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

It is possible to save money on interest charges by utilizing a balance transfer. This is done by applying for a credit card with a low introductory Annual Percentage Rate (APR), initiating a balance transfer, and paying down the balance. While some cards are suitable for balance transfers, others are not. Balance transfers are a form of credit card transaction where debt is moved from one account to another. This can be beneficial for those with high-interest debt since they can potentially pay off interest-free with a credit card which has a 0% introductory APR on balance transfers. However, this comes with certain costs and restrictions. Generally, a balance transfer fee is charged and this is usually 3-5% of the total amount transferred. Additionally, if the limit of the balance transfer card is low, it may not be possible to transfer the full balance.

Understanding the process of transferring the balance from one account to another.
Transferring a balance from one card to another can differ depending on the issuer, but usually, these steps must be taken:

1. Obtain a card with a 0% interest rate offer or use one you already have, but to qualify for the best deals, typically you must have good or excellent credit (generally, FICO scores of at least 690). Be aware that transferring a balance from one card to the same issuer is not allowed, so if you want to move a balance from a Citi card, another Citi card cannot be used.
2. Begin the balance transfer. When performing this online or by phone, provide the required information about the debt, for example, the issuer name, the amount of debt, and the account information. Balance transfers can also be done using convenience checks, but read the terms and conditions first to understand if this will be considered a balance transfer and the interest rate that will accompany it.
3. Wait for the transfer to process. After it is approved, which can potentially take two weeks or more, the issuer will typically pay the prior balance in full. This balance, as well as the balance transfer fee, will show up in the new account.
4. Repay the balance. When it is added to the new card, you will be responsible for making monthly payments on that account. If you do this during the introductory 0% APR period, you could save money.

Tip: You can transfer more than just credit card debt. Some issuers allow cardholders to move auto loan or personal loan debt to a credit card. Use our calculator to see how much you can save.

Moving outstanding balances to a credit card that offers a no-interest introductory annual rate could help you save a lot of money in interest payments as you pay off your debt.

The amount of money that you still owe on your credit card
How much money do you need to move from your current credit card to a new card, and what is the Annual Percentage Rate (APR) associated with that debt? Ideally you move over balances that you plan to payoff during the promotional period. Once the promotional period is over your APR might be higher than what you transferred the card away from.
If you switch your debt to a new balance transfer card with a 3% fee and pay it off during the 0% interest period, your only expense will be the balance transfer fee. However, if you stay with your current card and pay the debt off in equal installments over the same timeframe, your total interest costs would be roughly equal to: 1-(1+r)^-N x PV/(1+r)^-N, where N is the number of months in the 0% interest period, r is the interest rate, and PV is the present value of the debt.

The amount of money you can save with a balance transfer
Estimating interest charges is not a definitive figure; the actual amount of your finance charge will be contingent on the payments you make and the terms of your credit card. To ensure making the right decisions with your money, consider the following topics: Banking, Credit Score, Checking, Savings, Prepaid Debt Cards, Money Transfer, CDs, Credit Cards, Credit Card Basics, Credit cards for bad credit, Student Credit Cards, Rewards Credit Cards, Credit Cards for average or fair credit, Cash Back Credit Cards, Balance Transfer Credit Cards, Airline Credit Cards, Low Interest and No Fee Credit Cards, Financial Planning, Paying off debt, College Savings, Making Money, Financial News, Insurance (Life Insurance, Medicare, Renters Insurance, Pet Insurance), Investing, Retirement Planning, Roth IRA, Estate Planning, Brokers, 401k, Loans (Auto Loans, Student Loans, Mortgages, Mortgage Rates, Mortgage Process, Homeownership, Homeownership costs, Selling your home, Home affortability, Property Tax, Small Business, Running Your Business, Small Business Loans, Business Credit Cards, Small Business Taxes, Starting a Business, Taxes (Income Taxes, Investment Taxes, Personal Taxes), Travel (Vacations & Trip Planning, Reward Optimizations, Rental Cars, Travel Insurance). Additionally, you may want to review the details regarding the company's leadership, careers, corporate impact, diversity, inclusion, editorial guidelines, editorial team, news, press kit, investors, help, support team, community, security FAQs, terms of use, privacy policy, California privacy policy, updated do not sell my personal information, the app, and the disclaimer.

Credit cards that offer a positive balance transfer experience
The purpose of a balance transfer is to save money; therefore, it is essential to select a card that will reduce your expenses. The perfect balance transfer credit card should come with three zeroes: 0% introductory APR offer for balance transfers, $0 annual fee, and $0 balance transfer fee (or a way to avoid paying such a fee). This way, it is possible to pay off debt without being charged additional interest and fees. Although cards with no transfer fees are scarce nowadays, a card with no annual fee and 0% introductory offer for balance transfers is still very valuable. Interest charges can add up quickly and are usually more expensive than a one-time 3% to 5% fee. It is important to be aware that some 0% APR offers are only applicable to purchases, so to save money when transferring debt a card with an introductory 0% APR promotion for balance transfers must be chosen. By following this advice, one can decide which balance transfer credit card to apply for.

Should I move my balance from one credit card to another?
If you can afford to pay off your debt in three months or less, or you are not eligible for a favorable 0% APR deal, it may be the most cost-efficient route to pay off the debt quickly. On the other hand, if you require a higher limit with some interest, a personal loan might be the answer; you can investigate the amount you could borrow and the interest rate you could get before agreeing to any offer. Generally, a balance transfer is the most advantageous selection if you need some time to clear your debt with high-interest rates and have a good enough credit rating to acquire a card with a 0% introductory APR on balance transfers. This kind of card will save you plenty on interest, giving you an advantage when it comes to settling your balances.

What will happen next?
Have a look at the balance transfer and 0% APR cards. Will transferring a balance have a negative effect on my credit rating? There are 3 straightforward steps to pick a balance transfer credit card. Determine how much you'll save by doing a balance transfer.

Calculate the amount of money that can be saved through balance transfer
Moving your debt to a credit card offering an initial 0% yearly interest rate could help you save hundreds of dollars in interest costs as you pay off your debt.

The amount of money you currently owe on your credit card
What is the value of the credit card debt that you would like to move over to a different card, and what is the interest rate (APR) being charged on that existing debt?

Facts concerning a credit card that enables balance transfers
If you decide to transfer the balance to a new card with a 3% fee and pay it off during the 0% introductory period, your only expense would be the transfer fee. However, if you kept the debt on your current card and paid off the amount over the same amount of time, the total interest payments will amount to roughly the same as 1-(1+r)^-N multiplied by the present value (PV) of the debt, where N is the number of months in the 0% interest period and r is the rate of interest.

The potential financial benefits of performing a balance transfer of your funds.
The amount of interest you will be charged for your credit card can only be calculated approximately. The exact amount of finance charges will depend on the payments you make and the conditions of your credit card.