What is a balance transfer credit card?

Written by
Jennifer Doss
Terms apply; see the online credit card application for full terms and conditions of offers and rewards. Please note: Any balance transfer savings vary depending upon account usage and payment behavior.

A balance transfer credit card is a credit card that allows you to transfer your debt (or balance) from one credit card to another. Usually, people transfer balances from a credit card with a higher APR to one with a lower APR and/or to a card with a 0% intro APR offer. By making a balance transfer, you’re giving yourself more time to pay off the debt interest-free (if there’s an intro 0% APR offer), or at a lower interest rate. A balance transfer credit card is NOT a way to hide from debt you’ve run up on a card you already have. Your debt won’t magically disappear if you transfer it to a new credit card.

Balance transfer cards are usually available only to those with good or excellent credit. Typically, that means having a credit score of at least 670 or more. Balance transfer cards for fair credit are harder to come by, and they may not offer 0% APR. Instead, they may charge a lower interest rate for their introductory period. Before signing up for one of these cards, be sure to read the fine print and calculate your potential savings – including any balance transfer fees. What’s more, be aware that late payments could cause an immediate increase in the APR.

What is the best balance transfer credit card?

Because it offers a lengthy intro 0% APR period on balance transfers AND rewards (a rarity among balance transfer credit cards), the CardName regularly tops our list for the best balance transfer credit card. This card offers a generous 18-month balance transfer period before regular RegAPR APR applies, plus up to 2% cash back on purchases. Earn 1% when you make a purchase, and then another 1% when you pay at least the minimum amount due on your bill each month, on time. And, for a limited time, news cardholders earn $200 cash back after spending $1,500 in the first six months. Citi is a CardRatings advertiser

Everyone’s needs will differ though when it comes to shopping for a balance transfer credit card, so what might be best for you won’t be best for everyone. Maybe you need an intro 0% APR period on both balance transfers as well as new purchases. If that’s the case, the CardName might be your best pick as it offers intro 0% APR on balance transfers for 21 months (from date of first transfer and transfers must be completed within four months of account opening) AND 12 months on new purchases (then RegAPR). Just remember to do your research and evaluate all the benefits offered with each card you’re considering, instead of just going with the first card you see that you think might meet your needs. You can see our list of the top balance transfer credit cards for more options.

>>SEE MORE: How to do a balance transfer

Who needs a balance transfer credit card?

If you have excellent credit and are regularly carrying a credit card balance, you might want to consider a balance transfer credit card to help you eliminant your debt. Having excellent credit will likely earn you a lower introductory (or ongoing) rate which can then help eliminate your debt faster.

For everyone else, balance transfer credit cards are a tempting option, especially if you have a higher-than-usual credit card balance, and an APR that makes the debt mount up faster than you’re able to pay it off. But, before you succumb to the temptation, take a moment to really assess what you’re signing up for. If you have a “good” or “average” credit score (or lower) the APR and terms you are signing up for may not actually help your situation. If you do qualify for a 0% APR balance transfer offer, make sure you pay off, or at least pay down as much as possible, your balance before the intro period expires as regular APR will apply to any unpaid balances after this period. If this happens, you could find yourself in a worse-off position than you started.

Brooklyn Lowery
Brooklyn Lowery
Editorial Director

FIRSTHAND ACCOUNT: My 1930s house desperately needed a kitchen remodel, so my husband and I got to work (we're DIYers whenever possible). We had saved and planned and had every intention of paying cash for the full project. Everything (miraculously) went pretty much as planned, so we stayed largely on-budget. But then it occurred to me, "Why would we empty our savings account to pay for this when we could open a balance transfer credit card and just pay this off slowly, interest-free, over the course of several months?" So that's what we did. We opened a Chase Slate® card and transferred a balance to it.

Doing this allowed us to keep our savings in our account just in case some other emergency happened, but we still didn't pay anything in interest; it was basically an interest-free loan. We set up two automatic payments each month so that we never missed a payment and we were certain to pay off the card well within the zero-interest period. Worked like a charm. We have a new kitchen, no debt and money in our savings account.

>>SEE MORE: Pros and cons of balance transfers

How to choose a balance transfer credit card

Before you choose a balance transfer credit card, it’s important to:

Know your credit tier

Before you do anything else, get to know your credit score/history. If your credit has taken a hit in the past, getting a balance transfer card with a 0% APR offer may be a bit of a challenge. Applying for cards for which your credit score disqualifies you will only negatively impact your credit score with no purpose. There are balance transfer options available for cardholders with average or fair credit, but the terms may not be as desirable (as in, maybe they offer a lower APR but probably not a 0% APR period). Understanding what fee and rate you will be getting is a valuable first step to determining which card will be best for you. All in, you may still pay less with a balance transfer, but you’ll need to crunch some numbers to know for sure (see our balance transfer calculator).

Read the fine print

Far too often cardholders don’t look beyond the excitement of an initial 0% APR offer and that’s a flashy feature, sure, but it can get you in trouble if it distracts you from the rest of terms. Ensuring that whatever APR your card transitions to (after the intro offer) is just as important as looking into the intro offer. Ask yourself: What if your APR jumps from 0% to 20% – would the card still be worth it to you? Maybe it is if the rewards program is strong enough and you have a solid plan to pay off your balance during the initial 0% period. Also, it’s important to note that some cards charge fees for each transfer you make. Knowing you card’s terms inside and out is a smart first step to saving money.

Compare your debt to your credit line

Many times people have a one-track mind when it comes to balance transfer credit cards: Get the lowest interest rate possible for the longest period of time. This line of thinking isn’t wrong, but it’s important to expand your mindset, too. Remember that credit utilization makes up about 30% of your credit score. When you make your transfer, it’s likely best to keep your old card open; closing it would reduce your available credit and your credit score could take a hit. Additionally, it’s not a great idea to max out any credit card. In other words, if your new card has a $2,000 limit and you transfer $2,000, your credit score could still take a hit even if you keep that old card open.

How to apply for balance transfer credit card

After assessing which card fits within your spending wheelhouse, applying is an easy process. Let’s say you’ve decided on a card. With most credit cards, there will be an opportunity to apply online. You will need to enter some personal information, so make sure to apply over a secure connection in a private area. You’ll enter sensitive information like:

  • Name
  • Address
  • Social Security number
  • Housing costs
  • Employment status
  • Annual income

Usually after you’ve entered in all of the requested data, the inquiry will automatically be submitted to the lender. Sometimes you’ll see approval immediately and other times you’ll receive a letter and/or a phone call to verify your approval or denial of credit card issuing. The process usually happens within a week at the latest (unless you’re applying for a secured credit card or credit cards for bad credit in which cases the process can take up to four weeks).

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Disclaimer:

The information in this article is believed to be accurate as of the date it was written. Please keep in mind that credit card offers change frequently. Therefore, we cannot guarantee the accuracy of the information in this article. Reasonable efforts are made to maintain accurate information. See the online credit card application for full terms and conditions on offers and rewards. Please verify all terms and conditions of any credit card prior to applying.

This content is not provided by any company mentioned in this article. Any opinions, analyses, reviews or recommendations expressed here are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any such company. CardRatings.com does not review every company or every offer available on the market.

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