Is a Credit Card Balance Transfer a Good Idea or Not Worth It?

A credit card balance transfer lets you transfer part or all of your balances from one credit card to another. Credit card companies may give you a balance transfer offer, such as a low or 0% intro APR on the balances that you transfer to the card for a limited time. Using these promotional interest rate offers can help you save money and pay off your debt faster if you transfer high interest debt. But you’ll want to compare how much you can save to the potential fees, and consider how you’ll manage your cards once the transfer is complete.

Pros and cons of balance transfers

Consider the advantages and disadvantages of using a balance transfer before applying for a new credit card or requesting a transfer.

Pros

Here are some reasons why it might be good to transfer credit card balances:

• Save on interest. Moving debt to a card that has a promotional low or 0% annual percentage rate(APR) offers can save you money.
• Pay down debt faster.A larger portion of your payments can go toward the principal balance because you won’t be accruing as much interest if you transfer high interest debt. As a result, you can pay down your debt faster, even if you’re making the same monthly payments.
• Lower your monthly payment. Consolidating multiple credit card balances by transferring them to a single credit card can also lower your minimum monthly payment. However, you may have to make larger payments if you want to pay off the balance before the end of the promotional period.

Cons

Here are some reasons why it might not be the best time to do a balance transfer:

• There may be a fee. You may have to pay a balance transfer fee for each transfer. It’s often 3% or 5% of the amount you transfer, with a $5 to $10 minimum. However, the fee can depend on the credit card and current offer.
• The intro APR rate is temporary.The intro low or 0% APR offer generally has a limited promotional period. After the promotional period, any remaining balance could start to accrue interest at the card’s standard APR.
• APR offers don’t always apply to purchases.If the balance transfer offer doesn’t have a promotional APR for purchases and balance transfers, your purchases may start to accrue interest immediately.
• Limits on transfer options.You generally can’t transfer balances between two cards from the same credit card provider. However, you may be able to transfer balances from other credit cards. Some card issuers also let you transfer a balance into a bank account.

When is it worth it to transfer a balance?

To figure out if a balance transfer is a good option for you, try to calculate how much you’ll pay in fees vs. how much you might save from the lower interest rate. The result can depend on your current balances, the balance transfer fee, the promotional period, and how much you can afford to pay each month.

If you think a balance transfer might be a good choice, you can look for offers from your current credit cards and new credit cards to determine which might work best. Sometimes the math might be surprising. For example, an offer with no balance transfer fee and a low interest rate might wind up saving you more money than an offer with a balance transfer fee and 0% APR.

In either case, you may be limited by the card’s balance transfer limit, which could be lower than its credit limit for purchases. And if you’re considering a new credit card, you won’t know this limit until after you apply.

Reasons to avoid doing a credit card balance transfer

You likely don’t want to do a balance transfer if you’ll pay more in fees than you could save on interest. But even if the math works out, consider whether you’ll use your credit cards for purchases and how that can impact the calculations.

While keeping your credit cards open could help you avoid hurting your credit score (depending on your circumstances), the transfers also free up the cards’ credit limits. If you use them to make purchases that you can’t afford to pay off in full, you could wind up in more debt than before using a balance transfer.