A young man, holding a credit card in one hand, looks contentedly at the phone in his other hand.

What is Credit Card Refinancing?

Published July 3, 2023

6 min read

Key points:

Credit card refinancing may help you pay your debt by transferring your balance to a lower-interest credit card during an introductory period.
You might be able to reduce your monthly credit payments by refinancing multiple cards with outstanding balances.
Consider factors like balance transfer fees, the limited offer period, and the standard APR before making a decision on credit card refinancing.

Credit card debt is stressful, and high interest rates don’t make it easier. Credit card refinancing (also called balance transfers) offers a way to shift high-interest credit card debt to a new credit card with a potentially lower interest rate.

If you have a pending balance on one or more credit cards with a high interest rate, you can transfer the debt to a different credit card with a low-interest balance transfer option, if available. Refinancing means applying to a new lender for a new credit card, after which the lender will conduct a hard credit inquiry to review your credit history.

A balance transfer may help ease the stress of accumulating interest and give you a chance to focus on repaying the existing balance.

Reasons to consider credit card refinancing

There are a few reasons that signal it’s time to think about refinancing and balance transfers for your credit card debt. Here are just a few:

You're paying high interest: A pending balance on a credit card may cost you heavily in interest. As an example, a card balance of $2,000 with an Annual Percentage Rate(APR) of 20%, paying your balance off over a year will cost $185 in interest.

Tip: you can calculate the amount of interest you’ll owe for any balance and payoff period using our credit card interest calculator.
You have a high credit utilization ratio: Your credit utilization ratio is the percentage of your available credit that you currently use. To calculate your credit utilization ratio, add your outstanding credit balances and divide that number by your total credit limit for all your accounts.

Credit utilization is one of the factors that credit reporting agencies use to calculate your credit score. A higher ratio is likely to negatively impact your credit score. Leading credit bureau Experian says maintaining a credit utilization of 30% or less shouldn’t affect your credit score. This means that if you reduce your outstanding balances, you could raise your credit score and build a good credit profile.
You have too many payment due dates: Multiple cards may mean you have several payment due dates to keep track of. By consolidating your debt on one card, you also simplify when payments are due, potentially making budgeting easier.

What are the pros and cons of credit card refinancing?

While credit card refinancing through balance transfers can be effective for many people, this strategy has pros and cons.

Pros: Refinancing allows you to concentrate on paying off your balance by reducing interest for a fixed period. Saving on interest enables you to pay down your credit card balance faster. The process of applying for a new credit card, getting approved, and transferring your balance is comparatively quick and easy.

Cons: The intro APR only lasts for a fixed period, so you’ll need to repay the outstanding debt within the promotional period or risk incurring further interest. The balance transfer fee can also be a deterrent if your debt is high. You’ll also have to look closely at the terms and conditions of your card since promotional APRs don't always apply to purchases. If your card doesn’t have an intro purchase APR, the intro APR is not valid when you make purchases.

How to refinance your credit card debt

To effectively refinance your credit card debt, start by seeking out balance transfer cards with a low interest rate or 0% intro APR period. Remember that you’re also looking for low fees and a reasonable standard APR in addition to a longer low-APR offer period.

Once you’ve found the right card for your spending style, you’ll need to apply for the card and get approval. After approval, you can make your balance transfer request, which you may have the option to do online or over the phone. With Discover, an account must be open for 14 days before Discover can begin processing your balance transfer request. After that, most transfers are processed within 4 days.

Did you know?

As a Discover cardmember you can request a balance transfer online or through the phone number on the back of your card. Once you’ve transferred your balance successfully, avoid paying the standard interest rate by paying off the balance before the introductory period expires.

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Finding the best credit card for you

It’s crucial to find the right balance transfer card offer to quickly and effectively pay off an outstanding balance. In general, you’ll have to pay a balance transfer fee of 3% to 5%, so ensure that the fee is affordable for you. Read the terms and conditions of potential cards closely; you’ll need to understand if the promotional APR applies to new purchases on the balance transfer card.

Another important thing to consider when looking for the best credit card for you and for refinancing your debt is how much interest you’ll pay on the new card. Credit cards with low intro APR offers allow cardmembers to enjoy low-interest balance transfers and purchases for a limited time.

You’ll also want to know if the standard APR that applies at the end of the promotional rate period is reasonable for you. You may also want to consider any rewards programs that the card offers and see what type of card best matches your lifestyle.

Seek out a card with no annual fee where possible. Discover has no annual fee on any of our cards. Since your goal is to pay off your entire balance during this offer period, looking for cards with a longer period will give you more time to do so.

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Alternatives to credit card refinancing

The main alternative to credit card refinancing is credit card debt consolidation, which involves paying off outstanding credit card balances with a bank loan (either a home equity loan or a personal loan). Debt consolidation may streamline your repayment process and offer better interest rates, but personal loans may also come with additional costs such as processing fees.

Unlike refinancing, it’s not guaranteed that you’ll pay lower interest. However, loans typically come with a longer repayment term. The terms of a personal loan vary from bank to bank and will depend on your credit history and financial situation.

If you refinance high interest debt with a balance transfer credit card it can be an effective way to pay off your credit card debt at lower interest rates. With a fixed intro APR period, it may be a great motivator to get serious about your debt repayment strategy and pay down your debt faster.

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