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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[1][2]. Consider that the average credit card has an APR of nearly 17% [3] 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.

What is a balance transfer? (The simple definition)

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

Should I transfer my credit card balance?

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.

Learn if a balance transfer is right for you.

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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:

  1. Length of the introductory APR period
  2. Introductory interest rate
  3. Balance transfer fees (either a dollar amount or a percentage)
  4. Regular balance transfer interest rate

If you already have a balance transfer credit card, skip ahead to Step 2.

Introductory APR period

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.

Introductory APR rate

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.

Balance transfer fees & other fees

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.

Regular APR

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.

Looking for the best balance transfer offer? See them all in one place.

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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.

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

Until the transfer has been confirmed, you still may be required to make a monthly payment on those accounts you’re attempting to pay off. If your normal payment due date is within two weeks of the day you’re initiating the transfer, anticipate that you’ll be making your payment, as usual, just to be on the safe side[4].

Once the balances have successfully been transferred the balance transfer fee will be rolled into your outstanding balance⁠—you do not have to pay the balance transfer fee 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.

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.

Short-term benefits

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.

Long-term benefits

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.

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.

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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:

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.

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.[5] 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.

More questions about transfers

Q:What is the best balance transfer credit card?

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A: The best balance transfer credit card is the one that offers:

  1. The lowest transfer fees
  2. 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.

Compare balance transfer cards »

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Q:When you transfer balance on credit cards what happens?

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A: When you transfer balances, the balance transfer card pays the balance off on the existing card. You need the account number and amount you wish to transfer. Then you call customer service on the balance transfer card and give them the list of accounts you wish to move. Accounts may take seven days to up to a few weeks to transfer.

Once the balance is transferred to the new card, the balance on the existing card drops to 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.

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Q:Is it good to transfer credit card balances?

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A: This depends on your budget, credit, and how much debt you need to pay off. Credit card balance transfers usually work best for someone who has less than $5,000 or less to pay off. With a good credit score, you should be able to qualify for a one-year introductory offer. That gives you twelve months to pay off the balance without interest charges.

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.

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Q:Can I transfer credit card balance back and forth?

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A: Most credit card issuers have rules for balance transfers. For example, many issuers won’t let you transfer balances from one of their cards; they only accept transfers from cards issued by other companies. So, back and forth balance transfers may be prohibited in some cases.

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.

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Q:Can your transfer store credit card balances?

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A: Yes. Most balance transfer credit cards let you transfer any existing balance, minus the exclusion mentioned above. Store credit cards tend to have much higher APR, so transferring these balances often makes sense. You save money and keep your store cards in good standing so you can continue using them.
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Q:Can you transfer part of a credit card balance?

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A: Absolutely. When you set up the balance transfer, you tell them how much debt you wish to move. There’s no requirement to pay off a balance in-full. However, there’s a good reason to transfer the whole thing. That way, you can take advantage of 0% APR on the full balance owed.
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Q:Can your transfer a loan to a credit card?

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A: Yes. There is no restriction on just transferring credit card balances. If you want to move a loan, such as a personal loan or auto loan to your balance transfer credit card, you can. Just be sure you can pay off the debt during the 0% APR period.

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.

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Q:Can you transfer a balance from someone else’s credit card?

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A: Yes. Unlike other forms of debt consolidation, this one lets you pay off someone else’s debt. You can transfer any balance from any existing credit card, even if it’s not yours. Just be aware that this means you incur fees and are responsible for paying off the other person’s debt.
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Sources:

Article last modified on August 18, 2022. Published by Debt.com, LLC

contributors

Howard Dvorkin, CPA

CPA - Debt.com Chairman & Personal Finance Expert