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What is a Balance Transfer Credit Card?

Last Updated: March 10, 2024
6 min read

Key points about: balance transfer credit cards

  1. A balance transfer credit card may come with a low intro APR.

  2. Transferring a balance can help you pay off credit card debt faster.

  3. Some balance transfer credit cards don’t have an annual fee.

A credit card balance transfer may help you save money on interest when transferring high-interest debt, but you may have some basic questions: What is a balance transfer? Are there fees? Is a balance transfer right for you?
Consider these tips when evaluating a balance transfer credit card.

What is a credit card balance transfer?

A credit card balance transfer is when you transfer debt, such as from credit cards or loans to another credit card account, usually one with an introductory balance transfer interest rate.

For example, if you have a high balance on a store credit card that has a 21% APR, you may be able to transfer that debt to a credit card with a lower introductory rate, saving money on interest if you pay off the balance by the end of the balance transfer introductory period.

How balance transfers work

Consider another example: If you have a $3,000 balance on a credit card with an 18% APR, it may take you a long time to pay off the credit card, even if you’re making more than the minimum payment due each month.

If you do a balance transfer to a credit card that offers a low introductory APR for a specified time period, say 12 or 15 months, the new card won’t charge interest, or will have a much lower interest rate than your current card on the transferred balance during that time. This means more of your monthly payment can go toward paying down the full balance.

Ideally, you want to take advantage of this zero- or low-interest period and pay off your credit card balance completely, or as much of your balance as you can during the introductory period. That’s because once the intro period ends, your new balance transfer card’s standard interest rate kicks in and you’ll accrue interest on the remaining balance. This is one reason why you may want to avoid adding new purchases to your balance transfer card; it could make it more difficult to pay off the card before the intro period ends.

Also, keep in mind that a balance transfer may charge a transfer fee, typically around 3% of the balance. If you transfer $3,000 with a 3% balance transfer fee, your new starting balance would be $3,090.

Here are some important numbers that factor into a credit card balance transfer calculation:

  • How much you want to transfer
  • Your current card’s APR
  • Your new card’s introductory APR
  • Length of the promotional balance transfer period
  • Your new card’s standard APR
  • The balance transfer fee

When approved for a balance transfer credit card offer, you can request your new credit card issuer to pay creditors on your behalf, which adds the balance from your previous creditor to your new balance transfer card.

If you have any payments due on your old account, you’ll want to pay by the due date to avoid late fees if the transfer doesn’t go through in time.

Does a balance transfer mean you're closing your old account?

Balance transfers don’t automatically close an account. If you want to close a credit card account after a balance transfer, contact the creditor to do so. But you may want to keep the card open, as closing cards has the potential to negatively impact your credit rating.

Is there a limit to credit card balance transfers?

The amount you can transfer will depend on the credit limit of the new card and the issuer’s policy. There may be debts from specific account types that you’re allowed to transfer to your new card, and the issuer may limit how much you can transfer based on your credit available.

What are the benefits of a balance transfer?

A balance transfer can help you pay off debt and save money when you transfer your balance to a card with a lower interest rate for a defined time. 

The introductory APR lets you use the money you would have spent on interest to reduce your debt more quickly.

Plus, instead of paying multiple creditors on multiple due dates, consolidating all of your balances onto one card means you only have to keep track of one payment a month.

How to choose the right balance transfer credit card offer

While cardholders with the best credit scores will likely have the most competitive balance transfer options, you don’t always have to have excellent credit to qualify for a balance transfer offer.

Balance transfer credit card offers are sometimes available on existing credit card account(s) with promotional APRs, which apply for a defined time period. If you qualify for an introductory 0% APR balance transfer credit card offer, you’ll want to compare the length of the intro period.

Also, compare the balance transfer fees for any cards you’re considering. A balance transfer fee is usually a percentage of the balance you transfer and typically added to your new card. If you’re paying off a balance over a long introductory period, the balance transfer fee usually is less than the amount of the interest you’ll save. And check if your new balance transfer credit card has no annual fee that could save you more.

Consider how much you can afford to pay to the card each month and match it against the card’s promotional period. If you’d still owe a lot, that could reduce any savings you may have gained by transferring the balance. You’d need to increase your payments or choose a card with a longer promotional offer.

Also consider the overall benefits and rewards of the card, like cash back or miles.

Did you know?

Every Discover Card lets you earn rewards on every purchase, with no annual fee. Choose the card that earns the type of rewards that are most valuable to you.  

How to tackle debt with a balance transfer credit card

Here are some ideas on how you can stay out of debt for the long run.

  • Curb spending. Don’t use a balance transfer credit card as a short-term fix. In other words, you don’t want to continue accumulating debt during an introductory period where you have a 0% APR, and then go right back to paying a higher rate with a bigger balance.
  • Maximize the introductory period. If you qualify for a balance transfer offer, seize the opportunity to pay off as much debt as possible before the promotional financing period expires.
  • Keep old cards. Remember that transferring the balance doesn’t close the original card, and you may not want to shut down that card. Closing down old accounts can impact your credit score by changing your credit utilization ratio or the average age of your accounts.
  • Avoid using old cards. At the same time, you don’t want to make the mistake of racking up new debt on the old card. Doing so can erase any headway you may have made with the transferred balance in the first place.
  • Pay on time. Finally, it’s important to be disciplined about making payments to the new card on time every month. Late payments can wreak major havoc on your credit score, trigger a late fee, or increase your APR. The new APR could be much higher than the promotional rate you started out with.

With a little discipline and some research, you can use a balance transfer credit card to get closer to being debt-free.

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  • Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service. It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.