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What Is a Balance Transfer, and Should I Do One?

Photo to accompany story about what a balance transfer is. Getty Images
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A balance transfer allows credit cardholders to roll over their debt from an existing credit card account to another, usually to save on interest charges. 

Balance transfer credit cards offer a low introductory interest rate — commonly 0% APR — on transferred balances for a limited time. Then, you can use the intro period to catch up on payments, without having to worry about accruing high interest fees. 

“The most significant advantage of using a balance transfer is the 0% interest rate period,” says Leslie Tayne, a debt attorney who founded Tayne Law Group in New York. “As a result, you should be able to pay off your debt more quickly because all of your payments are going directly to the principal.”

Credit card debt isn’t the only balance that can be rolled over to a balance transfer card. It’s also possible to transfer other types of debt, including student loans and personal loans to certain credit cards. 

But before you apply for a balance transfer for your high-interest debt, it’s important to consider the risks and have a plan to pay off your balance during the introductory period. 

How Do Balance Transfers Work?

When you complete a balance transfer, all or part of your existing debt from a loan or other credit card is moved onto a balance transfer card. Then, you can chip away at the principal balance without accruing interest during the introductory period.

For instance, say you have $6,000 in credit card debt on a card with a 16% interest rate, and you decide to open a balance transfer card with a 0% balance transfer offer for 18 months and a 3% balance transfer fee. You can transfer your balance and pay the $180 fee, then have 18 months to pay down your balance. If you’re able to pay at least $343 each month, you could pay your credit card balance in full by the end of the intro period.. 

If you do decide to complete a balance transfer, you should know that transferring your balance is not an instantaneous process. While some are complete in a matter of days, others can take up to 21 days to complete. During that time, you’re still responsible for making credit card payments on your old card account until the transfer is complete. 

A balance transfer can offer a relatively easy way to reduce your credit card debt, and ultimately help you get out of debt faster. To make this work, it’s key to find the right balance transfer credit card. 

Although it sounds simple, some of the fine print involving balance transfers can be complex based on bank policies and your credit card agreement. If you have two credit cards with the same bank, they often won’t let you consolidate all your debt on one credit card. 

Still, credit card companies are quickly bringing back competitive balance transfer offers after they largely went away during the pandemic. Here are some cards with a balance transfer offer available today from major issuers: 

Bank Balance Transfer Cards Available
Bank of America Bank Americard®
Bank of America Unlimited® Cash Rewards
Bank of America® Customized Cash Rewards
Capital One Capital One Quicksilver Cash Rewards Credit Card 
Capital One SavorOne Cash Rewards Credit Card
Chase Chase Freedom Unlimited®
Chase Freedom Flex℠
Chase Slate Edge℠
Citi Citi Simplicity® Card
Citi® Double Cash Card
Citi Custom Cash℠ Card
Citi Rewards+® Card 
Discover Discover it® Cash Back 
Wells Fargo Wells Fargo Reflect℠ Card 

Balance Transfer Fees

Balance transfer cards also come with balance transfer fees. A transfer fee usually ranges between 2% and 5% of the amount transferred, depending on the card. These fees are added to the balance on your new balance transfer card. 

For example: if you transfer $2,500 from an existing card to a balance transfer card with a 4% transfer fee, you’ll pay $100. Your new balance will be $2,600 — equal $2,500 from the original balance and an additional $100 in fees. However, if you can pay off much of your existing credit card debt within the intro period, you’ll likely save enough on interest to make up the balance transfer fee cost. 

Balance Transfer Credit Cards 

Balance transfer credit cards offer a 0% introductory interest rate on existing debt you transfer to the card, meaning you won’t pay any interest on that debt for a period of time. The best balance transfer credit cards available today offer introductory balance transfer APRs for up to 21 months.

While you can transfer balances between most credit cards, it’s important to pick a balance transfer credit card with a 0% interest rate to pay off that debt faster. Current average credit card interest rates are around 16%, according to the Federal Reserve, so moving debt to a balance transfer credit card can save hundreds on interest charges as you pay down debt. 

However, you should check your credit score to make sure you’re eligible for a balance transfer credit card before you apply. If your credit score is below 700, you may not qualify for a new credit card. 

The Best Balance Transfer Cards 

The best balance transfer credit cards don’t carry an annual fee and have an introductory period to help you save money and pay off your debt interest-free, Some cards also include ongoing rewards and perks to use responsibly after your balance is paid in full. 

Here are our top balance transfer credit cards available today:

Who Should Do a Balance Transfer?

Before considering a balance transfer credit card, you should take a realistic look at your existing credit card debt and financial situation to make sure it’s the right move for you. To make the most of a balance transfer, you should be able to commit to paying down your credit card debt while you can take advantage of the introductory balance transfer APR. 

Moving around debt can free up space on other cards, which could also come with the temptation to spend even more. 

“Not understanding how balance transfers work can bring someone into a vicious debt cycle within just months,” says Nami Baral, founder of personal finance platform Harvest. “The fine print can be reduced to the simplest concept to avoid danger: ensure your credit card spending does not exceed your cash inflows.” 

If you have the discipline to pay down credit card debt with a balance transfer, determine how much you could save in interest by transferring debt to a balance transfer credit card with a 0% intro APR. 

For example, say you have $5,000 on a credit card earning 16% interest. To pay off that debt in 12 months, you would have to make monthly payments of $460 per month, accounting for interest.  

If you transfer your balance to a credit card with 0% interest for the same 12 months and a 3% balance transfer fee, your new balance would be $5,150. To pay it off in 12 months, your minimum payment would be around $429 per month. Over the span of the year, not only would you have that debt erased, but you would save around $370 in payments. 

Original BalanceInterest due (over 12 months)Balance transfer feeMonthly payment required to be debt-free in 12 monthsTotal amount paid
Regular Credit Card$5,000$520n/a$460$5,520
Balance Transfer Credit Card$5,000$0$150$429$5,150

Finally, it’s key to have a plan to pay down your credit card balance during the introductory period. If you don’t pay off the debt during that period, the interest rate on any remaining balance will jump to the credit card’s regular rate, which could start the cycle of debt all over again.

Costs and Fees Associated With Balance Transfers 

Balance transfers are not free and usually come with a balance transfer fee. These fees typically range between 2% and 5%, though you can find balance transfer credit cards with no balance transfer fees. Although it may not sound like much, the fees can add to your balance when you transfer debt. 

Pro Tip

You must pay at least the minimum on your credit card each month, but it’s best to use a balance transfer card only when you have a plan to pay the entire balance during the 0% introductory period. Otherwise, you’ll be hit with a high new interest rate when your ongoing APR kicks in.

There are also serious costs associated with not paying off the debt. Along with applying the current interest rate to any debt leftover from your balance transfer, some credit cards will charge retroactive interest if you can’t pay off the entire debt on time. That means if you were close to paying off the balance but can’t get it over the finish line, the retroactive accrued interest will send you back to square one. 

This is most common in retail cards with deferred interest offers. You can read the terms of your balance transfer in your card agreement to ensure your credit card balance does not take on retroactive interest after the introductory period.

If you’re late on a payment, you could face a similar setback. Certain cards require that you make payments on your balance transfer credit card on time throughout the introductory period. If you fall behind on even one payment, you could forfeit the introductory offer, and begin accruing interest at the current interest rate on your moved debt. Before applying, be sure to read all the fine print to make sure you understand which situations could cancel the 0% APR offer. 

And if you like collecting reward points, frequent flyer miles, or cash back on your credit card spending, be aware that you are not likely to earn a bonus on your balance transfer. Balance transfers almost never qualify to earn any kind of bonus.

The Effect on Your Credit of Balance Transfers

Aside from the requisite credit check that comes with applying for any new credit card, resulting in a temporary hit to your credit score, moving debt around can also have an effect on your overall credit report. For instance, getting approved for a new card gives you more available credit, which can raise your credit score.

You must however have good or excellent credit history to get approved. A denied application not only hurts your credit score, but also may require you to look for another way to pay down your debt. 

Closing the card you transferred your credit card balance from can also hurt your credit score. 

“There is nothing stopping you from continuing to charge on the card you transferred from,” says Tayne. “But closing that account could hurt your credit score because it will decrease the length of your credit history and increase your credit utilization.”

Like every financial decision you make, applying for a balance transfer credit card should not be taken lightly. Instead, understanding how a new application will affect your credit score and making a plan for your remaining credit can prevent a decrease in your credit score. 

Alternatives to Balance Transfers 

Balance transfers aren’t for everyone — and that’s okay. If you don’t trust yourself to stop spending on credit cards, or don’t have a plan to pay off the transferred debt during the 0% introductory period, it may not be worth the trouble of applying for a balance transfer card. There are still options available that can help you pay off debt on your terms. 

One such option is the personal loan, which has gained popularity over the last 10 years for debt consolidation. Banks, credit unions, and online lenders offer personal loans at a variety of interest rates and terms to fit all lifestyles. For those who are looking to roll all their credit cards into one monthly payment, without adding a way to spend more, a personal loan might be the right fit. 

Another idea is to create a strategy to pay down your current credit cards. By understanding the most common ways to knock down debt using your current budget, you can start chipping away without worrying about being approved for a new card or personal loan. 

As you set your plans, be sure to stay away from credit repair companies. Instead of helping you make a plan to pay down credit cards or negotiate settlements with debtors, most only review your credit report and dispute negative items for a fee. With free access to your credit report, you can do the same work at only the cost of time. 

Bottom Line

Balance transfer credit cards can provide a lot of relief for those struggling with debt. But they can only do so if you have the discipline to not rack up new debt on old cards, and pay off the debt you transferred before the promotional period ends. 

Before you think about applying for a balance transfer credit card, start by taking stock of your personal situation. If you already have great credit and can budget around the payments necessary to eliminate your debt, then a balance transfer card could be exactly what you need to help you get ahead. 

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