It’s a strategy people usually use to take advantage of a low interest rate on a new card—typically so that they can save on interest and pay off their balances faster.
Balance transfers let you move credit card balances from one account to another—often to a brand-new card. (Sometimes, you can also move some types of loans.)
Here’s how the process works:
Find a balance transfer card;
Apply and get approved
Give the new card issuer
the details for the accounts you’re transferring
New card issuer pays off the old cards;
Old cards now have a $0 balance
New card now has the combined balances
of all the accounts you transferred
Start making payments on the new card
Even after you’re approved, it might take the card issuer a few weeks to complete the balance transfer. Until you’re sure the transfer is finished, you need to keep making payments on your old cards, or you’ll risk wrecking your credit score (and racking up late fees).
Even after the transfer is complete, it doesn’t hurt to check old accounts on occasion to make sure there aren’t any fees or balances still hanging around.
People typically use balance transfers for two main reasons:
You might be considering a balance transfer if you’re trying to dig out of high-rate credit card debt. While it can be a helpful strategy in many situations, it’s not always the right move. Here are some questions to ask yourself as you’re trying to decide:
And remember that although a balance transfer might sound like a no-brainer (who wants to pay 20% if you can pay 0%?), they’re not free. The new card typically charges 2% and 5% of the total amount you transfer. Do your best to weigh the hard numbers of the situation before you commit.
And while you might be tempted to Marie Kondo your wallet by closing all your old cards after the transfer, think twice before you do so. Experts generally recommend keeping them open because it’s good for your credit.
A balance transfer lets you shift existing balances from one or more credit cards onto a new credit card—usually one with a low introductory interest rate. Many people use it as a strategy to save on interest while they’re paying off their cards. Although it can sound like a great deal, it can be hard to qualify for a balance transfer card, and doing a transfer typically comes with fees.