What is a balance transfer and how do they work?

A balance transfer is when you move debt from one lender to another, typically in the form of moving a balance from one credit card to another. This is often done to take advantage of an introductory offer on balance transfers. These promotional offers allow you to pay off your debt faster as more of your payment is applied toward the principal instead of being siphoned away towards the interest charges.

What is a balance transfer?

A balance transfer allows you to move all or a portion of high-interest credit card debt to a card with a lower interest rate, where more of your payment will go directly toward the principal debt rather than a combination of the principal plus the interest charges.

Balance transfer offers include a 0% intro APR for a specified period of time, from as little as six months to as long as 21 months. You’ll most likely have to pay a fee of at least 3% for each balance transfer, which is added to your balance. So it’s important to calculate whether paying that fee is worth what you’d save on interest charges on the old card.

It’s also important to know that balance transfer cards with the best terms are typically reserved for applicants with above-average credit scores (generally a FICO Score of 670 or higher).

How does a balance transfer work?

There are two ways you can initiate a balance transfer:

1. By checking to see if your existing card is promoting a balance transfer deal.
2. By researching and applying for a new balance transfer card from a different issuer.

An existing balance transfer offer can save you the hassle of having to apply for a new card and avoid the temporary credit score ding that happens when the issuer checks your credit.

To see if your current card is offering a balance transfer deal, log into your account online and look for transfer opportunities. You can also call the number on the back of your card to ask a customer service representative if your existing card has a balance transfer offer available to you.

However, you may find a longer intro APR period on a balance transfer card from a different issuer, so do some comparison shopping before you make a decision.

If you choose to apply for a new balance transfer card, know that most issuers don’t allow you to transfer a balance from a card from the same issuer. For example, you cannot transfer a balance from a Chase credit card to a Chase balance transfer card.

When applying for a new balance transfer card, you may be able to include the card details of the balance you’d like to transfer right on the application. Otherwise, you’ll have to wait until you are approved to initiate the transfer, either by phone or online.

If you do wait until you’ve been approved for the balance transfer card you’ll want to initiate your balance transfer as soon as you get the card. Many promotional offers only cover transfers done within a certain time after opening the account. You’ll want to ensure that the transfer is done within the required time frame.

Some issuers may provide you with balance transfer checks. These are checks you can send in as payments to your existing loans that will move the balance over to your credit card. Keep in mind that some issuers have limitations on how much of your new credit limit can be used for transfers. You’ll also have to account for any balance transfer fee (typically 3% to 5% of each transfer), which will be added to your transferred balance.

Once the balance transfer promotional period ends, any balance remaining will be subject to your new card’s ongoing APR.

When is a balance transfer a good idea?

If you have a solid credit score but are struggling to pay off a large balance on a credit card with a high APR, a balance transfer can provide the opportunity to pay down that debt faster as the balance will not accrue interest during the balance transfer promotional period.

For example, the Citi Simplicity® Card * The information for the Citi Simplicity® Card has been collected independently by Blueprint. The card details on this page have not been reviewed or provided by the card issuer. is offering a 0% intro balance transfer APR for 21 months from the first transfer and 0% intro purchase APR for 12 months from account opening. After that, the variable APR will be 19.24% to 29.24%. There is an intro balance transfer fee of $5 or 3% of the transfer, whichever is greater, for transfers made in the first four months. After that, a balance transfer fee of either $5 or 5% of each transfer, whichever is greater, applies.

For example, say you’re carrying a $5,000 balance on a card with a 29.99% APR and want to move that to the Citi Simplicity balance transfer card:

Once you transfer a balance to the new card, commit to a repayment plan to get out of debt within the 0% APR promotional period. Just divide the balance by the number of months in the promotional period to calculate how much you need to pay every month to pay off the account.

If you don’t pay it all off by the time the promotional period ends, you can continue to pay whatever balance remains at the ongoing interest rate or consider opening yet another balance transfer card and repeat the process.

Interest does not backdate to the start of the balance transfer. You will only pay interest on the remaining amount of the balance going forward.

Is a balance transfer worth it?

To figure out whether a balance transfer will make financial sense, use a balance transfer calculator online to see if the math works in your favor.

In some cases, the credit line you receive with your new balance transfer card isn’t high enough to accommodate the amount of debt you want to transfer. In that case, you have a couple of options:

1. Transfer as much as you can, but continue to make payments on your old card along with the new card.
2. Open a second balance transfer card and move any remaining balance from the old card.
3. Consider a personal loan instead of a balance transfer card. You’ll still have to pay interest, but that rate may be much lower than your card’s current APR. Plus, you’ll likely get a much longer loan term and lower monthly payments in which to repay than you would with a balance transfer card.

A balance transfer card makes the most sense if you know you’ll be able to make a significant dent in what you owe. And you’ll need to avoid the temptation to use the old card for new purchases once the balance is transferred or else you’ll end up right back where you started.

Be aware that opening a new credit card will result in a hard pull of your credit by the issuer, which will knock down your credit score by a few points for about a year. That said, your credit score should recover nicely as you pay down that transferred balance and keep your old card’s balance at or near $0.

Pros 

• 0% APR promotional periods allow you to pay down debt faster.
• Ability to consolidate debt from multiple high-interest credit cards.
• Potential credit score increases as you pay off your debts.

Cons

• Balance transfer fee added to each transfer which can increase your debt load.
• Promotional periods have an end date. Any unpaid balance is subject to the card’s ongoing APR.
• Freeing up available credit on your existing card may lead to more debt if you aren’t careful.