What is a balance transfer credit card?

4 min read

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If you’re continuously carrying balances on multiple credit cards, it might be time to consider a balance transfer credit card. The best balance transfer credit cards help you consolidate your existing credit card balances into a single monthly payment, and many offer generous introductory APR periods that last a year or longer.

This means that you can use a balance transfer credit card to pay off your existing debt interest-free, as long as you pay off your transferred balances before the intro APR period runs out. You’ll have to pay a balance transfer fee on every balance you transfer to your card, but a balance transfer credit card is a great way to pay off old balances, get out of debt and boost your credit score.

What is a balance transfer?

A balance transfer is exactly what it sounds like: a method by which you can transfer a balance from an existing credit card to a new credit card. By transferring old credit card balances onto a balance transfer credit card, you can consolidate your debt and, in many cases, pay it off faster. Many balance transfer cards make this easier by offering an introductory zero percent APR period during which you can pay down your transferred balance without paying interest.

A balance transfer is an excellent way to consolidate credit card debt and pay it off quickly. The best balance transfer credit cards offer an introductory zero percent APR on balance transfers for 15 to 21 months, giving you over a year to pay off your transferred debt interest-free.

Should you do a balance transfer?

Balance transfers have both pros and cons. If you choose — and use — your balance transfer credit card wisely, you’ll be able to pay off your debt in full before the intro APR runs out. However, you could also find yourself in a situation where you don’t pay off your whole debt before the regular APR kicks in, which means you’ll be back to paying interest on your transferred balance.

If you’re having difficulty paying off the balances on your existing credit cards, a balance transfer credit card can help you consolidate your debt into a single monthly payment. If you have high-interest credit card debt, a balance transfer card with a lengthy introductory APR period can help you save money as you pay down your transferred balances.

A balance transfer credit card can also boost your credit score. When you open a new line of credit, you’ll generally see your credit utilization ratio improve. Your credit utilization ratio, which compares your available credit to your current debt, makes up 30 percent of your credit score. If you make regular monthly payments on your transferred balances without taking on any new debt, your credit utilization ratio will continue to go down — meaning your credit score should continue to go up. Plus, you’ll reap the credit-boosting benefits of all of those on-time credit card payments, which make up 35 percent of your credit score.

Some people take out balance transfer credit cards with good intentions, but find themselves racking up new balances on their credit cards even as they work to pay their old balances off. If you’re not ready to commit to paying off your credit card debt without taking on new debt, a balance transfer credit card might not be right for you.

What is a balance transfer credit card?

A balance transfer credit card has terms specifically designed to help you manage and pay off the balances you’ve charged to your existing cards. While many (not all) credit cards will allow you to transfer a balance from another card, the best balance transfer cards offer generous introductory zero percent APR periods, so you can work on paying off your balances without paying interest.

That said, balance transfers aren’t free. Expect to pay a balance transfer fee of 3 to 5 percent on any balance you transfer. This means that if you transfer $1,000 to a balance transfer credit card, you’ll pay between $30 and $50 in balance transfer fees.

How do you do a balance transfer?

The balance transfer process is actually very simple. When you apply for a balance transfer credit card, you’ll be able to indicate which balances you’d like to transfer to the card upon approval. Enter the 16-digit number of the credit card(s) from which you plan to transfer the balance, as well as the amount of money you’d like to transfer to your new balance transfer credit card.

If you already have a balance transfer credit card and want to transfer an additional balance to your card, you can complete a similar transfer process online or over the phone. Be aware that some balance transfer cards limit the period of time in which you can transfer balances; the Citi Simplicity® Card, for example, offers an introductory zero percent APR for 21 months, but all balances must be transferred during the first four months of card ownership to take advantage of this offer.

You should also be aware that balance transfers aren’t instantaneous. Although it only takes a few minutes to complete a balance transfer request, it generally takes between one week and one month to transfer a balance to a balance transfer card. Continue to make regular payments on all of your existing credit cards until you have confirmed that your balances have transferred in full and any final interest charges have been paid off.

How to choose a balance transfer credit card

When you’re trying to decide between balance transfer credit cards, start by checking your credit score. Many of the top balance transfer cards are designed for people with good credit or excellent credit, but there are also balance transfer options available for people with less-than-good credit. The Discover it® Secured card, for example, is a secured credit card that offers 10.99% APR on balance transfers for six months (24.49% variable APR thereafter) — which isn’t as great as a zero percent APR offer, but is still better than the interest you’re probably paying on your existing balances.

Once you know which balance transfer credit cards are right for someone with your credit history, start comparing terms. Which balance transfer credit card offers the best APR on balance transfers? Which card comes with the lowest fees? Are you looking for a balance transfer credit card that also offers cash back rewards? Take a look at what’s out there, choose the card that’s best for you and then start transferring balances and paying off your debt.

After you get your credit card debt paid off in full, do your best to avoid carrying any new revolving balances — though if you find yourself in a similar situation in the future, remember that balance transfer credit cards can be a solution.