A balance transfer is when you repay existing debt with a new credit card. This moves, or transfers, the balance to the new card for future repayment, usually adding a balance transfer fee of around 3% in the process. The point of a balance transfer is to get a lower interest rate, save money on finance charges and pay off what you owe much faster.
Key Things to Know About Credit Card Balance Transfers
- Certain credit card companies accept balance transfers not only from other credit cards, but also from loans.
- You generally need good or excellent credit to get a 0% balance transfer credit card.
- The average credit card balance transfer fee is 3.04% of the amount you transfer.
- A balance transfer is likely to be worth it if you can get approved for a low-APR offer and pay off the transferred amount before the card’s higher regular APR takes effect.
When you transfer a balance to a credit card, that card’s issuer pays off your debt with the original lender, which could be another credit card company or lender. This satisfies your original agreement and shifts your payment obligation to the new card’s issuer. The original lender cannot prevent you from transferring away a balance, as all they see is a payment being made on your behalf.
You can request a balance transfer when you apply for a new credit card or at a later date. But sooner usually is better. Many credit card companies offer reduced interest rates and fees on balances transferred within a couple months of account opening.
Here’s what you’ll need to do a balance transfer:
- The account number for your existing balance.
- The dollar amount you wish to transfer.
- Standard credit card application information, including your name, Social Security number, employment information and income.
After you transfer a balance to a credit card, you will be responsible for paying at least the minimum amount required by the issuer each month. This amount will be listed on your monthly bill. Paying that by the due date will keep your account in good standing and allow you to keep any 0% intro APR your card may offer. But you’ll need to pay more than the monthly minimum at some point because cards with low intro balance transfer rates typically have pretty high regular APRs. So if you carry much of a balance beyond the low-rate intro period, it won’t take long for any money you’ve saved to turn into extra costs.
The types of balances that you can transfer to a credit card depend on which bank you get your card from. The graphic below illustrates the policies for the 10 largest credit card issuers in the United States.
Source: WalletHub 2013 Balance Transfer Study
WalletHub’s editors regularly compare more than 1,500 credit card offers to identify the best balance transfer cards. The cards below are some of the best available right now.
U.S. Bank Visa® Platinum Card
Citi® Double Cash Card – 18 month BT offer
Citi® Diamond Preferred® Card
|Rewards Rate||N/A||2% Cash Back||N/A|
|Purchase Intro APR||0% for 20 billing cycles||N/A||0% for 18 months|
|Transfer Intro APR||0% for 20 billing cycles|
Transfer Fee: 3% (min $5)
|0% for 18 months|
Transfer Fee: 3% (min $5)
|0% for 18 months|
Transfer Fee: 3% (min $5)
|Regular APR||14.49% - 24.49%* (V)||13.99% - 23.99% (V)||13.74% - 23.74% (V)|
|Editors' Rating||4.8 / 5||5.0 / 5||3.6 / 5|
|Details, Rates & Fees||Learn More|
Rates & Fees
|Learn More||Learn More|
The best balance transfer credit cards usually offer 0% introductory balance transfer APRs, $0 annual fees, and balance transfer fees around 3%. Even the best balance transfer cards usually have a high regular APR, however, so it’s a good idea to use a balance transfer calculator to see which card will save you the most money at the end of the day.
Want to see more balance transfer credit card offers?
Check Your Credit Score.
0% balance transfer credit cards typically require good or excellent credit for approval. So it’s a good idea to see where you stand before picking a card and applying.
Decide How Much to Transfer.
A balance transfer doesn’t have to be for the full amount you owe. Partial transfers are not only acceptable, they’re actually wise. They allow you to take advantage of a card’s 0% intro period without worrying about how regular rates will affect the portion of your balance that you cannot pay off during the intro term.
To determine the proper transfer amount, start by identifying the monthly payments that you can comfortably afford to make. Then multiply that figure by the number of months you’ll have a low introductory interest rate.
Don’t Overlook Balance Transfer Fees.
Balance transfer fees can prove quite expensive, having the potential to offset savings from a lower interest rate. But people often fail to appreciate their significance before the fact. That’s largely because balance transfer fees are among the least clearly represented account terms on credit card applications, according to WalletHub’s annual Credit Card Application Study.
Be on the Lookout for Free Balance Transfer Offers.
There usually are a fair number of credit cards with no balance transfer fee. But most don’t offer a 0% balance transfer APR. Every so often, however, a free balance transfer credit card comes along. Such cards charge neither a transfer fee, nor interest for the first few months and typically are available only to people with good or excellent credit.
Make a Payoff Plan.
Balance transfer credit cards must be used strategically, or not at all. That means you should only get one for a specific purpose and with an exit strategy in mind. A credit card payoff calculator can tell you what monthly payments you’ll need to make to be debt free by the time regular rates kick in, or how much you’ll save with a predetermined payment in mind.
Don’t Assume 0% Rates Will Always be Available.
As mentioned above, the availability of 0% balance transfer credit cards isn’t a given. You should therefore approach each balance transfer that you make as if you’ll have no choice but to pay regular rates at the conclusion of the introductory period. If you are able to transfer another balance down the road, great. But banking on it is a recipe for a less robust bank account.
Understand the Various Ways One Can Leverage Balance Transfers.
A balance transfer credit card’s most obvious value is as a debt management tool. The right card can help you save on interest and thus escape debt at the lowest possible cost. That’s the case whether you’re leveraging a balance transfer to pay off a lone revolving balance or as a means of debt consolidation.
Interestingly enough, you can also use a balance transfer as a savings mechanism. If your bank account’s interest rate is high enough, leaving the majority of your would-be monthly credit card payments in the bank during a balance transfer credit card’s interest-free introductory period can be worthwhile. But this strategy is only advisable if it doesn’t become an excuse to spend more than you otherwise would.
Carefully Compare Offers.
There are usually lots of different balance transfer credit cards available. Getting the best deal requires figuring out which ones you’re eligible for, then comparing the total savings available with each. Balance transfer savings depend on a card’s interest rates, fees, and introductory period (if applicable).
Consumers too often home in on one particular aspect of a balance transfer offer – typically the length of its 0% term. But it’s important to consider the overall impact of all potential costs. A balance transfer calculator will prove extremely helpful in this regard.
Keep Your Original Account Open.
Even if you aren’t going to continue using the account from which you transfer a balance, you should still keep it open. This will prevent your overall credit utilization ratio from changing for the worse. Just make sure your card does not charge an annual fee.
Don’t Use a Transfer as an Excuse to Overspend.
Thinking, “I’m not getting charged interest, so it doesn’t really matter how much I spend,” is the worst mindset you can have when it comes to a balance transfer. You’re going to have to pay up at some point, so make sure to use a balance transfer credit card in accordance with a well-thought-out budget.
Otherwise, any savings you score will quickly be erased by finance charges when regular rates take effect. You may even incur significant credit score damage if you can’t foot the bill.
Don’t Make New Purchases with Your Balance Transfer Card.
Anytime you carry a credit card balance from month to month, there is no grace period for purchases. That means any purchase you make will begin accruing interest immediately, unless your card has a 0% purchase APR. So it’s best to use a rewards credit card for spending.
Keep an Eye on Your Credit Score.
A balance transfer does not affect your credit standing directly. Balance transfers aren’t recorded on credit reports, and credit-scoring companies don’t factor them into their models. But a balance transfer can lead to changes in your financial profile that will affect your credit score. For example, a balance transfer could lead to increased debt and higher credit utilization. Regularly checking your free credit score on WalletHub will enable you to quickly spot anything out of the ordinary.