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What is a balance transfer?
Transfer your balance to an interest-free account and save money.
Balance transfers allow you to take your debt from one or more credit cards and move it to another card. Typically the transfer comes with a fee, but it also may come with a low or 0% intro APR promotion.
A balance transfer can be a great option if you’re paying heavy interest on your credit card. Taking advantage of a 0% intro APR can help you save hundreds as you pay off your debt faster.
What's in this guide?
- How balance transfers work
- How can a balance transfer help me save money?
- When are balance transfers a good idea?
- Balance transfers: What to know before applying
- How to choose the right balance transfer card
- Compare balance transfer credit cards
- What to watch out for
- Bottom line
- Frequently asked questions
How balance transfers work
To start, you need to apply for a balance transfer credit card and provide the account information of your old card and the amount you want to be transferred.
Keep in mind, it doesn’t necessarily mean your balance transfer will be approved even if you’re approved for the card. But with a good credit score or higher, your chances of success increase.
In the meantime, it’s important you keep making payments to your old account while you wait for a balance transfer decision.
A balance transfer in action
Let’s say Mary has a credit card with a $5,000 balance and a 20% interest rate.
A 20% interest rate is pretty high, and interest is compounded daily. This means that while Mary is trying to pay off her debt, interest on her balance keeps accumulating.
That’s where a balance transfer card can come in handy. For example:
- Mary finds a card that offers 0% intro APR for 15 months on balance transfers.
- She transfers her current balance of $5,000 to the new card. She also pays a fee of 3% of the transfer, which comes out to $150.
- The balance on the new card won’t accumulate interest for 15 months. Mary can pay off her debt knowing that it won’t increase for quite a while, as long as she doesn’t add to it with more spending.
How can a balance transfer help me save money?
A balance transfer credit card is designed to give you breathing room to pay off your debt interest-free for a promotional period, which can last up to 21 months. Depending on the size of your debt and the interest rate you’re currently paying, this could save you hundreds or thousands of dollars.
See how much you can save with our balance transfer calculator.
TIP: Credit cards issued by a credit union often waive balance transfer fees. Suppose you’re trying to move a balance of $6,000, you can potentially save $300 in transfer fees.
When are balance transfers a good idea?
Balance transfers can be an excellent tool if you are:
- Paying high interest. This is a no-brainer. If you’re stuck paying high interest and you have a good credit score or higher, a balance transfer card could be your way out of debt.
- Paying off multiple balances. If you have multiple balances that you’re paying off with interest, a balance transfer could help you move all of them into one account. This will not only help you save money, but will simplify your monthly payments to one account only.
Balance transfers: What to know before applying
A balance transfer is an efficient option to help pay off one or multiple debts. Before applying for a balance transfer credit card, take note of the following so you’re not taken by surprise:
You’ll likely pay a fee for the balance transfer
When you move your balance to a new card, you’ll probably need to pay a balance transfer fee. As an example, let’s say a card’s balance transfer fee is 3%. If you’re transferring $10,000, you’ll pay a fee of $10,000 x 0.03 = $300.
You can get a great APR on your transferred balance
A good balance transfer card will offer a 0% intro APR for a while on the debt you transfer. An exceptional balance transfer card will have a long intro APR. Instead of getting a 0% intro APR for six months, for example, you could get 0% for 21 months.
After the introductory APR ends, you’ll start paying interest
Some people forget to keep track of when their introductory APR expires, and get surprised when they’re charged interest. Consider how long your low intro APR lasts and if you can pay off your balance within that time.
It’s important to make monthly payments on time
Here’s one of those conditions that might throw you for a loop: You only get the nice 0% intro APR if you make your monthly payments on time. Just one late payment may get your promo APR revoked.
The process can take a while
Balance transfers are usually completed within seven to 14 days of the card being activated. In the meantime, keep up with your current monthly payments to avoid taking any hits to your credit.
Having good credit helps
Credit card providers usually require good credit to initiate a balance transfer. However, if you look around, you can find some decent balance transfer cards for poor credit.
You can transfer more than credit card debt
Credit card debt is the most common debt moved with balance transfers, but you may also be able to transfer auto loans, mortgages and student loans.
How to choose the right balance transfer card
Finding the right balance transfer card can be your ticket to get you out of debt faster. When comparing balance transfer cards, here’s what to consider:
- Intro APR period. On average, you’ll find 12 to 15 months of interest-free preiod credit cards, but some cards offer an intro APR period as long as 21 months. Getting a longer intro APR period gives you more time to consolidate your finances.
- Balance transfer fee. Depending on the credit card you choose, you can pay between 3% and 5% fee of the amount you transfer. If you’re moving a large sum, 2% can make a huge difference. Some credit-union issued cards have no balance transfer fees.
- Annual fee. You’re trying to save money, not pay more in fees. Luckily, most credit cards with a 0% intro APR period on balance transfers come with no annual fee.
- Balance transfer limits. All card providers have balance transfer limits. This can be either 75% or 100% of your available credit limit, or it can be up to a certain amount, such as $15,000. Read the card’s terms before you apply or talk to a customer support representative and ask about the amount you can move.
Our pick for a balance transfer card
Citi Simplicity® CardRead more
Compare balance transfer credit cards
What to watch out for
Although balance transfers are a solid option for paying off your debt without interest, there are some downsides to consider:
- Balance transfer fees.
Make sure you choose a credit card with minimal or no balance transfer fees to save even more money. This applies to balance transfer checks as well, which can sometimes carry fees depending on the issuer.
- After the low-APR promotion ends, you’ll start paying interest on your balance.
Once that low-APR promotion ends your remaining balance is subject to a much higher interest rate. To avoid this, pay off your entire balance before your low interest introductory rate ends.
- You must make your balance transfers within a certain time frame.
Most credit card providers require that you make your balance transfers after a certain time frame when you open your credit card account. This is usually between 40 days and four months. Any balance transfer made after this date will start accruing the standard APR on balance transfers.
- Late payments may forfeit your intro APR period.
Most credit card providers may cancel your intro APR period and impose a penalty APR of up to 32% if you’re late on your payments.
- You can’t make balance transfers within the same bank.
Also, credit card providers won’t allow you to move a balance from an affiliated financial institution.
- Don’t earn rewards.
Balance transfers don’t count toward your signup bonus spend requirements and you won’t earn rewards per dollar.
Opening a balance transfer card can improve your chances of paying off your debt. By utilizing the low APR intro period you could save hundreds of dollars — just be careful about adding to the debt.
Before you decide if opening a balance transfer credit card is for you, compare your balance transfer options.
Frequently asked questions
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