Balance Transfer
What Is a Balance Transfer?
A balance transfer is when you move debt from one credit card to another — usually to get a lower interest rate.
Most commonly, people transfer balances to a credit card offering a promotional 0% introductory APR.
The goal is simple: Pay less interest. Get out of debt faster.
Why People Use Balance Transfers
Credit card interest can compound quickly. If your current card has a high APR, a balance transfer may reduce or pause interest temporarily.
That breathing room can help you:
- Pay down principal faster
- Consolidate multiple credit cards
- Simplify payments
- Avoid accumulating more interest
When used strategically, it can accelerate debt payoff.
How a Balance Transfer Works
Here’s what typically happens:
- You apply for a new credit card with a promotional APR.
- You request to transfer balances from existing cards.
- The new issuer pays off your old balances.
- You now owe the balance to the new card issuer.
Major issuers like Chase and Citi frequently offer 0% intro APR promotions for 12 to 21 months.
But there’s usually a catch.
Balance Transfer Fees
Most balance transfers come with a fee.
Typical fee:
- 3% to 5% of the transferred amount
Example:
If you transfer $5,000 with a 3% fee:
- You pay $150 upfront.
- Your new balance becomes $5,150.
You still need a plan to pay it off before the promotional period ends.
What Happens After the Intro Period?
Once the introductory APR expires, the regular APR applies to any remaining balance.
And regular APRs can be high.
If you haven’t paid off the balance, interest begins accruing at that higher rate.
This is where many people lose the advantage.
When a Balance Transfer Makes Sense
A balance transfer may be smart if:
- You qualify for 0% APR
- You have a clear payoff plan
- The transfer fee is lower than projected interest savings
- You stop adding new debt
It may not make sense if:
- You won’t pay it off during the intro period
- You struggle with spending control
- The new credit limit is too low to cover your balances
Does a Balance Transfer Affect Your Credit Score?
Yes, but often temporarily.
It may:
- Trigger a hard inquiry
- Increase your total available credit
- Change your credit utilization
If used responsibly, it can actually help your score over time by lowering utilization.
Credit scoring models like those developed by FICO consider utilization a major factor.
Balance Transfer vs. Debt Consolidation Loan
A balance transfer keeps your debt on a credit card.
A debt consolidation loan moves your debt into an installment loan with fixed payments and a fixed term.
Each option has pros and tradeoffs.
FAQs About Balance Transfers
Can I transfer balances between cards from the same issuer?
Usually no. Most issuers require transfers from different banks.
Do I earn rewards on balance transfers?
No. Transfers do not earn points or cashback.
Can I transfer part of a balance?
Yes. You can transfer full or partial balances.
Is there a limit to how much I can transfer?
Yes. It depends on your approved credit limit.
Related Terms
