How to Transfer Credit Card Balances

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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.

Table of Contents

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

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.

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.

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.

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.

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.

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.

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.

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.

Balance transfer FAQ

contributors

Howard DvorkinAuthor

CPA - Debt.com Chairman & Personal Finance Expert

Laura Adams, Quick and Dirty TipsAuthor