What is a Balance Transfer & How Does it Work? (2024)

FAQs

What is a Balance Transfer & How Does it Work? ›

A balance transfer is a transaction that enables you to move existing debt to a new credit card. The purpose of a balance transfer is to get a lower interest rate and pay off what you owe much faster. Just keep in mind that most credit cards charge a 3% balance transfer fee.

A balance transfer is the process of moving a balance from one credit card to another, or from a personal loan to a credit card. You may also decide to transfer more than one balance to a different card to take advantage of an introductory offer and streamline your bills into one payment.

The problem is that transferring a balance means carrying a monthly balance. Carrying a monthly balance by not paying off the minimum amount due each month—even one with a 0% interest rate—can mean losing the card's introductory APR, its grace period and paying surprise interest on new purchases.

Transferring your debt has its drawbacks. Balance transfer credit cards often have a host of pitfalls that can potentially offset the benefits, including: Fees: Most credit cards have a 3% or 5% balance transfer fee. Temporary 0% APR: The 0% intro offer will eventually expire, and your regular APR may be 20% or higher.

If a balance transfer saves you money in the long run, it's a good move. Balance transfers are best for debt that would otherwise take several months (or more) to pay off. If you'd only need a couple of months to pay off your balance even without a transfer, you'll probably be better off leaving it on the current card.

Balance transfers won't hurt your credit score directly, but applying for a new card could affect your credit in both good and bad ways. As the cornerstone of a debt-reduction plan, a balance transfer can be a very smart move in the long-term.

Your old credit card will remain open after the balance transfer is complete, and you can decide whether you want to keep using it, stop spending on it, or close your account. Editorial Disclosure: The information in this article has not been reviewed or approved by any advertiser.

In some cases, a balance transfer can positively impact your credit scores and help you pay less interest on your debts in the long run. However, repeatedly opening new credit cards and transferring balances to them can damage your credit scores in the long run.

If you're not careful, you could find yourself making mistakes with your balance transfers that only push you further into debt. Plus, you'll still need to use your new card responsibly after your transfer goals are met, so a balance transfer might not be worth it if you don't want or can't manage another credit card.

Balance transfer credit cards typically require good credit or excellent credit (scores 670 and greater) in order to qualify.

Is it bad to max out a balance transfer? ›

While maxing out the credit line of a new account can cause your score to dip, your total available credit is also increasing, which can give you a boost.

You may be approved for a card but denied a balance transfer if your credit limit is too low, you waited too long to request a balance transfer after opening your account or you're trying to transfer a balance from one card to another with the same issuer.

You will save the most money if you pay off the transferred balance before your new card's low introductory APR expires and a much higher rate takes effect.

It costs $30 to $50 in fees to transfer a $1,000 balance to a credit card, in most cases, as balance transfer fees on credit cards usually equal 3% to 5% of the amount transferred.

The primary benefit of balance transfers is avoiding interest while you pay down debt. Therefore, they are best for people with a lot of high-interest debt to pay down.

A Balance Transfer is when you transfer an existing balance on a credit or store card to another credit card provider. A Money Transfer is when you use a Credit Card transfer to move money from the Credit Card to a bank account.

A balance transfer takes about five to seven days after your request before you'll see it appear in the account you're transferring the balance to. But a word of warning: Some credit card issuers can take 14 or even 21 days to complete a balance transfer.

Even if you have a 0% intro APR offer on your new balance transfer card, you still have to make at least your minimum payment every month (though, ideally, you'll pay more). If you don't make at least the minimum payment before your due date, you'll be charged a late fee and could lose your intro APR.

A balance transfer can be a useful tool to help you get out of debt and save money in interest in the long term, but it's risky. If you fail to pay off your balance by the end of the introductory period, or if you use your original line of credit to rack up more debt, you could add to your financial struggles.