How Do Credit Card Balance Transfers Work?

“How can I make sure I’m getting the most from my balance transfer?”

Balance Transfer

Pay off debt faster with a balance transfer.

Transferring outstanding debt to a credit card with 0% annual percentage rate (APR) can be a great way to consolidate bills and save money on interest. Discover card and other credit card companies offer introductory 0% APR balance transfers for limited periods of time varying between a few months to over a year. Knowing how to take advantage of these rates can help you pay down debt quicker, so here is a brief rundown of how balance transfers work and three tips for using them.

How They Work

Balance transfers allow individuals to move debt such as credit card balances, student loans, a medical bill or even a car loan to a lower interest, or no interest, rate on a credit card for a limited amount of time. The total amount you can transfer and the number of different balances you can move vary depending on the credit card and on your credit score. The time required for the balance transfer to be completed depends on the credit card company.

If you decide to utilize a balance transfer, take the following steps to get the most out of this transaction:

1. Prioritize Your Debt by Highest Interest Rates

Start by understanding the different interest rates of your credit cards. The higher the interest rate, the more money you will pay each month. The easiest way to identify the interest rate on your card is to check your statement, but of course you can also contact your credit card company.

To pay off debt affordably, give top priority to the credit cards with the highest interest rates and transfer the entire balance of these cards to a 0% APR card. If you are unable to transfer the balances from all of your credit cards to a 0% APR, you should transfer the balances from the highest interest credit card first. Check out our Debt Consolidation Calculator to estimate how much you can save.

2. Build a $1,000 Emergency Fund

A surprise car repair or medical bill can totally derail the most well-intentioned debt payment plan. Preventing additional debt is a really important part of an effective debt elimination plan. After you have transferred the maximum amount of debt possible, commit to saving a $1,000 emergency fund while making the minimum payments.

This fund will ensure you have money available for unplanned life events that can hurt your debt repayment plan. Make sure you keep this emergency fund separate from all other finances and use it only for unexpected expenses. After you have created your emergency fund, you can begin to aggressively tackle balances on your 0% APR credit card.

3. Develop a Payment Schedule

Create a clear monthly budget and debt payment schedule. Using tools such as Discover’s Spend Analyzer you can get a realistic picture of necessary monthly expenses to help determine the maximum amount you can allocate towards aggressively paying down debt.

Remember, the 0% APR is only for balance transfers. New purchases would be subject to the standard interest rate of the credit card and would ultimately add to your existing debt. To ensure you do not acquire additional debt, it’s a good idea to make credit cards inaccessible while paying off balances. One tactic is to take them out of your wallet and stash them in a drawer so you aren’t tempted to use them on the fly. Don’t simply cancel your cards as this can lower your credit to debt ratio and make future financial needs such as getting a car loan or refinancing your home more challenging.

Balance Transfer


Pay Off Debt Faster with a Balance Transfer.

Consistency is king in paying off credit card balances. Once you decide on your monthly payment you must commit to this being a non-negotiable monthly expense. You can also speed the process up by putting any extra funds such as work bonuses or tax returns toward the debt as well.

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.

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