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How do balance transfers work?

A man initiates a balance transfer.
August 13, 2019

By Katie Pins

If you're interested in making a balance transfer, we're here to help! We broke down somethings to consider, how a balance transfer works and the steps you'll need to take to initiate a balance transfer.

What are balance transfers?

A balance transfer is when you move your credit card balance to another (usually new) credit card. You do this by using the new credit card to pay the balance you owe on the other credit card. Although saying that you are “paying off” the credit card balance is technically accurate, I’d caution against this way of thinking. In reality, you are just moving your credit card debt from one credit card to another credit card.

So, why do people do it? You can transfer your debt from a high-interest rate card to a low-interest rate card. If you have a revolving balance that you’re trying to pay off, it is easier to make payments to the principal (your balance) if you are paying a lower interest rate. A transfer can save you money on interest and can lower your debt with extra payments.

A balance transfer can also save you a lot of headache and confusion by consolidating your payments into one place. Instead of paying multiple credit card bills, you could move those balances to one location and simplify your payments.

How do balance transfers work?

When you decide you want to do a balance transfer, you’ll notice there are a few things to consider, including your credit score, credit card special promotions, fees and fine print. Let’s break down the specifics of each.

Credit score: In order to get a new credit card with a 0% interest rate period, a low regular interest rate and a low transfer fee, you’ll need a good credit score. Each time a credit card company approves a new customer, they take on some risk. In order to know that you are a low-risk customer, the credit card company will need to know that you have a history of making payments on time. 

Low intro rate periods: Credit cards that are great for balance transfers have introductory rates as low as 0 percent. To take advantage of these low-rate promos, you may want to transfer your balance as soon as you open the card. See how long the special promotional period is. The longer the promotional period, the more time you have to pay your balance without interest.

Balance transfer fees: It is very rare to find a credit card without a balance transfer fee. This fee is usually a percentage of the amount you move to your new credit card and is charged by the new credit card. A balance transfer fee could be around 2 percent of the amount transferred.

Fees can also have a minimum. This means that if 2 percent of your amount transferred is less than the minimum, you’ll pay the minimum payment. It can be as low as $5 in some cases.

The fine print: Sometimes the special rate only applies to balances and not new purchases. In that case, you could end up paying a high rate on your recent purchases and bills, which can slow down your debt payment progress.

Also, pay attention to the standard rate after the promotional period ends. How high is that interest rate? Are you comfortable paying that rate if you’re unable to pay off your entire balance during the promo period?

Finally, most banks, credit unions and credit card companies do not let you transfer a balance within their own institution. So, you cannot transfer a balance from a credit card at Bank A to a new credit card at Bank A. You would need to open a credit card at a new bank. Make sure to read the account agreement and disclosures so you know what you’re getting into.

Balance Transfer Steps

1. Compare offers and check your credit score. Many credit cards have promotional rates just for balance transfers. It is important to do your research and compare these offers by looking at the fine print. Here are some things to look at closely to help you compare cards:

  • Balance transfer fee
  • Balance transfer limitations and restrictions
  • Interest rate (intro rate and regular rate)
  • Length of the promo period
  • Annual fee

Once you’ve picked a card you want, check your credit score before applying. It’s always helpful to know your credit score before applying for any new credit card or loan. It will allow you to set your expectations and get a better idea of what to apply for.

2. Apply for a new credit card.

3. Get your information together and call your new credit card issuer. If you’re approved for a card, you may want to start your balance transfer right away. You should be able to initiate the transfer by either calling your new credit card issuer or going to their online banking website. You will need the account number of your existing credit card(s) and the amount you wish to transfer. Your new credit card issuer will look at your credit limit and some other criteria to see if this amount works for them too.

4. Keep making payments. It could take up to three weeks to set up a new account and post the balance transfer transaction. During that time, you should continue to make your required payments on all your credit cards to avoid late fees or penalties.

5. Start paying off that balance!

6. Continue to monitor your old account. Switching to a new card can be simple but it’s important to keep an eye on that old card and its balance.

One last tip

Create a payment plan before opening the new card. Take a look at how much your current balance is and how much you want to pay off. There are a few ways you can come up with a plan if you have a zero-interest period:

1. Divide your planned payoff amount by the number of months you want to take to pay off that loan. Are you comfortable with making those payments or is it a stretch?

2. Divide your planned pay off amount by the amount you want to pay each month. Are you happy with the amount of time it will take to pay off this debt, or do you need to pay down the balance quicker?

No matter how you come up with your plan, it’s important to think about where your extra money will come from. What do you need to cut back on? You may have to cut expenses and reevaluate your other financial goals.


Katie Pins is a marketer fascinated with finance. Whether the topic is about the psychology of money, investment strategies or simply how to spend better, Katie enjoys diving in and sharing all the details with family, friends and Money Mentor readers. Money management needs to be simplified and Katie hopes she accomplishes that for our readers. The saying goes, "Knowledge is Power", and she hopes you feel empowered after reading Money Mentor.