You make credit card payments on time, month after month, but it seems like you never manage to put a dent in the amount you owe. If this sounds like you, you’re not alone.
Americans are bogged down by credit card debt—and it’s costing them a pretty penny. The average U.S. consumer has a balance of $5,221 and, according to the Consumer Financial Protection Bureau, U.S. consumers paid over $117 trillion in credit card interest and fee charges in 2021. Consider that the average credit card has an APR of nearly 17%  and it’s easy to see how carrying a credit balance can snowball, resulting in a statement balance that never seems to shrink.
If you’re not paying your full statement balance, or worse yet, only making minimum credit card payments, a credit card balance transfer might be just the thing to break the cycle of debt and help you become debt-free faster.
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What is a balance transfer?
A balance transfer is exactly what it sounds like. It’s when an outstanding balance (a.k.a. your debt) is moved from one account to another. You’re still required to repay the card balance, but depending on the repayment terms of the credit line you switched to, you may enjoy benefits such as introductory interest rates, a lower APR once that intro offer expires, or perhaps lower fees for missed or late payments.
Balance transfers can be used for consolidating a variety of debts. It’s most common with credit card debt, but not limited to it. You can also transfer balances from:
- Charge cards
- Store cards
- Gas cards
- In-store credit lines, such as for furniture or electronics
- Personal loans
- Auto loans
How does a balance transfer affect your credit?
On the positive side, when you transfer a balance to a new credit card, you are essentially opening a new line of credit, which can increase your available credit limit and lower your overall credit utilization ratio. This can have a positive impact on your credit score.
However, there are also potential negative effects to consider. When you apply for a new credit card to do a balance transfer, the credit card issuer will perform a hard inquiry on your credit report. This can cause a temporary dip in your credit score. Additionally, if you transfer a large balance and max out the new credit card, it can hurt your credit utilization ratio and lower your credit score.
Furthermore, if you fail to make timely payments or fail to pay off the balance before the promotional period ends, it can result in a higher interest rate and more debt, which can also hurt your credit score.
Overall, if you use balance transfers responsibly and make timely payments, it can have a positive impact on your credit score. However, it’s important to consider the potential risks and make sure you have a solid plan in place to pay off the balance before taking on a balance transfer.
The pros and cons of a balance transfer
If you’re considering transferring your credit card balance, here are some benefits to know:
- You can save money on interest charges for a limited time, even after paying a transfer fee.
- You can pay off your balance faster by using the extra savings to pay down your debt.
- You may improve your credit score by lowering your credit utilization ratio.
However, there are also some drawbacks to transferring your balance:
- You may have to pay a fee that can range from 2% to 5% per transfer.
- When the promotional period ends, your interest rate may increase dramatically.
- If you transfer a federal student loan balance to a credit card, you may lose out on benefits such as repayment or forgiveness options and tax deductions on interest.
What are the benefits of transferring credit card debt from one card to another?
If you only pay the minimum owed on a credit card with a 15% APR, more than half of every minimum payment would go towards paying off the interest charges. Make that a credit card with 20% APR and that monthly payment jumps to two-thirds going towards interest rather than the amount you actually owe on your credit card. Yikes.
Taking your existing credit card debt to greener pastures can give you a break from high-interest charges and provide some much-needed breathing room to pay down your balance. Most balance transfer offers include lower, or sometimes 0%, interest fees. This prevents interest charges from getting out of hand if you only pay the minimum. Consequently, smaller interest charges mean more of your money goes towards the principal and you get out of debt faster.
Removing the pressure to pay your full statement balance means less of your paycheck that has to go towards your bills. This can come in handy if you’re juggling multiple types of debt and want to pay off the one with the highest interest rates first. Perhaps you want to increase your cash reserves to improve your DTI ratio because you plan to apply for a mortgage. A balance transfer can free up your cash flow to be used towards more pressing debt or to further your financial goals.
Should I transfer my credit card balance?
This is a common question that people ask. Even knowing how balance transfers work, you may be wondering if it’s the right solution for you. You want to know that it will work and that you’ll be able to become debt-free.
You also want to avoid the risk of making a challenging situation with debt worse, which can happen if you run up new balances on your other cards or start making regular purchases on the balance transfer card. All of this can mean you wind up with more debt instead of less.
A credit card balance transfer is a valuable financial tool to keep in your back pocket that can help with both short and long-term financial goals. But is it the right debt solution for you?
Balance transfers can come with some strings attached. There are the costs to consider as well as the effects a transfer could have on your credit score (and how that could affect your other financial plans). You’ll want to avoid potential pitfalls that risk turning a bad financial situation worse.
Then there’s the matter of how to get approved for a balance transfer and whether it’s a viable option. Here are the circumstances where a balance transfer might not be beneficial:
- You have well over $5,000 in total in credit card debt
- You have subpar credit
- You’re not sure if you could make the minimum payments
- You could pay off your debt on your own in a few months
- You have a significant amount of credit card debt that’s more than the new lender would be willing to take on
- The balance transfer fee is higher than the amount you would save
Getting the most out of a balance transfer is more than just qualifying for a 0% APR rate. It means using it as a part of your getting debt-free strategy that improves your financial situation rather than acting as a temporary bandage for a sinking financial ship.
Most balance transfer credit cards with an introductory 0% APR for several months are for people with good to excellent credit. However, that doesn’t necessarily mean you won’t be approved for a balance transfer card if you have only “fair” credit.
You may still get approved for a balance transfer credit card with fair credit, but it probably won’t offer that sweet 0% APR. Instead, you’ll pay a higher APR that may cancel out any benefits you’d otherwise get by transferring a balance to the new card.
Keeping track of multiple credit card due dates isn’t just stressful. It’s also a situation that can lead to paying late and incurring late fees when you forget a payment due date.
If you’ll save more on interest with the balance transfer card than you’ll pay in balance transfer fees for multiple balances, putting them on one credit card with a low or 0% APR for a year or 18 months means you’ll have only one credit card due date.
If you’ve racked up thousands of dollars of debt on one or more high-interest credit cards, it can make sense to transfer credit card or loan balances to a new balance transfer card with an introductory 0% APR for a year or longer. That way, all your payments go directly to the balance without having to pay interest.
Before you apply for a balance transfer card, however, figure out how much you’ll pay for the balance transfer fee, which is typically 3% of the balance transferred. If you’ll save more on interest than you will pay for the balance transfer fee, transferring a balance could be a smart move. Just make sure you pay off the balance before the intro period ends and the APR jumps to a less manageable interest rate.
If you have a pattern of making late payments, a balance transfer card offer could backfire if you’re not careful. That’s because with some cards offering a 0% APR or other low introductory interest rate on balance transfers, making a late payment could cancel out that intro rate and bump you to a much higher interest rate going forward.
Transferring a large balance (or more than one balance) to an introductory 0% APR credit card can take a huge weight off your shoulders. After all, now that you’re not paying a huge chunk for interest each month, you can really hit that debt to get rid of it faster.
Don’t get too comfortable, however. The whole point of transferring the balance is to pay off before the introductory period ends so you don’t have to start paying high interest on the remaining balance on the new credit card, too. Set a goal to pay off the transferred balance before the promotional period ends.
Then don’t charge any purchases on the card, even if the 0% APR offer is also for new purchases. The last thing you need is another big credit card balance in your life, so focus on paying off the transferred balance as soon as possible, or at least before the intro offer ends.
Here is just one example of a balance transfer question that Debt.com has received:
Question: I have around $5,000 on, I think, five or six credit cards. I’ve been seeing these offers for other credit cards that say I can transfer my balance to them — and they won’t charge me interest. I don’t see how this isn’t a scam. How can they make money if I move thousands of dollars to them and then pay it all off without a dime in interest?
Are these things legit? If they are, what’s the catch? There’s got to be a catch.
— Richard in Delaware
Debt.com Chairman and CPA Howard Dvorkin responds…
Yes, Richard, these offers are “legit” — and yes, there’s a catch. There are several, actually.
First, I think you’re missing a key element of these offers: They expire. When you sign up for what’s known as a zero-percent APR balance transfer, you usually have between six and 18 months before an interest rate kicks in.
Second, that interest rate can be higher than the one you had on your old cards. If the rate is not significantly lower than the rate on your original accounts, then when that 0% APR period expires, you’ll go right back to paying those high-interest charges.
Third, as Debt.com has written about before: “Unfortunately, nearly all zero-percent APR balance transfer offers require the payment of a 3 percent ‘balance transfer fee’ — so this benefit isn’t really free.” You need to be aware that to pay off your balances interest-free doesn’t mean that you’re paying them off free of any charge. Fees on these transfers will increase the amount you need to pay off before you ever get started.
Still, these offers can be a real boon to dedicated debt hawks who want to pay off their credit cards. Why? Because instead of paying around 16 percent each month in interest — which is the national average right now — that 16 percent can go to paying down those big balances.
Sadly, it seldom works out that way.
Credit card companies don’t make these offers out of the goodness filling their bleeding hearts. Many are publicly traded companies with a responsibility (and a moral obligation) to make money for their shareholders.
These companies know most cardholders aren’t going to use those 18 months to pay down debt. They will simply spend whatever they save in interest payments, and when the zero-percent interest offer ends, many will simply be too apathetic to search for a better offer.
The bottom line…
The truth is Drew, that if you have good credit, find the right card, and are disciplined about repayment, these offers can really help you. But the truth is that credit card companies wouldn’t make these offers if they were losing money on them.
These companies are masters of psychology. They know darn well that many people will see the money they’re saving during the no-interest period and simply spend it elsewhere. Then, when the zero-percent offer expires, they still have big debts to pay at the full rate.
So, please keep in mind that DIY isn’t for everyone. Try it once if you think you can be disciplined enough to be one of the few who pays off the balance as planned. If it doesn’t work, don’t keep re-consolidating! Call in the professionals.
Having trouble getting out of debt on your own? Talk to a certified credit counselor for a free debt analysis.
Prioritizing balances for transfer
In some cases, you may not get approved for a credit limit that’s large enough to transfer all your balances. Or, you may get approved for a high limit, but a shorter 0% APR introductory period. This means you’d only have a small window to pay off the transferred debt. These are common challenges with balance transfers, even if you have good credit. If you run into either of these situations, then you will need to prioritize your balances and decide which ones you want to transfer.
This is a situation that Susan faced when she applied for a balance transfer credit card:
Question: I was approved for a 20-month balance transfer, but not for the entire amount that’s on my high interest cards. I have three cards open, and I want to transfer all of the highest APR debt and most of the second. The last card has 0% for 5 more months. So, how do I ensure that debt that I want to move gets transferred?
— Susan in Tennessee
Credit expert Laura Adams responds…
Congratulations on getting such a credit balance transfer credit card offer! When used properly, you should be able to save a boatload of interest. But you have to make sure you do the transfers in order of highest to lowest APR. And realize that it’s common to have different interest rates applied to different portions of a balance on the same card.
For example, on one card you might have the following types of annual percentage rates, or APRs, for different types of transactions:
- new purchase balance for regular charges made on the card at 14% APR.
- A cash advance balance for money withdrawn from a bank or ATM at 26% APR.
- A balance transfer balance for debt shifted to the card from another card or credit account during a promotional period at 0% APR.
Your new account that’s offering the balance transfer promotion will send the funds to the old account, which shifts or transfers your debt. So, when you transfer a balance, it’s like making a payment and should be applied in order of highest-to-lowest interest rate.
If you believe that your credit card company isn’t applying your payments in the right order, be sure to contact them for more information. If the issue isn’t resolved, you can file a creditor complaint with the Consumer Financial Protection Bureau at consumerfinance.gov.
Learn if a balance transfer is right for you.
How to transfer credit card balances: A step-by-step guide
The process of getting a balance transfer is pretty straightforward. It’s similar to applying for a new credit card but can take a few weeks from the application to approval. Here is an overview of how long it will take to apply, how long it might take to get approved, and what you can expect to be charged.
Step 1: Choosing the right a balance transfer offer
Balance transfer cards are a type of credit card. Like any other credit card, they have an interest rate they’ll charge if you carry a balance, late fees if you miss a payment, and credit score requirements to get approved. You may also be able to use your balance transfer card for in-store or online purchases—some of which may even offer rewards. What sets balance transfer cards apart is that they’re designed to entice you to move your existing credit card debt.
There are several key factors you’ll need to consider when looking for a balance transfer card:
- Length of the introductory APR period
- Introductory interest rate
- Balance transfer fees (either a dollar amount or a percentage)
- Regular balance transfer interest rate
If you already have a balance transfer credit card, skip ahead to Step 2.
Most credit card companies offer an introductory balance transfer APR for around 6-18 months—though some go up to 24 months! The longest rates are typically reserved for those with great credit scores, as are the best APRs.
To minimize the amount of money you’ll end up paying, the lower the APR the better. Naturally, 0% interest is ideal. Those offers aren’t hard to find but can be difficult to get approved for with a subprime credit score.
Instead, credit card issuers may offer a low APR that’s a few percentage points lower than their usual rate (hey, every little bit helps… maybe). If subprime card holders do find themselves eligible for 0% APR offers, it may be for a period on the shorter end of the scale (around 6 months).
Don’t assume that the no-interest offer is always your best bet if you find yourself in this situation. You may find yourself slammed with a high APR after the intro offer ends. If you aren’t able to pay off the balance within the introductory period, it might actually save you money, in the long run, to have a lower APR for a longer period of time. Time to break out the calculator.
The biggest caveat about transferring a credit card balance is the fees it requires. Card issuers don’t give you the opportunity to take a break from interest without expecting anything in return. They charge balance transfer fees which are either a percent of the total balance being transferred or a minimum dollar amount (in case the amount of credit card debt you’re bringing over is tiny).
The typical balance transfer fee is 3%-5% of the total amount being transferred. There are some cards that waive balance transfer fees altogether, but this isn’t very common. You’re more likely to find such an offer with credit unions or local banks rather than national lenders. So, it’s worth shopping around locally as you look for the right card.
Additionally, be mindful of whether an annual fee is charged. Most balance transfer cards don’t charge one, however, so it isn’t difficult to avoid.
The ideal scenario to maximize the benefits of a balance transfer would be to pay the entire balance while it’s being charged zero or low interest. However, if you’re dealing with several other sources of debt and in large amounts, a complete payoff might not be realistic. In that case, you’ll want to pay close attention to the regular APR for balance transfers, which is the interest rate that will apply once the promotional or introductory interest rate is over.
Your credit score is going to be the ultimate determinant of how low an interest rate you receive. If you want to shop around for the best balance transfer rate, you may find better luck with smaller institutions, like credit unions or regional banks, or with places where you already have a relationship in good standing.
That being said, online comparison tools also make it easy to find a range of offers nationally.
Step 2: Initiate the balance transfer
Nowadays you don’t have to wait to get the physical card to begin your balance transfer. Most online applications allow you to add a balance transfer request before you’re approved (others may immediately allow you to initiate the transfer once you’re approved). If you want to transfer a balance to a card you already hold (or didn’t complete the card application online) you can also call your card issuer to initiate the transfer.
In either case, you’ll need to provide the account information and balance total of each debt you wish to transfer. Most major card issuers will send the funds directly to the issuer of your original debt. It might take a week or two, but it minimizes the hassle and risk of anything going awry.
Sometimes a card issuer will give the money directly to you, the cardholder, with balance transfer checks (sometimes called convenience checks). The cardholder can then fill out and send these checks to the institutions they owe.
Q: When should you do multiple balance transfers?
Multiple balance transfers may be a good option if you’re trying to consolidate your debt from multiple credit cards into one account with a lower interest rate. However, it’s important to consider the fees associated with balance transfers, as well as the impact on your credit score.
If you can find a new credit card with a lower interest rate and favorable terms, then transferring the balances from multiple credit cards to that one account may help you save money and simplify your payments. However, keep in mind that most balance transfer cards charge a balance transfer fee, which is typically a percentage of the amount being transferred. Additionally, opening multiple credit accounts and transferring balances can negatively impact your credit score, so it’s important to weigh the potential benefits against the potential costs.
Overall, whether or not you should do multiple balance transfers depends on your individual financial situation and goals. It’s important to do your research and consider all of the fees and potential consequences before making a decision. Additionally, you may want to consult with a financial advisor or credit counselor to help you make an informed decision that aligns with your financial goals.
How much can I transfer? Understanding maximum balance transfer limits
It’s important to know how much credit card debt you can possibly transfer to the new card. Even if you find a great offer, a balance transfer card is only as useful as the amount of debt it’s alleviating.
In most cases, the maximum balance transfer limit will be between 90% and 95% of your given credit limit (the exact percentage will vary depending on the card issuer). Your credit limit on a balance transfer card is determined the same way it would be with any other credit card application. It is based on your income and your credit score (yes, balance transfers require a hard pull on your credit for the inquiry).
If you have $10,000 in credit card debt but are only approved for a balance transfer card with a credit limit of $7,500, you’ll only be able to transfer a partial amount of your total debt.
Step 3: Confirm the transfer went through
Before the transfer is confirmed, you may still need to make a monthly payment on the accounts you want to pay off. If your usual payment due date is within two weeks of initiating the transfer, it’s best to make your payment as usual. This is to ensure that your accounts remain current until the transfer is complete.
After the balances are successfully transferred, the balance transfer fee will be added to your outstanding balance, and you won’t have to pay it upfront.
Step 4: Paying off your debt (the most strategic way possible)
Even if you have a balance transfer that’s interest-free, that doesn’t mean you can’t just park your debt in a new account and forget about it. Balance transfers require monthly payments, just as do normal credit card balances do.
At the very least, you’ll need to make the minimum payments on your transferred balance. The minimum charge can vary by card issuer but is typically between $25 and $35. However, if your goal is to pay off debt quickly (with as little interest charged as possible), you’ll want to pay the balance in full before the 0% APR period ends. If you haven’t paid all—or at least, put a significant dent in—your balance, you may quickly find yourself back at square one once the regular APR kicks in.
Your focus should be on the fastest repayment possible. Review your budget to cut any unnecessary expenses. If there are expenses you can cut back or any luxuries you can do without, scale back as much as possible.
This will maximize the cash flow available in your budget for debt repayment. Make the biggest payments possible each month. Your goal is to pay off the total consolidated balance before the introductory APR rate ends.
Q: Should you transfer balances to no-interest credit cards multiple times?
When you transfer a balance to a no-interest credit card, you get a limited time to pay it off without interest charges. But if you can’t pay it off before the no-interest promotional offer ends, your interest rate goes up to the standard rate, which may be higher than what you paid before the transfer. In this case, another balance transfer to defer interest for another promotional period may make sense, but only if you have good credit to qualify for another transfer card or promotion.
Keep in mind that every time you apply for a new credit card, it results in a hard inquiry on your credit report, which can lower your credit score. Additionally, if you’re unable to pay off the balance within the no-interest period, you could end up paying even more in interest charges than you would have on your original credit card.
Therefore, it’s best to use balance transfer credit cards sparingly and only when necessary. If you’re struggling with credit card debt, address the root cause of the issue and develop a long-term plan for paying off your debt, which may involve reducing expenses, increasing income, or working with a financial advisor or credit counselor to develop a debt repayment plan.
Making multiple balance transfers without making progress toward paying down your debt can become a game of musical chairs, where you’re constantly moving your debt from one card to another without actually paying it off. Furthermore, lenders typically add transfer fees to your outstanding balance, so you should take them into consideration. It’s good to avoid paying extra interest on your credit card balance, but it’s even better to make a plan to pay off your debt. If you want to pay off your credit card balance and you find a good balance transfer offer, you can use it to save money on interest while you work on your plan.
Learn from the experts: Is a balance transfer a good idea?
Stacey Johnson, Money Talks News: The first thing you gotta do, you have to figure out why you’re in debt in the first place.
Adam Sosnick, SOSTalksMoney.com: You’re just trying to make little money moves; you’re saving money here, you’re saving money there but at the end of the day you’re kind of shooting yourself in the foot.
Steve Rhodes, Get Out of Debt Guy: You need to look at what exactly a balance transfer is. It’s a marketing tool to attract you to transfer your debt from one card to another.
Ryan Inman, Physician Wealth Services: If you do a balance transfer and continue to rack up more debt somewhere else — that’s a horrible idea. You really need to take control over your finances. Don’t let it take control over you.
Jasmine Watts, Miss Millennia Magazine: You put a plan in place as soon as you do that balance transfer.
Leanna Haakons, Black Hawk Financial: You need to change your mindset and change your life.
Brandon Neth, FinanceBuzz.com: A lot of people try to take advantage of these. They get charged 3-5 % up front and they don’t pay it off and they get hit with these huge interest rates at the end.
Jason Steele, Credit Card Expert: You have to look at the end date. Be it 12, 15, 18 months out as the finish line, and divide those numbers of months and that should be the amount you’re paying plus whatever you’re charged that month.
Cortlon Cofield, Cofield Advisors: Set a reminder in the calendar when the balance transfer is coming up.
Marcus Garrett, Paychecks & Balances: They’re banking on you not paying it off by the end of that balance transfer. So, keep that in mind that it seems like a great deal. But they’re hoping that you don’t pay that off by the time that balance transfer is due because it’s going to be a higher interest rate. That’s why they’re offering you that 18-24 months.
Adam Sosnick, SOSTalksMoney.com: Credit cards are not your friend. They’re there to lure you in and then BOOM! Jack the rate up. Right? and that’s how credit card companies make their money.
Steve Rhodes, Get Out of Debt Guy: The game is played by letting you think that it’s free money when in fact, it’s set up so that you don’t pay the balance off before the 0 % rate expires.
Gerry Detweiler, Credit Expert: When you use a balance transfer, be smart about it.
How the Credit CARD Act affects balance transfer cards
The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act was passed in 2009 to provide additional consumer protections to credit users. Part of the act requires credit card companies to apply payments to a balance in order of highest to lowest APR.
For example, if you use your card to take out a cash advance, this balance will be paid off first as you make payments because cash advance APR is generally much higher than the APR applied to regular purchases.
For balance transfers, this can be both good and bad for card users.
Good: Transferred balances pay off highest APR portion of the balance first
As Laura Adams explains in the question above, a transfer is basically treated like a payment. So, if you only transfer a portion of the balance from one of your accounts, the portion with the highest APR would be transferred first. If you have cards with cash advances on them that are costing an arm and a leg, transferring part of the balances would wipe out those higher interest charges.
Bad: Making regular purchases on a balance transfer card can negate 0% APR
On many balance transfer credit cards, the 0% APR period only applies to balance transfers. Regular purchases made on the card would have purchase APR applied to the balance. Since this rate is higher than the 0% teaser rate applied to the balances you moved, purchases would be paid off first. If you make regular purchases on a balance transfer card, you may miss out on the benefit of the 0% APR period.
Balance transfer FAQ
Q:What is the best balance transfer credit card?
- The lowest transfer fees
- The longest 0% APR promotion period
These two factors make the card more effective because they reduce the cost of getting out of debt. Lower fees mean less to pay off. A long 0% interest rate period gives you more time to pay off debt interest-free.
Q:When you transfer balance on credit cards what happens?
After you move your balance to the new card, the balance on the old card becomes zero. The account is still open and in good standing. This means you can continue to use the card. Just be careful not to run up a new balance! Otherwise, you can end up with more debt to pay off instead of reducing your debt.
Q:Is it good to transfer credit card balances?
Just keep in mind that the payments to reach zero in one year will be around $420 if you owe $5,000. So, if you have limited cash in your budget, this may not be the best solution. But with good credit and good cash flow, balance transfers can be the right choice.
Q:Can I transfer credit card balance back and forth?
Some cases may prohibit back and forth balance transfers. There is also a concern about cost. If you constantly incur balance transfer fees, you’re constantly adding to what you owe. You may end up paying the fees off and then transferring again. So, you might not get anywhere with this method.
Finally, be careful about your credit score. Each time you apply for a credit card, you must authorize a credit check. These stay on your credit report for two years. Too many inquiries within 6 months to a year is bad for your score.
Q:Can your transfer store credit card balances?
Q:Can you transfer part of a credit card balance?
Q:Can your transfer a loan to a credit card?
Remember, loans almost always offer lower interest rates than credit cards. So, unless you pay the balance off interest-free, transferring a loan could increase the cost of repayment. You basically make it more expensive to pay off that debt.
It’s also worth noting that you can transfer in-store credit lines for things like furniture or electronics. Just have the name of the original lender plus account number handy and call customer service to make the transfer.
Q:Can you transfer a balance from someone else’s credit card?
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Article last modified on June 20, 2023. Published by Debt.com, LLC