pay it off during the intro period.

There’s another type of APR you should know about: penalty APRs. If you miss payments, the issuer may charge a penalty APR. And take note: As part of the penalty for late or missed payments during an intro APR period, the issuer may also cancel your 0% intro APR offer.

Take a look at the card’s terms and conditions before applying for the card and transferring your balance, so that you’re prepared for the different APRs that may apply to your balance and when they’d kick in.

3. Be cautious when charging new payments to your balance transfer card

A card may offer a 0% intro APR to help you pay off a balance transfer — but if the intro 0% APR doesn’t apply to purchases, you’ll have a different interest rate for new purchases you charge to the card. Weigh any potential rewards you can earn by making purchases on the card with how much interest you’ll pay on those purchases.

4. Set alerts to make monthly payments on time

Even if your card offers an intro 0% APR on balance transfers and purchases, you should still make at least the minimum monthly payment on time. You can set alerts to help you remember when your payments are due.

But keep in mind that to pay off your transferred balance before the intro no-interest period ends, you may need to pay more than the minimum each month.

5. Continue making payments while you wait

Requesting a balance transfer can be a speedy process, but in some cases it may take several weeks to complete.

The amount of time can depend on the card issuer. That’s why it’s important to keep making at least the minimum payments on your original card on time, until the transfer appears on that account.

Will applying for a balance transfer hurt my credit?

Applying for a balance transfer card will likely result in a hard inquiry on your credit reports. This could cause your credit scores to drop by a few points. But it could also increase your available credit and lower your credit utilization, which could have a positive impact on your credit scores. Read more about how a balance transfer can affect your credit.

Next steps

A balance transfer can be a good option to consolidate your credit card debt and pay it off more quickly. But pay close attention to the terms.

APRs, fees, the amount you can transfer and other terms can differ from card to card. Before you apply for a new card, check the terms and conditions for fees, APRs and any restrictions on transfers. Look for a card that can make a balance transfer work for you.

About the author: Kim Porter is a writer and editor who has written for AARP the Magazine, Credit Karma,, U.S. News & World Report, and more. Her favorite topics include maximizing credit card rewards and budgeting. Wh… Read more.