What is a Balance Transfer? Guide for 2024

What Is A Balance Transfer?

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.

Compare Balance Transfer Credit Cards

Table of Contents

1. Is a Balance Transfer Worth It?
2. How Do Balance Transfers Work?
3. How to Do a Balance Transfer
4. Types of Balances Transferable to a Credit Card
5. Best Balance Transfer Credit Cards
6. Balance Transfer Tips
7. Ask the Experts

Is a Balance Transfer Worth It?

A balance transfer is likely to be worth it if you can get approved for a low-APR offer and pay off the transferred amount before the card’s higher regular APR takes effect. Using a balance transfer calculator can help you determine whether a transfer is worth it in your situation.

It’s just about that simple. There are a few other contributing factors you should familiarize yourself with before making a decision, though.

Here are some key things to consider:

• Credit card companies may accept balance transfers from other credit cards as well as from loans, so it’s worth exploring a transfer if you have high-interest debt of any kind.
• You generally need good or excellent credit to get a 0% balance transfer credit card, which makes a transfer most worthwhile. You can check your score for free on WalletHub.
• The average credit card balance transfer fee is 3.12% of the amount you transfer, and you need to take this cost into account when deciding whether a balance transfer is worth it.

In addition, you should weigh both the pros and cons of this type of transaction when deciding whether a transfer is right for your situation. You can peruse the biggest pros and cons below.

Pros and Cons of Balance Transfers

Learn more about the pros and cons of balance transfers.

How Do Balance Transfers Work?

When you transfer a balance to a credit card, the issuer of that card makes a payment to your original lender. The amount of the payment is equal to the amount being transferred. After the card’s issuer pays the original lender, you will owe the issuer of the card rather than your original lender.

Example of How a Balance Transfer Works

Let’s say you have a Chase credit card with a $10,000 balance and a 20% APR. To save money, you could potentially transfer your $10,000 balance to a low APR credit card from another company – Capital One, for instance.

Assuming your credit limit on the new Capital One card is high enough, Capital One would make a $10,000 payment to Chase. This would satisfy your payment obligation to Chase, and you would then owe Capital One.

Your balance would likely swell to $10,300 after Capital One assesses a balance transfer fee, but you could still save a lot if the card has a 0% introductory balance transfer APR. In fact, if your new card offers 0% for 15 months and you pay off what you owe during that time, you will save around $1,096 compared to the original card with the 20% APR.

What Happens After You Transfer a Balance?

After you transfer a balance to a credit card, you will be responsible for paying at least the minimum amount required by that card’s issuer each month. This amount will be listed on your monthly bill.

Paying at least the minimum by the due date will keep your account in good standing and allow you to keep any 0% intro APR your card may offer. But you’ll need to pay more than the monthly minimum at some point because cards with a low intro balance transfer rate typically have a high regular APR, which applies to any balance remaining when the intro period ends.

Learn more about how balance transfers work.

How to Do a Balance Transfer

1. Check your credit score. Balance transfer credit cards with 0% APRs usually require good credit or better for approval.
2. Find the best balance transfer card for you. Compare cards based on their balance transfer APRs, balance transfer fees, annual fees, and approval requirements.
3. Apply for your balance transfer card. Fill out the application with your personal and financial information, including the section of the application for requesting a balance transfer. Alternatively, you can request a transfer to an existing account. You’ll typically need to provide the following information when requesting a balance transfer:

• The account number for your existing balance.
• The dollar amount you wish to transfer.
• Standard credit card application information, including your name, Social Security number, employment information and income, if you’re getting a new card.

4. Keep making payments. Continue paying your original lender at least until the transfer is finalized. Your credit score could suffer otherwise.
5. Get approved (hopefully). You might be approved for a limit high enough to transfer your full balance, or you might only be able to do a partial balance transfer. Alternatively, you could be rejected for the new card altogether.
6. Pay the rest of the balance. 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.

Learn more about how to do a balance transfer.

Types of Balances Transferable to a Credit Card

The types of balances that you can transfer to a credit card depend on which bank you get your balance transfer card from. The graphic below illustrates the policies for the 10 largest credit card issuers in the United States.

Source: WalletHub evaluated the terms and conditions of online offers and called customer service representatives when information was not readily available.

*According to Citibank customer service, you can transfer loan debt and other types of debt by calling customer service, if your account is eligible.

Learn more about the types of balances you can transfer to a credit card.

Best Balance Transfer Credit Cards

WalletHub’s editors regularly compare more than 1,500 credit card offers to identify the best balance transfer cards. The cards below are some of the best available right now.

Opinions and ratings are our own. This report is not provided, commissioned or endorsed by any issuer. WalletHub independently collected information for some of the cards on this page.

The best balance transfer credit cards usually offer 0% introductory balance transfer APRs, $0 annual fees, and balance transfer fees around 3%. Even the best balance transfer cards usually have a high regular APR, however, so it’s a good idea to use a balance transfer calculator to see which card will save you the most money at the end of the day.

Want to see more balance transfer credit card offers?

Compare the Best Balance Transfer Cards

12 Balance Transfer Tips for 2024

1. Check Your Credit Score

The best 0% balance transfer credit cards typically require good or excellent credit for approval. So it’s a good idea to see where you stand before picking a card and applying.

2. Decide How Much to Transfer

A balance transfer doesn’t have to be for the full amount you owe. Partial transfers are not only acceptable, they’re actually wise. They allow you to take advantage of a card’s 0% intro period without worrying about how regular rates will affect the portion of your balance that you cannot pay off during the intro term.

To determine the proper transfer amount, start by identifying the monthly payments that you can comfortably afford to make. Then multiply that figure by the number of months you’ll have a low introductory interest rate.

3. Don’t Overlook Balance Transfer Fees

Balance transfer fees can prove quite expensive, having the potential to offset savings from a lower interest rate. But people often fail to appreciate their significance before the fact. That’s largely because balance transfer fees are among the least clearly represented account terms on credit card applications, according to WalletHub’s annual Credit Card Application Study.

4. Be on the Lookout for Free Balance Transfer Offers

There usually are a fair number of credit cards with no balance transfer fee. But most don’t offer a 0% balance transfer APR. Every so often, however, a free balance transfer credit card comes along. Such cards charge neither a transfer fee, nor interest for a certain number of months and typically are available only to people with at least good credit.

5. Make a Payoff Plan

Balance transfer credit cards must be used strategically, or not at all. That means you should only get one for a specific purpose and with an exit strategy in mind. A credit card payoff calculator can tell you what monthly payments you’ll need to make to be debt free by the time regular rates kick in, or how much you’ll save with a predetermined payment in mind.

6. Don’t Assume 0% Rates Will Always be Available

As mentioned above, the availability of 0% balance transfer credit cards isn’t a given. You should therefore approach each balance transfer that you make as if you’ll have no choice but to pay regular rates at the conclusion of the introductory period. If you are able to transfer another balance down the road, great. But banking on it is a recipe for a less robust bank account.

7. Understand the Various Ways One Can Leverage Balance Transfers

A balance transfer credit card’s most obvious value is as a debt management tool. The right card can help you save on interest and thus escape debt at the lowest possible cost. That’s the case whether you’re leveraging a balance transfer to pay off a single revolving balance or as a means of debt consolidation.

Interestingly enough, you can also use a balance transfer as a savings mechanism. If your bank account’s interest rate is high enough, leaving the majority of your would-be monthly credit card payments in the bank during a balance transfer credit card’s interest-free introductory period can be worthwhile. But this strategy is only advisable if it doesn’t become an excuse to spend more than you otherwise would.

8. Carefully Compare Offers

There are usually lots of different balance transfer credit cards available. Getting the best deal requires figuring out which ones you’re eligible for, then comparing the total savings available with each. Balance transfer savings depend on a card’s interest rates, fees, and introductory period (if applicable).

Consumers too often home in on one particular aspect of a balance transfer offer – typically the length of its 0% term. But it’s important to consider the overall impact of all potential costs. A balance transfer calculator will prove extremely helpful in this regard.

9. Keep Your Original Account Open

Even if you aren’t going to continue using the account from which you transfer a balance, you should still keep it open. This will prevent your overall credit utilization ratio from changing for the worse. Just make sure your card does not charge an annual fee.

10. Don’t Use a Transfer as an Excuse to Overspend

Thinking, “I’m not getting charged interest, so it doesn’t really matter how much I spend,” is the worst mindset you can have when it comes to a balance transfer. You’re going to have to pay up at some point, so make sure to use a balance transfer credit card in accordance with a well-thought-out budget.

Otherwise, any savings you score will quickly be erased by finance charges when regular rates take effect. You may even incur significant credit score damage if you can’t foot the bill.

11. Don’t Make New Purchases with Your Balance Transfer Card

When you carry a credit card balance from month to month, there is no grace period for purchases. That means any purchase you make will begin accruing interest immediately, unless your card has a 0% purchase APR. So it’s best to use a separate rewards card for spending. Plus, if you make purchases on your balance transfer card, those purchases could start accruing interest immediately.

12. Keep an Eye on Your Credit Score

A balance transfer does not affect your credit standing directly. Balance transfers aren’t recorded on credit reports, and credit-scoring companies don’t factor them into their models. But a balance transfer can lead to changes in your financial profile that will affect your credit score. For example, a balance transfer could lead to increased debt and higher credit utilization. Regularly checking your free credit score on WalletHub will enable you to quickly spot anything out of the ordinary.

Ask the Experts

For more insight into this balance transfer, we consulted a panel of experts. Click on the experts below to read their bios and thoughts on the following key questions:

1. Do you think most adults know what a balance transfer is and how it works? Why or why not?
2. What advice do you have for someone thinking about doing a credit card balance transfer?
3. Are 0% introductory APR balance transfer deals better for consumers or credit card companies at the end of the day?

Ask the Experts

Jim Drinkwine
Professor, Whatcom Community College
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Orhan Kara
Ph.D., Professor, Department of Economics & Finance, West Chester University of Pennsylvania - College of Business and Public Management
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Lawrence J. Belcher
Ph.D., Professor of Finance, Past President, Financial Education Association, Board of Directors, Financial Education Association, Editorial Board, Journal of Financial Education and Advances in Financial Education, School of Business, University of Indianapolis
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Kari Lamoreaux
Ph.D., Lecturer, Technology, Design and Technical Education, Utah State University, College of Agriculture and Applied Sciences
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Catalin Stefanescu
Professorial Lecturer, American University - Kogod School of Business, Department of Finance and Real Estate
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Michael P. Richman
Adjunct Professor, The University of Wisconsin-Madison, School of Law
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