How a Credit Card Balance Transfer Works

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  • Balance transfers allow you to move debt from an existing credit card account to a new card at a lower interest rate.
  • Most credit card companies charge fees between 3% and 5% of the balance being transferred.
  • The low interest rates that typically accompany balance transfers are temporary, so be sure to take advantage of your low introductory rate by paying more toward your debt during this time.

Balance transfers are one popular method for getting a handle on excessive credit card debt. If you're considering a credit card balance transfer, be sure to understand how the process works and the role your credit scores may play.

What is a credit card balance transfer?

Credit card balance transfers allow you to move debt from an existing credit card account to a new card at a lower interest rate. Specially designed balance transfer credit cards typically offer borrowers a low or zero percent annual percentage rate (APR) for a fixed period.

During a balance transfer, the principal amount of your debt will remain the same. However, because balance transfer credit cards offer a low introductory APR, borrowers often save money on interest charges. As a result, balance transfers may help borrowers pay down debt faster than they could otherwise.

Things to know before transferring your credit card balance

Balance transfers are popular options for debt management. However, like any financial tool, they come with risks as well as rewards.

  • Your credit scores can determine your APR. Lenders may consider your credit scores as a factor when determining the APR for your balance transfer card. Many cards only offer the lowest rates to applicants with good, very good or excellent credit scores.
  • Balance transfer fees can add up. Most credit card companies charge balance transfer fees, which are typically between 3% and 5% of the amount being transferred. Be sure to keep these fees in mind when considering a balance transfer.
  • Low introductory APRs are temporary. Introductory APRs vary from card to card, but they usually last anywhere from 12 to 21 months. Be prepared for your interest rate to go up and try to take advantage of your low introductory APR by paying more toward your debt during this time. APRs for a balance transfer credit card beyond this promotional period may be based on your credit scores.

How a credit card balance transfer works

If you're considering a balance transfer credit card, you may be unsure about the process. Here's a step-by-step breakdown of how credit card balance transfers work.

  1. Do your research and apply for a balance transfer card.

    First, evaluate your financial health. Applicants with higher credit scores are more likely to be approved by a lender and qualify for the best introductory offers.

    When you're looking for the best balance transfer credit card, read up on the terms of the card's introductory offer, including grace periods, fees and benefits. Hidden costs can be hard to spot, so it's important to run the numbers to see if the card will help you save.

    Compare different cards to find the best deal. Once you've nailed down the right offer for you, it's time to submit your application. You'll need to provide personal and financial information such as your Social Security number, income and expenses. The credit card company will then evaluate your finances, including your credit reports and credit scores.
  2. Transfer your existing balance to the new credit card.

    If your application is approved, the balance transfer can begin. You may receive a blank check from your new credit card company to pay off your old card, or they may complete the transfer on your behalf. The timeline for your balance transfer depends on your unique circumstances. Some transfers may take as little as two to three days, while others may take up to six weeks.

    Your old credit card account will remain open after your balance transfer, but don't rush to close it. Doing so may impact your credit scores by reducing your total available credit and increasing your credit utilization rate.
  3. Pay off your balance.

    Once your unpaid balance is transferred, you'll begin making payments on your new balance transfer credit card. If your goal is to eliminate old debt, you should aim to pay as much as you can afford before your introductory rate expires.

Once your balance is paid in full, use your new credit card cautiously. Remember: You've worked hard to improve your financial health. Don't undo that hard work by charging more debt to your new card.