How Do Credit Card Balance Transfers Work?

If you have a significant credit card balance to pay off, paying down the principal balance can be a challenge if you have a high annual percentage rate (APR). That’s where balance transfers come in.

Credit card balance transfers give you the opportunity to move existing debts over to a new card, with the goal of lowering your interest rate or — even better — getting a period with a 0% APR.¹

Learn more about how credit card balance transfers work and how to do it.

What Is a Credit Card Balance Transfer?

A credit card balance transfer is when you move all or some of the existing balances you owe to a different credit card. Most people do this to take advantage of a lower interest rate for a period of time.

If you wish to make a balance transfer, you’ll have to complete an application with the credit issuer either online, by phone or in writing.

Many credit cards allow balance transfers, with some offering promotional periods of 0% APR. Some cards are even marketed as "balance transfer credit cards" because they have longer-than-average promotional periods to help consumers make progress on their debt payoff goals — some as long as 21 months.²

For cards offering balance transfers to new cardholders, there is typically a time limit to complete the transfer and still be eligible for the promotional APR.³ In other cases, cards may allow balance transfers on an ongoing basis or promotions may be offered periodically. (Note: CareCredit is not a credit card that allows balance transfers from other cards.)

How to Transfer a Credit Card Balance

If you’re thinking about doing a credit card balance transfer, follow these steps:

1. Assess your credit card debt and available options

Typically, consumers opt for a balance transfer when they have lingering high-interest debt they are having trouble paying down. They may find, for example, that they are only able to pay the minimum amount due, and because of interest charges, they don’t make much progress on the principal balance.

That’s why step one is to look at your credit card debt across your various card accounts and total it up. Balance transfer credit cards will allow you to move over balances from more than one card as long as you stay within the credit limit. Some cards might even allow you to move over other types of debt, such as a personal loan.²

You often won’t know your balance transfer limit until you apply for it, and it is based on creditworthiness.²

One of the main factors to consider when choosing a balance transfer offer is how long the promotional APR period will be. The longer it is, the more time you’ll have to pay down your balance without any interest accruing.³

Pay special attention to other card features, including the balance transfer fee (which is typically between 3% and 5% of the amount you're transferring) and what your APR will be once the promotional period ends. You should also consider other ongoing card rewards and benefits to find one that best aligns with your spending style and can provide you the most value moving forward.²

2. Apply for a balance transfer

Once you have chosen a balance transfer card offer, you have to apply for the balance transfer. The process could vary slightly by card issuer, but in general, you will fill out a brief application.

If the card is completely new to you, you may be able to apply for the card and the balance transfer offer at the same time. If you’re taking advantage of a balance transfer offer on a card you already have, then you can complete the balance transfer application via your online account or by calling customer service.²

Some cards might send balance transfer checks that let you pay off existing debt from your credit line. You can either write out those checks to your other creditors or deposit money directly into your bank account. Just be mindful to read the terms on these offers since they could vary from other types of balance transfer offers.²

Timing is important when you do a balance transfer because promotional offers might be for a limited time. For instance, if you are a new cardholder, you may have to transfer balances within a few months of opening the card to qualify for a lower or 0% APR offer.³

You also want to apply for a balance transfer when your credit is in good shape; the credit bureau Experian recommends a score of 660 or higher. That will give you the best shot at qualifying and getting a higher balance transfer limit.²

3. Understand the fine print

It may seem like there are only upsides to balance transfers, but there are a few drawbacks to keep in mind. For starters, most balance transfer cards do charge an upfront fee to transfer the balance, around 3% to 5% of the balance amount.² So, if you transfer $5,000 with a 5% fee, your balance owed now shoots up to $5,250.

It may be difficult to find a balance transfer credit card — apart from a few credit unions — that does not charge a fee. Still, if you transfer high-interest balances to a card with a lower or 0% APR offer — and as long as you pay off all or most of that balance before the promotional period is up — you should come out ahead.²

Other major factors to consider include what the regular APR will be after your promotional period ends and whether there is an expiration date on the balance transfer offer.³

You'll also want to make sure you manage your balance transfer card responsibly. With some cards, if you miss a payment, you may not only lose your promotional rate, but it could also trigger an even higher penalty APR. These rules will be listed in your credit card’s terms and conditions.⁴

As far as mistakes to avoid, a common one is thinking that balance transfers happen instantly. When you initiate a balance transfer, you’re telling the credit card company to pay your other creditor(s) on your behalf. That process can take some time. If you have payments due on those accounts while you're waiting, then you should continue to make the minimum payment, so you’re not charged a late fee.⁴

Maximize the Benefits of a Balance Transfer

The whole point of a balance transfer credit card should be to lower the cost of your debt payment and accelerate your progress. This requires some planning and discipline on your part to ensure that you follow through.

• Establish a repayment plan. Before you transfer a balance, you should create a plan of attack. The simplest method is to take the total of your balance transfer amount plus any fees incurred and divide it by the number of months you'll have the 0% or low APR.³ This will give you a monthly payment goal. For example, your transfer amount plus fee is $5,250 and you have 12 months of 0% APR. If you pay around $438 per month, you can pay off the full balance — without interest — before the promotional period is over.

• Manage your credit card spending after your balance transfer. You may successfully be paying down your debt after it's transferred, but if you continue to spend on the old card accounts, you’ll be creating more high-interest debt on top of what you already owe. Your goal should be to pay any new purchases made in full each month while continuing to make progress on your transferred balance.

• Utilize balance transfers to improve your credit score. When you first transfer a balance, especially if you’re opening a new credit card to do it, your credit score may take a temporary hit since it's considered a hard inquiry on your credit file.³ Over time, however, that temporary drop in score will recover, especially if you gradually lower your debt.⁵ That's because credit utilization — the amount you owe compared to your total credit limit — is a huge component in credit scoring calculations.⁶ Therefore, the closer you get to a zero balance, the better it is for your score.

• Don’t close your old accounts after you transfer your balances. Although it may be tempting to do so, keeping old credit lines open can help with your credit utilization.⁶ If you don’t trust yourself to not spend on your old accounts, simply hide those cards away and remove the cards as payment sources on your digital accounts.

• Use credit card balance transfers sparingly. Remember, each time you apply for new credit, including a balance transfer offer, it triggers a hard inquiry on your credit. If you keep applying for new credit or keep transferring the same balance to new cards and tacking on balance transfer fees each time, it can be counterproductive.⁷

Use Balance Transfers Carefully

Balance transfer credit cards can be helpful tools for consolidating existing debt and improving your overall credit. To make the most of these offers, however, use them sparingly and strategically. Do your research to find a card offer that gives you ample time to make payoff progress, and create a realistic payoff plan that works for your budget.

Managing Health and Wellness Costs With the CareCredit Credit Card

If you are looking for an option to help manage your health and wellness costs, consider financing with the CareCredit credit card.* Get the care you want or need with easy, flexible financing options that allow you to pay for out-of-pocket expenses over time. Use our Acceptance Locator to find a provider near you that accepts CareCredit. Continue your wellness journey by downloading the CareCredit Mobile App to manage your account, find a provider on the go and easily access the Well U blog for more great articles, podcasts and videos.

Your CareCredit credit card can be used in so many ways within the CareCredit network, including vision, dentistry, cosmetic, pet care, hearing, health systems, dermatology, pharmacy purchases and spa treatments. How will you invest in your health and wellness next?

Author Bio

Dawn Papandrea is a journalist with more than two decades of experience covering personal finance and consumer issues. She has written for leading financial publications and organizations, including U.S. News & World Report, Investopedia, Bankrate and others.