Balance Transfer Basics


Navigating credit card debt can be an overwhelming process. There are services, like balance transfers, that credit card issuers offer, but it’s important to be educated about your options before you jump into signing up for another credit card. Here’s the information you need to make an informed decision.

What is a balance transfer?

A balance transfer is a service most major credit card issuers offer that moves debt you’re already carrying from its current creditor to a new credit card. The purpose of a balance transfer is usually to secure a special low interest rate, as many balance transfer credit cards feature 0% APR periods for transferred balances. Balance transfers are often restricted to credit card debt and store card debt, though some issuers will accept balances from loans.

How can a balance transfer help you?

While transferring a balance won’t reduce the amount of money you owe, it can help you pay less in interest charges and get rid of your debt more quickly. They aren’t for everyone, but if you’re smart about using them, they can be a handy debt management tool if you’re in a certain financial situation:

  • Your credit is good or excellent so you can qualify for a balance transfer card (typically a FICO credit score of 670 or above meets this criteria).
  • You can repay most or all of the debt you transfer before the 0% APR period of your balance transfer card runs out.
  • Your current creditor is charging high interest on your debt.

How to do a balance transfer right

Find a good balance transfer credit card

The most important feature of a balance transfer card is its 0% intro APR period for balance transfers. You should try to find a card that offers at least 12 months of 0% balance transfer APR. Apart from that, also try to find a card with a $0 annual fee and a reasonable balance transfer fee. Balance transfer fees normally range from 3% to 5% of the balance you’re transferring. Some cards offer 0% balance transfer fees, but they’re the exception rather than the norm.

Make a repayment plan

Before you even apply for a balance transfer card, make a plan to pay off the debt you’re moving over. Figure out what payment you can realistically afford to make each month and compare that to the length of the 0% intro balance transfer APR period of the card you’re considering. Use this information to determine how much of your debt you’re going to transfer, as you’re allowed to only transfer part of your debt if you want. Remember to also factor in your card’s balance transfer fee, which will get added onto the debt you transfer.

Don’t make purchases with your balance transfer credit card

Keep new purchases separate from the old debt you’re trying to get rid of. Purchase APR and balance transfer APR are two separate rates, so making purchases with your balance transfer credit card may result in you having to pay interest on those new charges even as your transferred balance stays at 0% APR. Plus, not having to worry about paying off two different sources of debt on the same card will make your finances simpler.

With these tips in mind, you can use a balance transfer to save big on interest payments. Visit our Balance Transfer and Low APR pages to compare your options.


Editorial Note: Any opinions, analyses, reviews or recommendations expressed are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.
*CardCritics references a FICO® 8 score, which is one of many different types of credit scores. A financial institution may use a different score when evaluating your application.