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Balance Transfers

What Is a Balance Transfer and How Does It Work?

A credit card balance transfer is a way to move your credit card debt from one card to another. Your outstanding balance will stay the same, but you may be able to lower your interest rate, or in some cases, get 0% interest for a period of time, sometimes up to 24 months.

With the right balance transfer card—one that offers 12 months or more with no interest charges - you can save money, get ahead on your credit card payments and pay down your debt faster.

What Are the Benefits of a Balance Transfer Credit Card?

For one, as described, you can save on interest charges for a set period of time. During that time, you can pay off as much of your debt as possible and hopefully emerge from the 0% introductory period with a paid off (or as close to it as possible) card.

The typical American consumer carries an average of $6,354 in credit card debt, according to Experian's State of Credit. If this same consumer carried this balance for a year with an average Annual Percentage Rate (APR) of 18%, transferring this balance to a 0% APR card for 12 months could save more than $600 in interest charges.

The other benefit is that you can consolidate all your payments into one, which means not having to keep track of multiple monthly payments. Let's say you are moving the balances from three cards to your new balance transfer card. Now, instead of needing to keep track of payment due dates for three cards, you will only have to one.

Here are 3 things to look for in a balance transfer card:

1. 0% introductory Annual Percentage Rate (APR)

Look for a card that offers 0% APR for as many months as possible. For instance, the Citi Simplicity® Card offers 0% interest on balance transfers for 21 months, giving you more time to pay off your outstanding balance with no interest charges.

2. Low Balance Transfer Fees

Average balance transfer fees are usually 3% to 5% of the total balance you are transferring. These fees will be added to your outstanding balance on the new card, and they will be factored into the monthly payment.

3. The Ability to Transfer Balances From More Than One Card

If you have multiple cards with a high APR, you can transfer all the balances at once.

6 Tips For Making a Balance Transfer Work For You

  1. Find the right card, with as many months as possible with 0% interest on transferred balances.
  2. Make a plan on how you are going to use that period of time to pay off the debt.
  3. Set up automatic payments so you never forget to pay at least the minimum payment, and hopefully much more, by the due date.
  4. Don't make any additional purchases—you will be charged interest on those charges.
  5. Don't buy anything else with the card.
  6. Pay your balance in full before regular rates take effect.

How Do You Get a Balance Transfer Credit Card?

Experian offers numerous balance transfer cards. Alternatively, if you are currently doing business with another credit card issuer or bank, and you like doing business with them, look on the company's website for balance transfer cards to see what the offer. Keep in mind you will generally need pretty good credit scores to qualify.

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