What Is a Credit Card Balance Transfer and How Does It Work?

Credit cards have some of the highest interest rates of any type of debt. With such high interest rates, if you can’t pay off your balance in full one month, it’s easy for your balance to get out of hand. That’s why many people consider credit card balance transfers.
So what is a balance transfer credit card? This is when you transfer what you owe on one credit card to another with a lower interest rate. The idea is that the new, lower interest rate will reduce your monthly credit card payments so they're more affordable and you’re in a better position to chip away at your debt. The process works for debt on a personal loan or business credit card.
People don’t just use credit card balance transfers to take advantage of lower interest rates. They can also help you move to a credit card with better terms or consolidate your credit card debt from multiple cards so you have fewer payments to manage.
Pros and Cons of Balance Transfers: Are They Worth It?
If you’re wondering if you should transfer the balance on a credit card, it’s important to weigh the pros and cons before you commit.
In the plus column, a balance transfer can reduce your interest payments if you have a high annual percentage rate (APR) on your current card. Your APR is the percent your credit card company charges in interest on any money you borrow. The higher the APR, the more you’ll owe in interest on your credit card balance.
Some balance transfer cards even offer 0% APR as an initial promotional rate. Look for 0% APR credit cards, as they won’t accumulate additional interest for a set period. For example, American Express has balance transfer cards with 0% introductory APR for up to 15 months.
But what is a balance transfer on a credit card good for other than lower interest rates? You can also use balance transfer cards to consolidate your debt from multiple credit cards to just one.
The downside is that you will probably have to pay the balance transfer fee on your credit card to move the balance. It’s also easy to get drawn in by low interest rates during limited promotion periods and then blindsided by the higher rates when that period ends. Higher interest rates can damage credit scores.
Step-by-Step Guide to Completing a Balance Transfer

If you choose to go ahead with a balance transfer, follow these steps to complete it as smoothly as possible.:
- Review your current credit card balance and interest rate to make sure you know where you’re at.
- Compare all your options and select a balance transfer card. Pay close attention to interest rates, how long the introductory offers last, and whether any transfer credit limits specify how much debt you’re able to transfer.
- After you read all the fine print, apply for the balance credit card. It may take time for the issuer to get back to you with an approval or denial based on the details you submit.
- Once you have your approval, initial the transfer. The credit card issuer will either pay your other credit card company directly or send you a check to use to pay off your balance. You may need to wait 10 business days or more for the transfer to process.
- Stop using the old card and start repaying your transferred balance with your new creditor.
Tips To Maximize a Balance Transfer & Avoid Pitfalls
Completing a balance transfer can be a positive first step toward tackling your credit card debt, but there’s still more work to do. Try these tips to make the most progress with your debt during a balance transfer.
Pay Off Debt Before the Promotional Period Ends
The introductory rate on balance transfer cards won’t last forever. Once the promotional period ends, you’ll have a new, often much higher, interest rate to pay on your remaining debt.
Get around this issue by paying off your debt before the promotional period ends, or at least as much of it as possible. The less debt you have left when the new interest rate goes into effect, the better off you’ll be.
Avoid New Debt While Managing Existing Balances
Try to avoid adding to your debt balances while you’re tackling your existing credit card debt. Any additional purchases you charge to your card will just start racking up more interest fees, making it harder to clear your balance.
Should You Use a Balance Transfer To Pay Off Debt?
Balance transfers can help you consolidate debt and access lower interest rates, but they’re not all created equal. If you’re thinking about this option, review all the available cards to find the best one for your needs.
MoneyAtlas’s thorough comparisons of different credit cards based on interest rates, fees, and other terms can help. Explore credit card options to discover your ideal balance transfer card.
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