What Is a Balance Transfer & How Does It Work?

A balance transfer is a credit card transaction that involves using one credit card to pay a balance owed to another credit card company or lender, essentially shifting the debt to the new credit card. Transferring a balance to a credit card with a lower APR can help you consolidate payments and save money. It can also enable you to pay off what you owe much faster.

Many credit cards offer an introductory 0% APR on balance transfers for 6-24 months. That gives you the opportunity to pay off your balance interest-free for a limited time.

Key Things to Remember

• Balance transfers allow you to make debt "cheaper" by moving it to a card with a lower interest rate.
• Most credit cards allow balance transfers, but not all of them offer low introductory APRs, so doing a transfer to the right card is crucial.
• Transferring a balance usually triggers a fee equal to 3% or 5% of the amount transferred (3.28% on average). You can avoid that by opting for a no balance transfer fee credit card, but the intro APR period is typically not as long.
• Opening a new card in order to do a balance transfer will likely result in a small drop in your credit score, due to the hard pull involved in the application process.
• Once you request a balance transfer, you must continue making payments on the old debt until the transfer processes, or you’ll risk owing a late fee.

Table of Contents

1. How Do Balance Transfers Work?
2. How to Do a Balance Transfer
3. Pros and Cons of Balance Transfers
4. Is a Balance Transfer a Good Idea?
5. Types of Balances Transferable to a Credit Card by Issuer
6. What Is a Balance Transfer Credit Card?
7. Best Balance Transfer Credit Cards
8. More Balance Transfer Tips
9. Alternatives to Balance Transfers

How Do Balance Transfers Work?

Balance transfers allow you to pay off an existing debt with a credit card, which moves the debt to the credit card, often with an additional fee. Anyone can qualify to do a balance transfer as long as they have a credit card that allows transfers and has a high enough credit limit. However, in order to get a credit card with good balance transfer terms, such as a long introductory 0% APR, you’ll typically need good or excellent credit. If you don’t know where you stand currently, you can check your credit score for free here on WalletHub.

It can take up to 21 days for a balance transfer to process. You’ll need to keep making any required payments to your original issuer during that time.

Example of How a Balance Transfer Works

• Scenario: Let’s say you have a Chase credit card with a $10,000 balance and a 20% APR.
• Card Selection: To save money, you could potentially transfer your $10,000 balance to a low-APR credit card from another company – Capital One, for instance.
• Transfer Processing: Assuming your credit limit on the new Capital One card is high enough, Capital One would make a $10,000 payment to Chase. This would satisfy your payment obligation to Chase, and you would then owe Capital One.
• Transfer Fee: Your balance would likely swell to $10,300 after Capital One assesses a balance transfer fee, but you could still save a lot of money in the long run if the card has a 0% introductory balance transfer APR.
• Savings: If your new card offers an intro APR of 0% for 15 months and you pay off what you owe during that time, you would save around $1,096 compared to the original card with the 20% APR.

This is just one specific example. You can estimate how much money you’d save in different situations with WalletHub’s balance transfer calculator.

What Happens After You Transfer a Balance?

After you transfer a balance to a credit card, you will be responsible for paying at least the minimum amount required by that card’s issuer each month. This amount will be listed on your monthly bill.

Paying at least the minimum 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 a low intro balance transfer rate typically have a high regular APR. That APR applies to any balance remaining when the intro period ends. Ideally, you should plan to pay off your balance by the time the regular APR kicks in.

Learn more about how balance transfers work.

How to Do a Balance Transfer

To do a balance transfer, you’ll have to find the right card for your needs, fill out the full application including the balance transfer section, then wait to get approved and for the transfer to be completed. After that, you’ll need to proceed with paying down your balance on the new card.

1. Check your credit score. Balance transfer credit cards with 0% intro APRs usually require good credit or better for approval.
2. Find the best balance transfer card for you. Compare cards based on their balance transfer APRs, balance transfer fees, annual fees, and approval requirements. You might also want to consider other aspects like rewards that could make the card worth using even after the intro period ends.
3. Apply for your balance transfer card. Fill out the application with your personal and financial information, including the section of the application for requesting a balance transfer. Alternatively, you can request a transfer to an existing account. You’ll typically need to provide the following information when requesting 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, if you’re getting a new card.

4. Keep making payments. Continue paying your original lender at least until the transfer is finalized. Otherwise, y ou could get marked as late and your credit score could suffer.
5. Get approved (hopefully). You might be approved for a limit high enough to transfer your full balance, or you might only be able to do a partial balance transfer. Alternatively, you could be rejected for the new card altogether.
6. Pay the rest of the balance. You will save the most money if you pay off the transferred balance before your new card’s low introductory APR expires and a much higher rate takes effect.

If you’re not getting a new balance transfer credit card and instead want to transfer a balance to a card you already own, you should typically be able to request a transfer either by calling your issuer’s customer service or through your online account. You’re unlikely to get a low promotional interest rate, though.

Learn more about how to do a balance transfer.

Pros and Cons of Balance Transfers

Learn more about the pros and cons of balance transfers.

Is a Balance Transfer a Good Idea?

A balance transfer is a good idea if you can get approved for a low-APR intro offer and pay off the transferred amount before the card’s higher regular APR takes effect. Using a balance transfer calculator can help you determine whether a transfer is worth it in your situation.

Balance transfers typically aren’t a great option for people with less than good credit, as they will likely struggle to qualify for a credit card with a decent balance transfer offer. They’re also not ideal for people with extremely large debts, as it may be difficult to get a high enough credit limit, depending on your credit score and income. Partial transfers are possible, though.

There are a few additional details and potential pitfalls you should be aware of before requesting a balance transfer:

• Types of debt eligible: Credit card companies may accept balance transfers from other issuers’ credit cards as well as from loans, so it’s worth exploring a transfer if you have high-interest debt of any kind.
• Credit requirements: You generally need good or excellent credit to get a 0% intro balance transfer credit card, which makes a transfer most worthwhile. You can check your score for free on WalletHub.
• Regular APR: Once a balance transfer card’s 0% introductory APR ends, any remaining balance will be subject to the card’s regular APR. Credit cards often have higher regular APRs than other types of debt, so it’s best to try to fully pay off your balance within a card’s intro period. A balance transfer calculator can help you plan out your payoff.
• Fees: The average credit card balance transfer fee is 3.28% of the amount you transfer, and you need to take this cost into account when deciding whether a balance transfer is worth it. Some credit cards don’t charge balance transfer fees, but those that offer both no fee and a long 0% intro APR period are rare.
• Cost of making purchases: You should avoid making purchases on a card you’ve already transferred a balance to until that balance is paid off, unless the card also has a 0% intro APR on purchases. Carrying a balance from a balance transfer can cause you to lose your grace period on purchases, which means they’ll start accruing interest on a daily basis from the day you make them.
• Processing time: A balance transfer could take up to 21 days to process in some cases. If a due date on your original debt arrives before the transfer finishes processing, you should still make a payment on that debt. Otherwise, the original issuer may charge you a late fee. Any payment you make will be deducted from the amount transferred or credited to you.

Types of Balances Transferable to a Credit Card by Issuer

The types of balances that you can transfer to a credit card depend on which bank you get your balance transfer card from. The graphic below illustrates the policies for the 10 largest credit card issuers in the United States.

Source: WalletHub evaluated the terms and conditions of online offers and called customer service representatives when information was not readily available.

*According to Citibank customer service, you can transfer loan debt and other types of debt by calling customer service, if your account is eligible.

Keep in mind that no matter what bank or credit union issues your balance transfer credit card, you’ll never be able to transfer a balance from a credit card or loan that belongs to the same issuer. For example, you can’t transfer a balance from a Citibank credit card to another Citibank credit card. Companies don’t want to lend you money to pay off a debt you already owe to them, especially if it means giving you a lower interest rate.

Learn more about the types of balances you can transfer to a credit card.

What Is a Balance Transfer Credit Card?

A balance transfer credit card is a card geared toward people who want to pay off an existing debt at a lower interest rate. While the majority of credit cards allow balance transfers, we consider “balance transfer cards” to be ones that offer favorable terms such as low intro APRs on transfers and low transfer fees.

Balance transfer credit cards can offer an introductory 0% APR for anywhere from 6 to 24 months. The average 0% intro period lasts for 13.05 months, according to WalletHub’s data. The average balance transfer card also charges a fee of 3.28% of the transferred balance.

Best Balance Transfer Credit Cards

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.

Opinions and ratings are our own. This report is not provided, commissioned or endorsed by any issuer. WalletHub independently collected information for some of the cards on this page.

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.

You can also browse even more of the best balance transfer credit card offers here on WalletHub.

Compare the Best Balance Transfer Cards

More Balance Transfer Tips

Don’t Make New Purchases with Your Balance Transfer Card

Now that you know all about how to do a balance transfer and where to find the best offers, there are a few other things you should keep in mind before you request a transfer.

Check Your Credit Score

The best 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. You can check your credit score for free here on WalletHub.

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 use a card’s 0% intro period to reduce the cost of at least part of your debt, instead of the full amount racking up interest at a high rate.

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 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 a certain number of months. They typically are available only to people with at least good 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

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 may not pan out for your future finances.

Understand the Various Ways You Could 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 single revolving balance or as a means of consolidating multiple debts.

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.      If it does, you should close it despite the potential hit to your credit score. The exception is if you need the best credit score possible in the near future, like if you’re planning to apply for a mortgage or a car loan. In that case, paying the fee is worth avoiding the dip in your credit score.

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

When 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.

Therefore, it’s best to use a separate rewards card for spending. This strategy is part of WalletHub’s Island Approach to Credit Card 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.

However, 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 if you use it as an excuse to spend more on your original credit line. Or it could boost your score in the long term if it allows you to successfully pay down debt. Regularly checking your credit score for free on WalletHub will enable you to quickly spot anything out of the ordinary.

Alternatives to Balance Transfers

If you’re not able to qualify for a good balance transfer credit card, or if you simply want to explore your options, there are a few alternative avenues you can pursue to pay down debt.

Personal loans

You can use a personal loan to pay off an existing debt, after which you’ll have to pay back the loan in equal monthly installments. Personal loans won’t offer promotional 0% APRs, but their interest rates can be much lower than those normally on credit cards. Debt consolidation loans can also help you group together multiple debts into one simple monthly payment.

Using a debt payoff strategy

If you have multiple debts, there are several payoff strategies you can pursue. The best is the “avalanche method,” where you focus on paying down the balance with the highest interest rate first while making the minimum payment on all your other debts. Focusing on the most expensive debt first minimizes the total amount of interest you pay.

One popular alternative is the “snowball method,” which tells you to pay off the smallest balances first. This helps you reach small payoff milestones more quickly, which can be a good motivating factor for some people but won’t save you as much on interest.

Asking for a hardship plan: If you’re having trouble paying your balances because of financial difficulty, you can ask your creditor if you can enroll in a hardship program. This can temporarily reduce your interest, eliminate fees, or lower your payments until you get back on your feet.

Entering a debt management program: A debt management program is generally a      multi-year solution      that involves negotiating      better terms on your account with your creditor in order to make paying off your debt easier. However, enrolling in such a program can hurt your credit.

Settling your debt: Debt settlement involves paying part of your balance in a lump sum and having the rest forgiven. While this may seem like a great option, lenders typically won’t accept a settlement until you’ve already defaulted on your debt, so you’ll experience severe credit score damage in the process.

Learn more about debt solutions.

Bottom Line

Balance transfers are a powerful tool for paying off debt, especially when combined with a 0% introductory APR for more than a year. However, it’s important to be mindful of balance transfer fees and what APRs will apply once the intro period ends.

You should never do a balance transfer without having a solid plan for paying down your debt. In other words, before submitting an application for a balance transfer card, make sure you’ve drawn up a comprehensive budget and consulted a balance transfer calculator to work out your payments. Also, make sure to adjust your spending to avoid having to do more balance transfers in the future.

Ask the Experts

For more insight into balance transfers and how they can impact your finances, we consulted a panel of experts. Click on the pictures of the experts below to read their bios and thoughts on the following key questions:

1. Do you think most adults know what a balance transfer is and how it works? Why or why not?
2. What advice do you have for someone thinking about doing a credit card balance transfer?
3. Are 0% introductory APR balance transfer deals better for consumers or credit card companies at the end of the day?