What is a Balance Transfer?
A balance transfer moves existing credit card debt from one card to another, typically to take advantage of a lower interest rate. Many cards offer 0% APR introductory periods for balance transfers, giving you breathing room to pay down principal without interest accumulating.
When used strategically, balance transfers can save you hundreds or thousands of dollars in interest charges and accelerate your path to becoming debt-free.
How Balance Transfers Work
- Apply for a credit card with a 0% intro APR on balance transfers
- Once approved, request a transfer of your existing card balance(s)
- The new card pays off your old card(s)
- Your debt is now on the new card at the promotional rate
- Pay down the balance during the intro period
- After the intro period, remaining balance accrues interest at the regular APR
Typical Processing Time
Typical Balance Transfer Terms
| Feature | Common Range | Best Offers |
|---|---|---|
| Intro APR | 0% | 0% |
| Intro Period | 12-15 months | 18-21 months |
| Transfer Fee | 3-5% | 0-3% |
| Post-Intro APR | 18-26% | 15-20% |
| Credit Required | 670+ | 720+ |
Watch the Details
When Balance Transfers Make Sense
Good Candidates
- You have good credit (670+ FICO score)
- You can pay off the balance within the intro period
- Transfer fee savings exceed the fee itself
- You won't accumulate new debt on old cards
- You have a clear payoff plan
When to Reconsider
- Your credit score won't qualify for good offers
- You can't pay off the balance before the intro period ends
- You tend to create new debt after transferring
- The transfer fee eats up most of your savings
- You're planning a major purchase requiring good credit
The Balance Transfer Trap
Calculating Your Savings
The Math
Your net savings = Interest you would have paid - Transfer fee
| Balance | Current APR | 12mo Interest | 3% Fee | Net Savings |
|---|---|---|---|---|
| $5,000 | 22% | $1,100 | $150 | $950 |
| $8,000 | 20% | $1,600 | $240 | $1,360 |
| $12,000 | 24% | $2,880 | $360 | $2,520 |
| $15,000 | 22% | $3,300 | $450 | $2,850 |
Potential savings with 12-month 0% APR transfer
Break-Even Analysis
To determine if a balance transfer is worth it:
- Calculate interest you'd pay without transferring
- Subtract the transfer fee
- If the result is positive, the transfer saves money
- Consider your ability to pay off before the intro period ends
Maximizing Your Balance Transfer
Create a Payoff Plan
Divide your total balance by the number of months in the intro period to find your target monthly payment:
Example
Strategic Tips
- Set up autopay for at least the calculated monthly amount
- Pay more than the minimum whenever possible
- Don't use the new card for purchases (often no 0% on those)
- Set calendar reminders before intro period ends
- Consider another transfer if needed (but beware of credit impacts)
- Close old cards slowly to avoid credit score damage
Common Pitfalls to Avoid
- Missing a payment (may cancel the 0% rate entirely!)
- Using the new card for purchases (different APR applies)
- Ignoring the balance until intro period ends
- Paying only the minimum payment
- Running up new debt on old cards
- Applying for too many cards (hurts credit score)
Deferred Interest vs Waived Interest
Impact on Your Credit Score
Short-Term Effects
- Hard inquiry from the application (-5 to -10 points)
- New account lowers average age of accounts
- High utilization on new card initially
Long-Term Benefits
- Lower overall utilization as you pay down debt
- Improved payment history (if you pay on time)
- More available credit once paid off
Frequently Asked Questions
Q: Can I transfer between cards from the same issuer?
A: Usually no. Most issuers don't allow transfers between their own cards. You'll need a card from a different bank.
Q: Will a balance transfer hurt my credit score?
A: Temporarily, yes (hard inquiry, new account). But the debt paydown benefits usually outweigh this within a few months.
Q: What if I can't pay off the balance in time?
A: You'll pay the regular APR (often 18-26%) on the remaining balance. Consider another balance transfer before the intro period ends, or focus intensely on payoff.
Q: Can I transfer more than my credit limit?
A: No. You can only transfer up to your available credit limit, and sometimes less. The transfer fee also counts against your limit.
Q: Should I close my old cards after transferring?
A: Not immediately. Closing cards reduces your available credit and can hurt your credit score. Keep them open with zero balance (or small recurring charge) but don't accumulate new debt.
Q: How many balance transfers can I do?
A: There's no official limit, but each application impacts your credit. Some people 'balance transfer hop' every 12-18 months, but this requires discipline and good credit.
Your Action Plan
- Check your credit score to gauge your approval odds
- Calculate potential savings using this calculator
- Compare balance transfer offers (look at intro period AND fee)
- Apply for the best offer you qualify for
- Create a monthly payoff plan and automate it
- Track progress and celebrate becoming debt-free!
Results are estimates based on the inputs provided. Actual savings depend on your specific credit card terms, approval for the balance transfer card, and your payment behavior. Always read the full terms and conditions before transferring a balance.