What Is a Balance Transfer Credit Card? A Complete Guide

Key takeaways

• A balance transfer credit card moves debt from one or more cards to a new card, often with a low or 0% introductory APR.

• You’ll generally need a good-to-excellent credit score to qualify for the best offers.

• Many cards typically charge a balance transfer fee, so weigh that cost against the interest you could save.

• A balance transfer could be a good option if you have a clear plan to pay off the debt before the promotional period ends.

If you’re struggling to pay off high-interest credit card debt, a balance transfer credit card could help. Before you apply, it helps to understand how these cards work and whether one fits your situation. 

Below, learn more about balance transfer credit cards, how to choose the right card, and how to transfer your debt.

What is a balance transfer credit card?

A balance transfer credit card lets you transfer existing debt from one or more credit cards onto a new card, ideally with a lower interest rate. Your total debt stays the same, but a lower rate means more of each payment goes toward the balance instead of interest.

Some credit cards offer an introductory interest rate – often a 0% annual percentage rate (APR) – when you initiate a balance transfer. After the introductory period, the APR generally reverts to the regular variable rate. For perspective, the average interest rate on credit card accounts has stayed above 20% in recent years.

If you don't think you can pay off the balance before the promotional period ends, a balance transfer card may not be right for you, since you could still owe interest charges. A balance transfer is not the same as debt consolidation, debt forgiveness, or debt repayment. It's simply a way to lower the interest rate on your debt.

How do balance transfers work?

A balance transfer typically lets you move your existing debt from one credit card to another, ideally to qualify for a lower interest rate. Credit card companies routinely offer balance transfers to encourage people to move their balances over from their existing cards.

There are two ways this helps the credit card company:

• You may pay a balance transfer fee to complete the transaction, which adds to the amount you must pay off.

• If you fail to pay off the balance before the promotional APR period ends, the remaining balance will be subject to interest charges.

Is a balance transfer credit card right for you?

Before applying for a balance transfer credit card or searching for card offers, here's a quick checklist to help decide if it’s the right path for you.

1. Credit score

You'll typically need a good-to-excellent credit score to qualify for a balance transfer credit card. Credit bureaus base your scores on your credit history and how responsibly you manage debt.

So, what counts as good credit for a balance transfer? A good credit score is generally considered to be 670 or higher on the FICO^® credit scoring scale. Consider how you can improve your credit score if it falls below that mark. 

2. Credit card payments

If you have a balance on more than one credit card, a balance transfer can be a helpful way to consolidate multiple lines of credit without taking out a loan. You'll typically have just one low-interest payment and one due date to manage, which could make it easier to fit your debt payments into your monthly budget.

Having fewer due dates to track can help reduce the odds of missed payments. You can also reduce interest charges by transferring the full balance you owe to a card with a low or 0% APR.

3. Personal spending habits

If opening a new credit card account will tempt you to overspend, a balance transfer card may not be your best option.

Evaluate your spending habits and savings goals before applying for another credit card. If you can handle paying off your existing debt and commit to not creating new debt, a balance transfer card might be a smart move.

Remember that you'll likely need to pay more than the minimum payment each month to avoid interest charges once the promotional period ends. Paying down the balance faster can also help lower your credit utilization ratio, which could improve your credit score.

Who can get a balance transfer card?

Getting a balance transfer card means opening a new account, often with a different credit card company. Credit card companies may offer balance transfers to existing cardholders, but that's often an exception rather than a rule.

The offers you qualify for generally depend on your creditworthiness and the amount you'd like to transfer. If you want to transfer a large balance and can't find a single card with a high enough credit limit, you may need to open multiple new accounts.

But applying for multiple credit cards can mean paying multiple balance transfer fees. Each new credit inquiry can also slightly lower your credit score.

Choosing the right balance transfer card

If you decide a balance transfer is a good fit, review your options to find the right account. Here are some key questions to ask when comparing cards:

• How long is the introductory period? Many credit card companies offer a low – often 0% – interest rate during the introductory period. The longer that period, the more time you have to pay little to no interest.

• What is the regular APR? The annual percentage rate you get when opening a new balance transfer account doesn't stay the same. Know what the rate will increase to once the promotional period ends and what that could mean if you still owe a balance.

• What's the balance transfer fee? Credit card companies typically charge a balance transfer fee of 3% to 5% of the amount you move. Depending on how high your balance is, this can add up, so assess your situation to make sure you can afford the fee. Most card offers list the balance transfer fee upfront, but if you're unsure, take a closer look at the card agreement.

• Is there an annual fee? If you're trying to save money while repaying debt, you might prefer a card with no annual fee. Reviewing the card's terms and conditions can show you the types of fees you might pay.

• Can you transfer the whole balance? Being approved for a balance transfer card doesn't mean you can automatically move your entire balance. Your new credit limit may be lower than your previous card’s. In that case, you might need to apply for a card with a higher credit limit or spread the balance across multiple cards.

Your credit history can shape the range of choices you have when comparing balance transfer credit cards. The best offers and terms are typically reserved for people with higher credit scores.

How to transfer your credit card balance

The exact process might vary by issuer, but here's a closer look at how to do a balance transfer from one card to another:

1. Apply for a card: Look for one with an introductory 0% APR offer on balance transfers. Consider the intro APR period length, any fees you might pay, and the regular variable APR once it kicks in.

2. Determine which balances to transfer: Start with the card balances that carry the highest interest rates. This can help you pay off your balance quicker and save the most money on interest.

3. Initiate the balance transfer: You can request one online or by phone. You'll typically do this with the issuer where you opened the new account, and they'll handle the details of moving your balances. You'll usually need information about the debt you're transferring, including the card issuer's name, the amount, and your account number.

4. Calculate and pay balance transfer fees: Some credit card companies may waive the balance transfer fee, but not all do. Read the fine print to find out if you'll owe any fees.

5. Start making payments: Once the transfer goes through, your transferred balance will be on the new card. Try to pay off your balance – or at least most of it – within the introductory APR period to save money.

Balance transfer credit card pros and cons

Now that you know what a balance transfer credit card is and how it works, here's a quick breakdown of the advantages and disadvantages of using one.

Always weigh the pros and cons before opening any credit card. Remember, a balance transfer card can only do so much to ease debt. Ultimately, getting out of debt depends on you and your spending habits.

Alternatives to a balance transfer credit card

A balance transfer isn't the only way to tackle high-interest debt, and it isn't right for everyone. If you don't qualify or want to get out of debt another way, consider these options:

• Debt consolidation loan: A debt consolidation loan combines multiple debts into one monthly payment, often at a lower rate. This can simplify your finances if you qualify for a competitive interest rate.

• Debt payoff methods: The debt avalanche method targets your highest-interest debt first, while the debt snowball method clears your smallest balances first for quick wins. Either method could help you make steady progress without opening a new account.

• Debt management plan: A nonprofit credit counselor can work with your creditors to lower your interest rates and consolidate multiple payments. This route doesn't require a new loan, though it may come with fees.

If your credit needs work before you can qualify for a balance transfer, building it up first can help. A tool like the Chime Card^™ is designed to help you build credit over time when used responsibly.^{CC 1}

Choose wisely when considering a balance transfer

When signing up for a new balance transfer card, make sure you don't take on more than you can handle. For example, it's not wise to clear the balance on your old card and then max out the new one.

Keep your end goal in mind: You want to get out of debt. When you stay focused on that goal, you'll be more likely to accomplish what you set out to do and move your finances forward.