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Understanding balance transfers can be a game changer if you're dealing with high-interest credit card debt. A balance transfer involves moving debt from one credit card to another to take advantage of lower interest rates.

Balance transfer cards typically feature a 0% introductory APR lasting six to 21 months. This offer can be particularly beneficial if you can repay the entire balance within this zero-interest window, significantly reducing the interest you'll pay.

However, balance transfers also have potential drawbacks that you need to consider for a well-rounded debt management strategy.

  • A balance transfer involves moving debt from one credit card to another with lower interest rates, primarily to save on interest payments.
  • Balance transfers can be a powerful tool for managing credit card debt if used correctly and with financial discipline.
  • When selecting a balance transfer card, key considerations include a lengthy 0% APR period, low balance transfer fees, an adequate credit limit, competitive regular APR and no annual fee.

How Does a Balance Transfer Work?

A balance transfer involves moving your outstanding credit card balance from one or multiple cards onto another credit card. This is especially beneficial when you move your balance to a card with a lower interest rate, often a new card with a 0% APR offer lasting six to 21 months.

For example, say you have a $3,000 balance on a card with a 20% APR. If you transfer this balance to a new card offering a 0% APR for 12 months, you could potentially save hundreds of dollars in interest over that year.

It's important to note, though, that there's usually a fee associated with the transfer, typically 3% to 5% of the amount you're transferring or a minimum amount set by the issuer, whichever is higher. The balance transfer process can take anywhere from a few days to several weeks, so it's crucial to continue making payments on your original card until the transfer is confirmed to avoid late fees.

How To Do a Credit Card Balance Transfer

Executing a balance transfer may seem daunting, but it doesn't have to be. By following a clear set of steps, you can effectively manage this process:


Evaluate Your Debt

Start by understanding the total amount of your credit card debt. Include all cards that you plan to consolidate. This process will help you know what to look for in a balance transfer card, like ensuring it has a big enough credit limit.


Research Balance Transfer Cards

Look for cards with 0% introductory APRs, long promotional periods and reasonable balance transfer fees.


Apply for the Balance Transfer Card

Once you've chosen a card, you'll need to apply, which usually involves providing your personal and financial information. Approval may be instant or take up to a few weeks, depending on the card issuer.


Request the Balance Transfer

Upon approval, you can request the balance transfer. You'll need to provide details about your old credit card and specify the amount you wish to transfer. The new card company then pays off your old card for you.


Continue Paying Your Old Card

Until the balance transfer is confirmed, keep making at least the minimum payments on your old card. This practice will help you avoid late fees and maintain your credit score.


Plan Your Repayment Strategy

After the transfer, focus on repaying the balance before the promotional APR period ends. Otherwise, any remaining balance will be subject to the card's standard APR.

Features of a Good Balance Transfer Card

When choosing a balance transfer card, you're looking for features that make it easier to pay off your debt efficiently and affordably.

Extended 0% APR Period

An extended 0% APR period can be a lifesaver when trying to pay down debt. Essentially, this is a grace period during which the balance you transfer incurs no interest. The length of this period varies among cards, but the best ones offer 0% APR for anywhere between 12 and 21 months. The more time you have, the easier it becomes to clear your debt before interest starts accruing.

Low Balance Transfer Fees

Credit card issuers charge a balance transfer fee, usually around 3% to 5% of the total amount you move or a minimum set amount. A lower fee will reduce transfer costs and help you save money when paying back your debt.

Competitive Regular APR

Although the aim is to pay off the transferred balance during the 0% APR period, it's always smart to plan for the unexpected. Should you need more time to pay off the balance, a card with a competitive regular APR will reduce the interest you'll have to pay.

No Annual Fee

Lastly, consider whether the card has an annual fee. While some cards justify an annual fee with rewards or bonuses, it's best to keep costs low when focusing on paying off debt. Opting for a card with no annual fee ensures that more of your money goes toward paying down your balance.

MORE: Best Balance Transfer Credit Cards in 2023

Potential Downsides of Balance Transfers

While balance transfers can be useful for managing and reducing debt, they also come with potential pitfalls. Here's what you need to keep an eye on:

  • High APR for new purchases: The 0% APR often only applies to the transferred balance. Unless your intro offer also applies to purchases, the card's standard APR will apply to new charges.
  • Loss of promotional rate: Some card issuers may terminate the promotional rate if you miss a payment or pay late. Always aim to pay on time and in full to keep the promotional rate.
  • Debt complacency: Doing a balance transfer can make it seem like your debt problem is solved and can trick you into thinking your debt is smaller than it really is. You need to make sure you pay off the balance within the special offer period. Avoid spending too much so you don't add to your debt.
  • Impact on credit score: Applying for a new credit card results in a hard inquiry on your credit report, which can temporarily lower your credit score. Furthermore, a high balance on the new card could increase your credit utilization ratio, negatively impacting your credit score.

Weigh these potential downsides with the flexibility a balance transfer can provide when paying off debt.

Should You Do a Balance Transfer?

A balance transfer can be a powerful tool for managing debt, but it isn't the right choice for everyone. When considering a balance transfer, here are a few essential factors to ponder.

Evaluate Your Debt Situation

First, take a hard look at your debt situation. Balance transfers can be extremely beneficial for high-interest credit card debt, as the promotional 0% APR period allows you to make headway on your principal balance.

A balance transfer could be a smart move if you have a substantial amount of credit card debt and you're confident you can pay it off (or significantly reduce it) during the promotional period.

Consider Your Financial Discipline

Think about your spending habits. A balance transfer card can give you a break from high-interest rates, but it doesn't make debt disappear. If you continue unsustainable spending habits or don't make regular payments, you could end up with as much, or even more debt, when the low-interest-rate offer ends.

Assess the Impact on Your Credit Score

Applying for a new credit card will cause a hard inquiry on your credit report, which can temporarily reduce your credit score. Also, if you move a lot of debt to the new card and use up most of your credit limit, it can decrease your credit score.

Explore Other Debt Management Options

Finally, don't forget to explore other debt management options. A balance transfer is just one method to manage credit card debt. Depending on your situation, a personal loan, credit counseling or even debt settlement may be more appropriate. Discuss your situation with a financial advisor to understand the best path forward.

Next Steps

Understanding how a balance transfer works is the first step toward a smart debt management strategy. These offers can be a lifeline if you're struggling with high-interest credit card debt, giving you a chance to reduce your debt significantly.

But, carefully consider your options and practice disciple after the transfer to get the most from this strategy. If you keep these points in mind, you'll be better prepared to use balance transfers effectively and move towards a more secure financial future.

FAQs About How Balance Transfers Work

Need more clarity on balance transfers? You're not alone. Below are some frequently asked questions to guide you through the process.

About Grace Pilling

Grace Pilling headshot

Grace Pilling is passionate about empowering readers to make informed financial choices to support their best lives, not a company’s bottom line. Prior to joining MoneyGeek as a senior content manager, Grace was a senior editor at and Bankrate, where she focused on teaching people how to use credit cards wisely.

*Rates, fees or bonuses may vary or include specific stipulations. The content on this page is accurate as of the posting/last updated date; however, some of the offers mentioned may have expired. We recommend visiting the card issuer’s website for the most up-to-date information available.
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