How Do Balance Transfers Work? 5 Things You Should Know

How Do Balance Transfers Work? 5 Things You Should Know

A balance transfer can be a great way to pay down high-interest debt. Some of the best balance transfer credit cards offer 0% introductory APR promotions that could save you hundreds of dollars in interest charges.

But depending on your situation, a balance transfer may or may not be a good idea. Keep reading to learn how balance transfers work and whether a balance transfer is right for you.

What is a balance transfer?

A balance transfer is a credit card feature that allows the cardholder to move debt from one credit card to another. Generally, the new card has a lower interest rate or no interest rate at all for a set amount of time.

You can even consolidate balances from several credit cards, which can also simplify your debt repayment strategy as you’ll only have one monthly payment instead of several.

According to a report by WalletHub, some credit card issuers also allow you to use a balance transfer to pay off:

  • Store cards
  • Auto loans
  • Student loans
  • Mortgages
  • Home equity lines of credit
  • Small business loans
  • Payday loans    

The amount you can transfer depends on your credit limit on your new card and other set limits by credit card issuers.

How do balance transfers work?

When you request a balance transfer, either when you first apply for a credit card or after you’ve already opened the account, you share the account number of the debt you want to transfer and the amount.

Typically, the credit card issuer effectively pays off that amount directly. But in some cases, the issuer will mail you a blank convenience check that you can use to pay down other debts.

While you’ve submitted a request, however, you still need to make sure you make payments on the old debt until the transfer goes through. Depending on the card, the process can take anywhere between two days and six weeks.

Once the issuer has completed the transaction, you’ll have a balance on your new card and can start making payments.

If you do a balance transfer, it’s crucial that you have a plan to pay down the debt quickly. Credit cards don’t have set repayment terms, and your minimum monthly payment will likely be only 1% to 2% of the statement balance.

As a result, getting too complacent could put you right back in the same situation you were before. So, whether or not you have a 0% introductory rate, resolve to pay off the debt as quickly as possible.

Balance transfer credit cards

To entice you to open an account, many credit card issuers offer balance transfer credit cards with promotional rates. While some cards offer short promotional periods, some go as long as 18 or 21 months. That’s a long time to pay off debt interest-free.

But if something sounds too good to be true, it might be. Most balance transfer credit cards charge a fee to process the transaction — typically 3% or 5%. Also, if you accidentally miss a payment, you lose the 0% APR and start paying the card’s regular APR, which is typically above-average.

That said, some balance transfer credit cards don’t charge a balance transfer fee. But with these — and, frankly, many other balance transfer cards — you likely won’t get many other benefits, especially not rewards for your everyday purchases.

If you’re considering a balance transfer credit card, research several cards to make sure you get the features that suit your situation best. For example, a rewards credit card with a 0% APR balance transfer promotion could offer enough benefits to make up for a balance transfer fee.

But if you’re not a big spender or you don’t plan on using credit cards again anytime soon, a card with no balance transfer fee and no rewards should be perfect.

How balance transfers affect your credit

Almost everything you do with credit cards and loans can impact your credit in one way or another. Specifically, balance transfers can influence your credit score in two ways:

Opening a new card: If you’re applying for a balance transfer credit card, the issuer will run a hard inquiry on your credit report. Every inquiry you get can knock a few points off your credit score, so keep your applications to a minimum.

Credit utilization: Your credit utilization is calculated by dividing your balance by your credit limit. So, if you have a $5,000 balance and a $10,000 credit limit, your credit utilization is 50%. A high credit utilization tells creditors that you’re overloaded with debt, even if you have a small credit limit.

So, if you transfer that $5,000 balance to a card with a $7,500 credit limit, your utilization will jump to 75% and your credit score could go down. Generally, credit experts recommend keeping your utilization rate below 30%, but the lower, the better.

Is a balance transfer worth it?

While a 0% APR is appealing, it’s not necessarily the best idea for everyone. It generally depends on how much you need to transfer, your interest rate, your repayment plan, and your credit score.

For example, if you have less than $1,000 to pay off or your interest rate is relatively low — 12% or less — the savings would likely be minimal, especially if you have to pay a balance transfer fee. Use a balance transfer calculator to break down the math for your situation to see if the savings are worth it.

Also, if you have a lot to transfer and you don’t think you’ll make much of a dent in it before the promotional period ends, you’ll be right back where you started.

None of that matters, though, if you can’t get approved for balance transfer credit cards. These cards typically require good to excellent credit, which usually means a credit score of 700 or higher.

Check your credit score, and if it’s not good enough yet, work on improving it before you apply. You can use a free service like Credit Karma, Discover Credit Scorecard, or Credit Sesame to get your credit score for free.

The more you know about balance transfers, how they work, and what they can do for you, the easier it will be for you to determine whether it’s right for you. Do your research and consider several different options to make sure you select the best balance transfer card for your situation.

And, most importantly, don’t be a repeat offender. Once you’ve paid down the debt, avoid adding more, especially if it’s credit card debt. Doing this will help improve your financial health and your credit score.

Editorial Note: This content is not provided or commissioned by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.

This article was last updated June 4, 2018 but some terms and conditions may have changed or are no longer available. For the most accurate and up to date information please consult the terms and conditions found on the issuer website.

Our editors independently research, test, and recommmend the best products; you can learn more about our review process here. We may receive commissions on purchases made from our chosen links.

Article Staff

Ben is a money and travel writer living in Utah. He has spent the past 10 years studying and working in the financial industry.

Ben has written for sites such as NerdWallet, USA Today, Money,, Credit Karma, and US News.

Ben loves giving people the tools they need to improve their financial health.

When he's not writing, Ben enjoys planning his next vacation, reading, and eating chips and salsa. You can connect with him at

Editor Jenna Holtz
Researcher Ronnie Langston
Art Director Cherry Barbacena

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How Do Balance Transfers Work? 5 Things You Should Know

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