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In a nutshell
Balance transfer credit cards offer a time-limited opportunity for disciplined consumers to pay down more expensive debt.
- Credit card balance transfers are one vehicle for moving high-interest debt to a card with more favorable terms.
- Lower transfer rates are typically for a limited time and come with additional fees.
- Before choosing a balance transfer credit card, consider the total cost and ability to repay debt in a reasonable timeframe.
What is a balance transfer?
A balance transfer is the process of moving an amount of debt from one credit card or line of credit account to another. Credit card companies will often promote their balance transfers as a way to save money on interest paid over time. Consumers can take advantage of several months of low or no interest payments on their balance to pay down their debt.
What is a balance transfer credit card?
A balance transfer credit card is a credit card opened or used for the purpose of transferring a balance and saving money on interest paid. Many traditional credit cards offer balance transfers to their customers, whether as part of a promotional opportunity or as an ongoing service. Not all credit cards offer balance transfers, however, and those that do may not offer a lower fee than what you already pay.
How do balance transfers work?
When you complete a balance transfer, you ask the balance transfer credit card to pay off the other card (or cards) on your behalf. The balance transfer card sends a payment to the other card (or cards), lowering the balance and reducing the interest paid on the card. Most balance transfer offers are promotional and last six to 18 months, though some go up to 21 months.
When the promotional period expires, any unpaid balance will be subject to the balance transfer card’s standard rate (which is usually much higher).
Pros and cons of balance transfers
Balance transfers may help you meet your financial goals, but they aren’t right for everyone. Consider the advantages and disadvantages before committing.
Pros:
- Possibly save money on interest and fees: If the balance transfer card offers a lower annual percentage rate, and you pay off the card before the promotional rate ends, you may be able to save more money in the long run.
- Consolidate payments: If you transfer more than one card balance to the balance transfer card, you may be able to make fewer total payments each month.
- Pay off debt in less time: Provided your approach is disciplined, a balance transfer credit card can let you pay off debt sooner than you would otherwise.
Cons:
- Possibly pay more in the long run. Some cards have a high balance transfer fee that can eat up the money saved on interest. If you don’t pay the balance before the promotional period runs out, you’ll return to paying high interest rates.
- It could be hard to qualify. The best balance transfer offers are reserved for those with good or even excellent credit, excluding many people who may want balance transfer offers in the first place.
- It could encourage more debt. Transferring your balance from one card to another frees up money on that first card. Some consumers may be tempted to return to using the card again, which defeats the purpose of the transfer and can pile on additional debt.
Is a balance transfer right for you?
Like most financial questions, the answer will depend on your unique financial situation and goals. Questions to ask yourself before using a balance transfer include:
- Will I be able to pay off the transferred balance in time to save money?
- Can I commit to not charging up the original credit card?
- Will the money saved on interest and fees be enough to justify the decision?
- How do I feel about having another credit or card account to manage?
- Is this a good time to experience a possible decrease in my credit score?
If you don’t feel comfortable with the possible consequences of a very good balance transfer offer, it may not be the best option. Consider consulting a qualified financial professional about your options and what a balance transfer means for your overall money mission.
What to look for in a balance transfer card
Credit cards often use balance transfer offers to get new customers or encourage existing cardholders to use more of their available credit. You should look for a card that offers the following:
- A lower interest rate than what you currently pay for the amount being transferred.
- A long enough balance transfer promotional period to pay off most, if not all, of the transferred amount.
- A low balance transfer fee.
- Enough room on the new card to accommodate the amount you want to transfer.
The right combination of factors could save you money in the long run, but not all card offers will be what you need to accomplish your goals. Review them carefully before making a decision.
How to do a balance transfer with a credit card
Once you know what card you’ll transfer to, collect the information needed to conduct the transfer. For online transfers, this typically includes the account number and bank name of the card you’re transferring from and how much you’ll want transferred.
Sometimes a credit card will let you put the balance transfer amount directly into your checking account, so you can pay your card off on your own time. This benefit sometimes comes with different terms, such as interest rate or length of offer, so read the details carefully.
After you request the balance transfer, you’ll get a confirmation of the pending transaction from the card you are transferring to. Note how long they say the transfer will take to complete. It could be several business days. Continue paying on your other credit card account as normal. This way, you won't owe a late fee if the transfer isn't completed until after your payment due date.
The transfer amount may not be the exact amount needed to pay off the first card. This is common, especially since there may be interest from the previous statement period that hasn’t been applied yet. Check back in with your first card frequently to be sure you know the final balance and what you need to do to pay it off (if that’s your goal).
Best balance transfer credit cards:
| Card name | Annual fees | Balance Transfer intro APR | Credit score |
|---|---|---|---|
card_name | annual_fees | balance_transfer_intro_apr,balance_transfer_intro_duration | credit_score_needed |
card_name | annual_fees | balance_transfer_intro_apr,balance_transfer_intro_duration | credit_score_needed |
card_name | annual_fees | balance_transfer_intro_apr,balance_transfer_intro_duration | credit_score_needed |
card_name | annual_fees | balance_transfer_intro_apr,balance_transfer_intro_duration | credit_score_needed |
The AP Buyline roundup
Balance transfer credit cards offer a flexible method of transferring high-interest debt to a more affordable credit card, but the benefits are only temporary. They work best for those who can pay off the balance within the promotional period and avoid charging the original card again.
Frequently asked questions (FAQs)
Do balance transfers hurt your credit score?
Balance transfers affect your credit score in a few ways. First, your score could be temporarily lowered when the transfer is processing, as it’s common to appear as pending transactions on both cards simultaneously.
If you are opening a new credit card to do the transfer, this can also lower your score, both in terms of the average age of your accounts and as a hard inquiry for the application.
Finally, transferring the entire amount available to you on the new card will cause a high utilization rate for that card — which can also lower your score. All of these should resolve as you continue to make on-time payments for the balance transfer credit account.
What is the catch to a balance transfer?
The catch to a balance transfer is that it can be more expensive. When used properly, a balance transfer can reduce the amount of interest a consumer pays on a credit card over time. This only works if the amount transferred is paid off in full before the special balance transfer rate expires. You’ll also only save if the total interest plus the balance transfer fee together don't add to more than what you would have paid without doing the transfer.
What happens to old credit cards after a balance transfer?
Unless you close the account, the credit card you transferred the money from will still be open and available. It will just have a lower balance amount.
AP Buyline’s content is created independently of The Associated Press newsroom. Our evaluations and opinions are not influenced by our advertising relationships, but we might earn commissions from our partners’ links in this content. Learn more about our policies and terms here.
