Balance Transfer Credit Cards, Explained
Joy Wallet is advertiser-supported: we may earn compensation from the products and offers mentioned in this article. However, any expressed opinions are our own and aren't influenced by compensation. To read our full disclosure, click here.
Credit card debt is widespread across the United States. In 2023, Americans owe about $1 trillion in credit card debt, and those aged between 40 and 49 hold about $7,600 in debt, as per TransUnion. The average credit card debt has increased in 2023 compared to the past three years. If you have a lot of debt and find it tough to handle, you may want to consider a balance transfer credit card.
While it may not offer immediate relief, it will help reduce the debt to some extent and make it easily manageable. This guide explains everything you need to know about balance transfer credit cards.
Jump To
What is a balance transfer credit card?
A balance transfer credit card is a type of credit card that allows you to transfer the outstanding balance from one credit card to another. The primary purpose of a balanced transfer credit card is to consolidate your existing credit card debt onto a single card with a lower interest rate or promotional interest rate for a specific period.
What does a balance transfer credit card offer?
There are many benefits of applying for a balance transfer credit card. Let's take a look at what it offers.
- Balance Transfer: You can transfer the outstanding balance from one or more credit cards onto the balance transfer credit card. This consolidates your debt into a single account.
- Lower Interest Rate: Balanced transfer credit cards often offer a lower interest rate or even a 0% introductory APR (Annual Percentage Rate) for a specific period, typically 6 to 24 months. This allows you to save on interest charges and pay off your debt faster.
- Repayment Period: During the promotional period with a lower or 0% interest rate, you can make significant progress in paying off your debt. It's important to note the duration of the promotional period and any applicable fees or terms associated with the transfer.
- Standard Interest Rate: Any remaining balance will be subject to the card's regular interest rate after the promotional period ends. Understanding this rate before applying for the card is crucial, as it can vary depending on the issuer and your creditworthiness.
Related: Best Low-Interest Credit Cards
Raise Your Credit 80 points*
- 5 star service trusted by over 450,000 members
- Have processed over $11,000,000 in bill payments for members
- No deposit, no credit check, no interest
- New member promotions available
*Potential increase based on StellarFi member data. StellarFi numbers observed an average of 80 points VantageScore® 3.0 increase during a member’s lifetime. Score increase based on members with an incoming score range of 300-499 pts, who made regular on-time payments, with regular on-time payments. Results may vary.
Things to consider before applying
Balance Transfer Fees
Some balanced transfer credit cards may charge a fee for the transfer, usually a percentage of the transferred balance. Make sure to understand the fee structure and calculate whether the savings on interest outweigh the transfer fee.
Creditworthiness
The approval for a balanced transfer credit card depends on your creditworthiness. A good credit score increases your chances of qualifying for a card with a favorable interest rate.
Payment Discipline
Making regular payments and avoiding late payments on your balance transfer credit card is crucial. Failure to do so may result in losing the promotional interest rate and incurring additional fees or penalties.
Who should consider a balance transfer credit card?
- Those with high-interest credit card debt. If you currently have credit card debt with high-interest rates, a balance transfer credit card can help you save money on interest charges. By transferring your balances to a card with a lower interest rate or a 0% promotional period, you can potentially pay off your debt faster and more affordably.
- Those who own multiple credit cards with balances. Managing multiple credit cards with outstanding balances can be overwhelming and may result in missed payments or higher interest charges. Consolidating your debts onto a single balance transfer credit card simplifies your finances and makes tracking and managing your payments easier.
- Those with a solid credit score. Balance transfer credit cards typically require a good credit score for approval. Suppose you have a solid credit history and a good credit score. In that case, you are more likely to qualify for a balance transfer credit card with favorable terms, such as a lower interest rate or a longer promotional period.
Who shouldn't consider a balance transfer credit card?
- Those with poor credit scores. Balance transfer credit cards typically require a good credit score for approval. You may not qualify for a balance transfer credit card with favorable terms if you have a poor credit history or a low credit score. Applying for a card and getting rejected can further harm your credit score.
- Those who lack financial discipline. Balance transfer credit cards require regular payments to pay off your debt within the promotional period or before the regular interest rate applies. If you cannot make consistent payments or have a history of late payments, a balance transfer credit card may not suit you. Late payments can result in losing the promotional interest rate and additional fees.
- Those who have excessive spending habits. If you tend to overspend or lack discipline in managing credit cards, a balance transfer credit card may not be the best choice. It's important to avoid using the card for new purchases and focus on paying off your existing debt. If you continue to accumulate more debt, it can worsen your financial situation.
- Those nearing completion of debt repayment. If you're close to paying off your existing credit card debt or have a short repayment period, the benefits of a balance transfer credit card may not outweigh the effort and potential fees associated with transferring the balances.
Raise Your Credit 80 points*
- 5 star service trusted by over 450,000 members
- Have processed over $11,000,000 in bill payments for members
- No deposit, no credit check, no interest
- New member promotions available
*Potential increase based on StellarFi member data. StellarFi numbers observed an average of 80 points VantageScore® 3.0 increase during a member’s lifetime. Score increase based on members with an incoming score range of 300-499 pts, who made regular on-time payments, with regular on-time payments. Results may vary.
Which are the best balance transfer credit cards?
Chase Freedom Unlimited®
Chase Freedom Unlimited is known for its balance transfer offer with no introductory balance transfer fee within the first 60 days of account opening. It also offers a 0% introductory APR on balance transfers for a specified period, providing an opportunity to save on interest charges.
Citi Simplicity® Card
Citi Simplicity offers a lengthy 0% introductory APR period on balance transfers and purchases. It is known for its straightforward terms and conditions, with no late fees or penalty rates.
Discover it Balance Transfer
Discover it Balance Transfer card provides a 0% introductory APR on balance transfers for a specific period and cashback rewards on purchases. Discover also offers free access to your FICO credit score, helping you monitor your credit health.
Related: Best Balance Transfer Cards
Pros and cons
Pros
- Lower Interest Rates. One of the primary benefits of a balance transfer credit card is the potential for lower interest rates. Many balance transfer cards offer promotional periods with 0% or significantly reduced interest rates.
- Debt Consolidation. If you have multiple credit cards with outstanding balances, a balance transfer credit card allows you to consolidate your debt onto a single card. This simplifies your finances by having only one monthly payment to manage.
- Pay off Debt Faster. By taking advantage of a lower interest rate or 0% promotional period, you can allocate more of your payments toward the principal balance. This accelerated debt repayment can help you become debt-free sooner.
Cons
- Balance Transfer Fees. Some balance transfer credit cards charge a fee for transferring your balances. This fee is typically a percentage of the amount being transferred. While the savings on interest can outweigh the fee, it's important to consider this cost when evaluating the overall benefit.
- Limited Promotional Period. The low or 0% interest rate offered during the promotional period is usually temporary, typically lasting for 6 to 24 months. Once the promotional period ends, any remaining balance will be subject to the regular interest rate, which could be higher than your previous card(s).
- Impact on Credit Score. Applying for a new credit card and transferring balances can have an impact on your credit score. Opening a new credit account may temporarily lower your credit score, and closing old accounts can reduce your overall available credit, potentially affecting your credit utilization ratio.
- Requires a solid credit score. Balance transfer credit cards typically require a good credit score for approval. If your credit score is low or your credit history is not strong, you may not qualify for the card or be offered less favorable terms.
Raise Your Credit 80 points*
- 5 star service trusted by over 450,000 members
- Have processed over $11,000,000 in bill payments for members
- No deposit, no credit check, no interest
- New member promotions available
*Potential increase based on StellarFi member data. StellarFi numbers observed an average of 80 points VantageScore® 3.0 increase during a member’s lifetime. Score increase based on members with an incoming score range of 300-499 pts, who made regular on-time payments, with regular on-time payments. Results may vary.
FAQs
Can all credit card balances be transferred?
You can transfer the balances based on your new credit card's limit. If you have remaining balance on your old credit card even after transferring, you will have to continue making payment until it is paid off.
What is a zero balance transfer credit card?
With a zero balance transfer credit card, you have a 0% interest on the outstanding amount. It comes at a cost and has a limited tenure. Once the introductory period is over, you pay regular interest.
What is the limit on a balance transfer?
The limit on your balance transfer credit card will be the same as your account's credit limit.
How long does a balance transfer take?
The process of balance transfer can take between 5 to 7 days.
The bottom line
Remember, a balance transfer credit card is not a solution to address excessive spending habits or ongoing financial challenges. It's important to have a clear plan to pay off your debt and use the card responsibly to maximize its benefits. It's crucial to carefully review the terms and conditions, including any balance transfer fees, ongoing interest rates after the promotional period, and other relevant factors.
Additionally, your eligibility and the specific terms you receive may depend on your creditworthiness and other factors. Researching and comparing multiple options based on your specific needs can help you find the balance transfer credit card that best aligns with your financial situation.
Joy Wallet is an independent publisher and comparison service, not an investment advisor, financial advisor, loan broker, insurance producer, or insurance broker. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. They are not intended to provide investment advice. Joy Wallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. We encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Featured estimates are based on past market performance, and past performance is not a guarantee of future performance.
Our site doesn’t feature every company or financial product available on the market. We are compensated by our partners, which may influence which products we review and write about (and where those products appear on our site), but it in no way affects our recommendations or advice. Our editorials are grounded on independent research. Our partners cannot pay us to guarantee favorable reviews of their products or services.
We value your privacy. We work with trusted partners to provide relevant advertising based on information about your use of Joy Wallet’s and third-party websites and applications. This includes, but is not limited to, sharing information about your web browsing activities with Meta (Facebook) and Google. All of the web browsing information that is shared is anonymized. To learn more, click on our Privacy Policy link.
Images appearing across JoyWallet are courtesy of shutterstock.com.
Share this article
