What Is a Balance Transfer, and Should I Do One?
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Written by
Melanie Pincus
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Edited by
Jasmin Baron, CCC™
When you have debt, the money you still owe is called your balance. You’ll have to pay interest on that balance until you clear it.
But what if you want to avoid high interest on an unpaid balance? You can consider using a balance transfer credit card to get a lower interest rate.
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What Is a Balance Transfer?
A balance transfer happens when you move debt from a credit card or loan to a different credit card.
You’ll pay a balance transfer fee, which is a percentage of the balance you are transferring, usually 3% to 5%. You may be able to complete the transfer online, or you can contact the customer service department of the financial institution receiving the transfer.
Who Can Do a Balance Transfer?
A balance transfer may be possible if you have at least a good credit score. That’s what you’ll need to qualify for some of the best balance transfer credit cards.
Financial institutions typically won’t allow you to transfer a balance from one of their products to another. That means if you’re transferring a credit card balance, you’ll likely need to use a credit card issued by a different financial institution from the one where you have high-interest debt.
In other words, if you have debt on a Capital One credit card, don’t open another Capital One card with a 0% promotional APR, hoping to make a transfer.
Why Do a Balance Transfer?
A balance transfer can save you money on interest payments.
For example, say you’re making $250 monthly payments to pay down a $4,000 balance on a card with a 22.3% interest rate (the most recent average for credit card accounts with a balance, according to the Federal Reserve).
You’ll wind up paying off the balance in 20 months, including close to $800 in interest. If you instead transfer that balance to a card with a 0% introductory annual percentage rate that lasts for 18 months, you could pay off the $4,000 within 16 months, without paying a cent in interest.
How To Do a Balance Transfer
- Select a credit card for the transfer: To maximize savings, look for a new card with a 0% introductory APR. Offers typically range from 12 to 24 months. That said, lower rates are also possible on some cards outside of introductory periods. For instance, my Discover it® Cash Back, which I’ve had for years, recently offered me a 12-month promotional APR on balance transfers.
- Request a transfer: If you’re applying for a new card, you’ll likely be able to request a transfer when you apply. If you’re using an existing account, you might be able to ask for the transfer online. If not, call your issuer. Note that you’ll likely face a cap on how much debt you’re allowed to transfer.
- Monitor your balance transfer: Keep making any required payments on your old card until you’re sure the transfer has cleared. This might happen within a couple of days or take up to two weeks.
What Credit Cards Offer Balance Transfers?
The U.S. Bank Shield™ Visa® Card offers a field-leading 0% intro APR on purchases and balance transfers for 24 billing cycles. After that the APR is variable, currently 17.24%-28.24%. The card doesn’t charge an annual fee and also offers cash back on select purchases — unlike some other balance transfer cards.
The Citi Double Cash® Card, an advertising partner, also checks a lot of boxes: no annual fee, rewards and a 0% Intro APR on balance transfers for 18 months, then 17.49% - 27.49% (Variable). A 17.49% - 27.49% (Variable) APR will apply for purchases. You’ll earn 2% cash back on all spending: 1% when you make a purchase, and another 1% when you pay it off.
If you’re worried that credit card rewards will encourage you to spend more than you can afford, you can go in a different direction. Other balance transfer cards don’t offer rewards, giving them limited usefulness once you’ve paid off your debt. That said, they can be worth hundreds (or more) in interest savings during the 0% intro APR period.
The Wells Fargo Reflect® Card has a 0% intro APR for 21 months from account opening on purchases and on qualifying balance transfers, then a 17.49%, 23.99%, or 28.24% Variable APR. If you need slightly less time, the BankAmericard® credit card offers a 0% Intro APR for 18 billing cycles for purchases, and for any balance transfers made in the first 60 days. After the intro APR offer ends a 14.49% to 24.49% Variable APR on purchases and balance transfers will apply.
Frequently Asked Questions About Balance Transfers
Is a balance transfer ever a good idea?
Yes, a balance transfer is a good idea if you can use it to reduce the cost of existing debt. By transferring your debt to a card with a lower APR, you’ll owe less in interest, as long as you pay off your balance within whatever promotional period the card offers.
What is the disadvantage of a balance transfer?
You’ll likely have to pay a balance transfer fee between 3% and 5% of the transferred balance. You’ll also likely have to open a new credit card to get a 0% introductory APR. Applying will trigger a hard inquiry on your credit, which may result in a small, temporary decrease in your credit score.
How much will it cost in fees to transfer a $1,000 balance to a credit card?
Typically, you’ll pay a fee between $30 and $50 to transfer a $1,000 balance. That’s because credit card balance transfer fees are typically 3% to 5% of the balance.
When should I not do a balance transfer?
If the amount you’ll pay in balance transfer fees is greater than the amount of interest you’d pay to knock out your balance, don’t do a balance transfer. If you think you’re likely to rack up a new balance on your old card after transferring your debt, then a balance transfer is also likely unwise.
