What is a balance transfer?
Answered on Thursday, April 19th, 2018 by Amy Miller
Updated: April 19th, 2018
Amy Miller
The content is accurate at the time of publication and is subject to change.

A balance transfer is moving of your debt from one credit card (or cards) to a different card with a lower interest rate (usually 0% intro APR). When you are struggling to pay off your debts, the balance transfer can be of great help.

The most popular type of balance transfers is a credit card balance transfer. Often credit cards that offer a balance transfer come with 0% intro APR on balance transfers allowing to pay off the transferred debt at 0% interest rate. This zero interest rate is given only for a short period of time – introductory period – that usually varies from 6 months and up to two years. When the introductory period ends, an ongoing interest rate will apply to the unpaid amount. So it is important to pay off the transferred balance by the end of the zero interest period.

Balance transfer credit cards are not for any consumer. Consumers should have an established credit to be able to qualify. A credit score stating from 670 and higher should be enough to qualify for a 0% intro APR credit card. The amount of debt that can be transferred to a new balance transfer credit card depends on available credit limit. Basically, you won’t able to transfer more than available credit limit on your new balance transfer credit card.

As any other good benefit, the balance transfers are not usually free. The balance transfer fee varies between 2% and 5% of each amount transferred. It is possible to find a credit card with 0% balance transfer fee but be ready that you won’t be offered zero introductory period, just a lower interest rate.

What are the benefits of a balance transfer?

– You can save money. Since your new credit card has a lower or 0% interest rate, you may save on interest while paying off your debt.

– You can reduce or even pay off your debt. Moving an outstanding balance to a low interest rate credit card will help you pay off your debt faster as you will be paying off your principal balance rather than interest.

– You can improve your credit. We all now that the less we owe, the better it will be for our credit. Therefore, lowering your overall debt can potentially boost your credit score.

Choosing the right balance transfer credit card

– Interest on balance transfers. Look for credit cards with 0% intro APR on balance transfers. These cards are specifically designed for balance transfers and debt consolidation.

– Balance transfer fee. Ideally, you would want to pay no balance transfer fee. But the cards that charge no balance transfer fee have almost become extinct. So, look for the offers that charge the lowest possible fee – 2%-3% of each balance transfer.

– Introductory period. The longer the introductory period is, the more time you will have to pay off your debt. The average length of the 0% introductory period is one year, which is quite enough to pay off a considerable amount of debt.

– Annual fee. While you may have no choice but pay the balance transfer fee, an annual fee can be avoided. Many balance transfer credit cards come without any annual fee, so shop around to find the best offer for you.

All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.

Other Popular Balance Transfer Card FAQs

If you want to transfer your balance to a new credit card, note that many credit cards offer 0% APR on purchases for cardholders. If you need this feature you’d better consider getting a regular credit card, that may offer not only 0% intro APR on purchases but even decent rewards and no annual fee. […]

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If you want to consolidate your balances, the best option will be a balance transfer credit card. You can transfer all your balances onto one credit card and pay the debt off. When choosing a credit card pay attention to the credit rating required. You indicated you have a good credit history, so many cards […]

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