Carrying high-interest credit card balances is like running on a treadmill: You make monthly payments on time, but the interest charges keep pulling you back with no end in sight. A credit card balance transfer could offer a reprieve. By moving your existing debt to a new card with a lower or 0% introductory interest rate, you may be able to pay down those balances faster at a lower cost.
But balance transfers are not a guaranteed fix. If you’re not mindful of the fine print, you could find yourself on a steeper climb to pay down and manage your credit card debt. Before you agree to any transfer offers, learn more about how to do a balance transfer: what to know about them, how they work and whether doing one makes sense for your situation.
Key Takeaways:
- A balance transfer moves your existing credit card debt to a new card, ideally one with a lower or 0% introductory rate.
- Most cards charge a balance transfer fee of 3% – 5% of the amount moved.
- Introductory 0% APR periods typically last for a limited time (usually 12 – 21 months) before the standard APR kicks in.
- A good or excellent credit score (generally 670 or higher) is typically required to qualify for the best transfer offers.
What Is A Credit Card Balance Transfer?
A credit card balance transfer involves transferring debt from one or more credit cards to another card, especially if the new card offers a lower interest rate for an introductory period. The goal of a credit card balance transfer is to lower the interest you pay and reduce your revolving debt.
For most people, the main reasons to use a balance transfer are straightforward:
- You’ll save money on interest. If you’re carrying a balance at 24% APR and you move it to a card with a 0% annual percentage rate (APR) for 18 months, every dollar you pay during that period goes toward your balance.
- You’ll consolidate debt. Juggling multiple card balances, due dates and APRs can be overwhelming. A balance transfer can combine several balances into a single monthly payment, simplifying your life and budget.
- You’ll create a clear repayment schedule. The promotional period gives you a defined window to pay down your debt aggressively without the penalty of compounding interest on your balance.
Balance Transfer Example
To compare how savings might stack up, here’s a look at various account balances at a standard 24% APR versus a 0% balance transfer for 18 months.
| $3,000 Balance | $5,000 Balance | $10,000 Balance | |
|---|---|---|---|
| STANDARD APR SCENARIO | |||
| Interest Paid (18 Months) 24% APR* | $1,080 | $1,800 | $3,600 |
| BALANCE TRANSFER SCENARIO | |||
| Transfer Fee (3%) | $90 | $150 | $300 |
| Interest Paid During Promo Period | $0 | $0 | $0 |
| Total Cost of Transfer | $90 | $150 | $300 |
| Monthly Payment To Pay Off In Time | ~$172/mo | ~$286/mo | ~$572/mo |
| Net Savings From Transfer | +$990 | +$1,650 | +$3,300 |
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How A Balance Transfer Works
Initiating The Transfer
Once you’re approved for a balance transfer card, you request the transfer either during the application process or through the new card issuer’s online portal or customer service line. You’ll provide the account numbers and amounts you want moved from other cards to the new one. The new issuer then pays off the old creditors directly rather than sending you a payment. That way, the debt is paid off, and you begin making new payments to the new issuer.
Typical Timelines
Most balance transfers are completed within 5 – 7 business days, though some can take longer, depending on the issuer. During that window, you must continue making at least the minimum payment on your old account to avoid any late fees or dings to your credit score.
What Happens To Old Accounts
Your old credit card accounts remain open after a transfer is complete, but the balance is paid off. If you transferred only part of your balance, you’re still on the hook for any remaining payments. Even after an old credit card account is paid off, it’s prudent to keep it open. Closing credit cards with long histories can hurt your credit score.
Balance Transfer Fees And Introductory Rates
Almost every balance transfer card charges a fee for the transfer, usually 3% – 5% of the transferred amount. The fee is added to your new balance, so factor that in when determining whether you’ll save money with a transfer. On a short timeline, the fee may outweigh the interest savings.
Additionally, many cards offer an introductory rate period, sometimes called a promotional rate, for a set number of months, typically 12 – 21 months. The best introductory rate you can score is 0%. When the promotional rate period expires, the remaining balance on the account is assessed using the standard purchase APR. Current average credit card APRs are above 20%; but your specific rate will depend on your creditworthiness and the issuer.
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Eligibility And Credit Score Requirements
Balance transfer offers (especially with 0% introductory rates) are typically reserved for consumers with good to excellent credit. Most issuers look for a FICO score above 670, and the most competitive offers require a score of 740 or higher.
Beyond your credit score, issuers look at:
- Debt-to-income ratio (DTI): DTI is a measurement of how much of your gross monthly income is going toward debt payments. In general, keeping your DTI below 36% is a good rule of thumb.
- Credit history length: A long track record of responsible borrowing works in your favor.
- Recent credit inquiries: Multiple credit card or loan applications within a short period can be a red flag and may reduce your chances of approval.
- Existing relationship with the issuer: You typically cannot transfer a balance between two cards from the same issuer.
You won’t know your approved credit limit until after you apply, and issuers don’t have to transfer the full amount you request. You may be approved for less, leaving part of your old balance in place with your former issuer.
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Pros And Cons Of A Credit Card Balance Transfer
| Pros | Cons |
|---|---|
| Interest savings can be significant | Fees may eat into interest savings |
| Simplified monthly payments | Balance transfer approval isn’t guaranteed |
| Motivation to pay down debt faster | Risk of going into deeper debt |
| No collateral required | New purchases may not qualify on transfer |
How To Do A Balance Transfer Step By Step
If you’re ready to save on interest and consolidate debt, here are some steps to follow to get a credit card balance transfer.
- Assess your current debt. List all cards, their balances, interest rates and minimum payments. Identify which balances might benefit most from a transfer.
- Check your credit score. Know where you stand before you apply. Many banks and credit card issuers offer free access to FICO scores.
- Compare balance transfer card offers. Look at the length of the introductory period, the transfer fee, the ongoing APR and any annual fees. A longer promo period may be worth paying a slightly higher transfer fee.
- Do the math. Add the transfer fee to your balance, then divide by the number of promo months. If that monthly payment is feasible and beats the interest you’re paying now, a balance transfer is probably ideal.
- Apply for the card. Submit your application and wait for a decision. Approval could happen the same day or take a few business days.
- Request the transfer. Once approved, initiate the transfer with your new card issuer. Provide the old account number and the amount you want moved over.
- Keep paying on the old card. Don’t stop payments on your existing account until the transfer is complete in order to avoid potential late fees or interest charges.
- Create a payoff plan. Divide your new balance by the number of months in the promo period, and commit to making that monthly payment. Automate it to stay on track.
- Avoid adding new debt. Don’t use your old card for new purchases while paying down the transferred debt. Check whether the new card charges its standard rate on new purchases from day 1.
- Keep tabs on the end date of the promotional period. If you’re not on track to pay off the full balance in time, adjust your payments or explore other options (such as another low or 0% balance transfer card).
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Alternatives To Balance Transfers
A balance transfer isn’t always the right move. Here are other options to consider.
Personal Loans
An unsecured personal loan can consolidate credit card debt at a fixed interest rate – often lower than revolving credit card rates – with predictable monthly payments over a set loan term.
Best when: Your credit card debt is too high to pay off within a typical introductory period, you may want to look into personal loan options.
Debt Management Plans
Nonprofit credit counseling agencies offer debt management plans to negotiate lower interest rates with your creditors. They consolidate debt payments into one monthly amount that you send to the agency, which then distributes the funds to each creditor. These plans run about 3 – 5 years and may require that you close your enrolled accounts.
Best when: Your debt is unmanageable, your credit is too damaged to qualify for a balance transfer and you need structured support.
FAQ
Bottom Line: A Balance Transfer May Get High-Interest Debt Under Control
A balance transfer to a new credit card can be a savvy way to reduce your debt when used with intention and discipline, but it’s not a shortcut. The savings materialize only if you pay down the balance before the promo period ends, factor in the transfer fee from the start and avoid piling on new debt.
Ready to start saving on interest? Explore balance transfer credit card options with Quicken Loans and find the right offer for your debt payoff goals.
Deborah Kearns
Deborah Kearns is an award-winning independent journalist with more than 15 years of experience covering real estate, mortgages and personal finance. Her work has appeared in the Wall Street Journal, Kiplinger, U.S. News & World Report, Quartz, CNN, Forbes, Fortune, Newsweek, The Associated Press and dozens of other outlets. She previously led content and communications at a Top 15 national mortgage company and held writing and editing roles at Bankrate, NerdWallet, LendingTree and RE/MAX. She holds a bachelor's degree in journalism from the University of Florida and a master's degree in public relations from Ball State University.
