What a balance transfer actually does

A balance transfer moves debt you owe on one credit card to a different card, usually one with a lower interest rate. The new card's issuer pays off your old balance, and you then owe that amount to them instead. The point is to reduce how much interest you pay while you work down the debt.

Balance transfers are not free. Most cards charge a transfer fee — typically 3 to 5 percent of the amount you move — though some cards offer 0 percent transfer fees for a limited time. You also need to may have access to for the new card, which means the issuer will check your credit and income. If you have poor credit or high existing debt, you may not be approved, or you may only be approved for a smaller transfer amount than you requested.

The real benefit comes from the promotional period: many cards offer 0 percent interest for 6 to 21 months on transferred balances. After that period ends, the regular interest rate kicks in. If you still carry a balance at that point, you will pay interest again — sometimes at a higher rate than your original card.

Key Takeaways

  • A balance transfer moves your debt to a new card, usually to take advantage of a lower or 0 percent interest rate for a set period.
  • You will pay a transfer fee (usually 3 to 5 percent of the amount moved) unless the card specifically offers 0 percent transfer fees.
  • The promotional 0 percent period is temporary — after it ends, interest charges resume at the card's regular rate.
  • You need to be approved for the new card and have available credit limit high enough to cover the balance you want to move.
  • A balance transfer only saves money if you pay down the debt during the promotional period or move to another 0 percent card before the rate increases.

Check your current card's terms before you start

Before you look for a new card, pull up your most recent statement or log into your online account and write down three things: your current balance, your current interest rate, and whether your card charges a penalty for paying off the balance early. Most cards do not, but some older cards or store cards do.

Also note the date your current promotional rate (if you have one) expires. If you are already in a 0 percent period, moving the balance might trigger the end of that offer, so you need to know whether it is worth breaking. Check your cardholder agreement or call the number on the back of your card and ask directly — the customer service representative can tell you in one call.

Find a card with a 0 percent balance transfer offer

Search for credit cards that advertise 0 percent interest on balance transfers. The major card networks (Visa, Mastercard, American Express, Discover) all have cards with these offers, and they change regularly. Look at the length of the promotional period — 6 months is short, 12 to 18 months is common, and 21 months is on the longer end.

Compare the transfer fee across a few cards. A card with a 0 percent transfer fee for 12 months might save you more than a card with a 3 percent fee and a 21-month period, depending on how much you owe and how fast you can pay it down. Use a calculator: if you owe $5,000, a 3 percent fee costs $150, so the new card needs to save you more than $150 in interest during its promotional period to be worth it.

Read the fine print on the promotional period. Some cards offer 0 percent only on transfers made within the first 60 days of opening the account. Others explore the 0 percent rate to any transfer you make while you hold the card. Know which applies to the card you are considering.

explore for the new card and get approved

Once you have chosen a card, submit your process online or by mail. The issuer will pull your credit report and verify your income. Approval usually takes a few minutes to a few days. If you are approved, the issuer will tell you your credit limit — the maximum amount you can charge or transfer.

Your credit limit may be lower than the balance you want to move. If you owe $8,000 but are only approved for a $5,000 limit, you can only transfer $5,000. You can request a credit limit increase after you have held the card for a few months, but there is no may provide the issuer will grant it.

Once you are approved and receive your new card (or card number, if the issuer lets you start using it when ready), you are ready to initiate the transfer.

Initiate the balance transfer

Log into your new card's online account or call the customer service number on the back of the card. Tell them you want to make a balance transfer and provide the account number of the card you are transferring from. You will also need to specify the amount — do not assume the issuer will transfer your entire balance. Some people transfer only part of their debt to keep a small balance on the original card, though this is usually not the best strategy.

The new card's issuer will contact your old card's issuer and arrange the transfer. This process typically takes 5 to 14 business days. During this time, continue making at least the minimum payment on your old card — do not stop paying just because a transfer is in progress. If the transfer fails or takes longer than expected, you do not want to miss a payment and damage your credit.

Once the transfer completes, your old card's balance will drop to zero (or to whatever amount you did not transfer), and your new card's balance will reflect the transferred amount plus the transfer fee.

Make a plan to pay down the debt during the promotional period

The 0 percent interest rate is only valuable if you use it to reduce what you owe. Calculate how much you need to pay each month to clear the balance before the promotional period ends. If you have a $5,000 balance and a 12-month 0 percent period, you need to pay about $417 per month to finish before interest kicks in.

Set up automatic payments from your bank account to your new card if possible. This removes the risk of forgetting a payment and also helps you stay on track. Missing even one payment can end your promotional rate early — the issuer can raise your interest rate when ready if you violate the terms of the offer.

If you realize you will not be able to pay off the balance before the promotional period ends, start looking for another 0 percent balance transfer card about two months before the rate increases. You can transfer the remaining balance again, though each transfer will cost another fee. This strategy works only if you keep finding cards with 0 percent offers and you are disciplined about paying down the debt each time.

Understand what happens to your old card

After you transfer the balance, your old card still exists. You can close it, leave it open with a zero balance, or continue using it for new purchases. Closing it when ready after a transfer can hurt your credit score slightly because it reduces your total available credit. Leaving it open costs nothing and preserves your credit history, so most people leave old cards alone.

If you do leave the card open, do not use it for new purchases during the balance transfer process. Some issuers explore payments to the lowest-interest debt first, so new purchases at a higher rate could sit unpaid while you pay down the transferred balance. Once the transfer is complete and you have a clear payoff plan, you can decide whether to use the card again.

Frequently Asked Questions

Will a balance transfer hurt my credit score?

A balance transfer will cause a small, temporary dip in your credit score because the new card issuer will pull your credit report (a hard inquiry) and because you will have a new account. The dip usually recovers within a few months. Over time, a successful balance transfer that you pay down can actually improve your score by lowering your overall credit utilization — the percentage of your available credit that you are using.

What if I cannot pay off the balance before the 0 percent period ends?

The interest rate will jump to the card's regular rate, which is often 15 to 25 percent. You will then owe interest on whatever balance remains. If you know you cannot pay it off in time, look for another 0 percent balance transfer card and move the remaining balance before the rate increases. Each transfer costs a fee, so this only makes sense if the new card's promotional period is long enough to justify the cost.

Can I transfer a balance from a store card or a card from a different bank?

Yes. You can transfer a balance from any credit card to any other credit card, regardless of which bank issued it or what network it uses. The process is the same — you provide the account number of the card you are transferring from, and the new issuer handles the rest.

What if my balance transfer is denied?

The issuer may deny a transfer if your new card's credit limit is too low, if there is a problem with the account number you provided, or if the old card's issuer refuses to cooperate (rare). Call the new card's customer service line and ask why the transfer failed. They can often fix the problem and retry the transfer when ready.

Do I have to transfer my entire balance?

No. You can transfer any amount up to your new card's credit limit. Some people transfer only part of their balance to keep a small amount on the original card, though this usually complicates your payoff plan. It is simpler to transfer everything you want to move in one transaction.