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This article was last updated Oct 14, 2019. Terms and conditions may have changed. For the most accurate information, please consult the issuer website.
If you’re struggling to pay down high-interest credit card debt, a balance transfer card could be a lifeline — a chance to get a 0% APR for a specified period of time. With a 0% APR, your payments will be 100% directed toward the balance rather than the principal owed plus interest charges, allowing you to knock down that debt faster.
However, consumers can be easily tripped up and make expensive mistakes with a balance transfer deal.
According to our 2018 CompareCards.com Balance Transfer Credit Card survey, 41% of Americans have had a balance transfer card in the past — but four out of 10 of those consumers failed to pay off the balance in full during the reduce-rate intro period.
To avoid that happening to you, here are some tips to help you succeed.
In this article:
- How does a balance transfer card work?
- Who can qualify for a balance transfer card?
- How will a balance transfer card affect my credit score?
- What is the best repayment strategy for a balance transfer?
- Common pitfalls of balance transfer deals
- The bottom line
How does a balance transfer card work?
Put simply, a balance transfer is when you use one credit card to pay off another. You can’t do a balance transfer between cards from the same issuer, however, so if your debt is on a Chase card, for instance, you won’t be able to transfer it to another card issued by Chase.
But you may be able to take advantage of a balance transfer offer on an existing card. For example, if you have the Discover it® Cash Back, you can log into your account online and click “Transfer Balances: See Your Offers” to find out what balance transfer periods you might have available. If there’s one you like, you can use that deal to pay off the balance of another high-APR card in your wallet (as long as it isn’t another Discover card).
Many balance transfer cards charge a fee of around 3% or 5% of the amount you’re transferring. For example, if you’re transferring $1,000 in debt to a card that charges a 3% balance transfer fee, the fee would be $30 and your balance on the new card would be $1,030. However, know that there are credit cards that don’t charge a balance transfer fee.
The two key features you should look for in a balance transfer card is the length of the introductory period of 0% APR and the balance transfer fee. For example, the Citi Simplicity® Card - No Late Fees Ever offers 0% for 21 months on balance transfers (then a 16.24% - 26.24% (Variable) APR applies) from the time you open the card.
Get a dollar-for-dollar match of all the cash back you've earned at the end of your first year, automatically*
Earn 5% cash back at different places each quarter up to the quarterly maximum, when you activate*
Any amount, any time. Cash back rewards never expire*
- INTRO OFFER: Discover will match ALL the cash back you've earned at the end of your first year, automatically. There's no signing up. And no limit to how much is matched.
- Earn 5% cash back at different places each quarter like gas stations, grocery stores, restaurants, Amazon.com and more up to the quarterly maximum, each time you activate.
- Plus, earn unlimited 1% cash back on all other purchases - automatically.
- Redeem cash back any amount, any time. Rewards never expire.
- Use your rewards at Amazon.com checkout.
- Get an alert if we find your Social Security number on any of thousands of Dark Web sites.* Activate for free.
- No annual fee.
- See Rates & Fees
See additional details for Discover it® Cash Back
0% for 12 months on Purchases
0% for 21 months on Balance Transfers
16.24% - 26.24% (Variable)
- No Late Fees, No Penalty Rate, and No Annual Fee... Ever
- 0% Intro APR on balance transfers for 21 months from date of first transfer. All transfers must be completed in first 4 months. After that, the variable APR will be 16.24% - 26.24%, based on your creditworthiness.
- 0% Intro APR on purchases for 12 months from date of account opening. After that, the variable APR will be 16.24% - 26.24%, based on your creditworthiness.
- If you transfer a balance with this offer, after your 0% Intro purchase APR expires, both new purchases and unpaid purchase balances will automatically accrue interest until all balances, including your transferred balances, are paid in full
- The standard variable APR for Citi Flex Plan is 16.24% - 26.24%, based on your creditworthiness. Citi Flex Plan offers are made available at Citi's discretion.
- Stay protected with Citi® Quick Lock and $0 liability on unauthorized charges
See additional details for Citi Simplicity® Card - No Late Fees Ever
Who can qualify for a balance transfer card?
With a credit score in the good-to-excellent range you’ve got a good shot at being approved for a balance transfer card. Otherwise, you may have to search for alternative debt-payoff strategies.
It’s smart to check your credit score before applying for a new credit card. There are ways to do that for free, such as with the Discover Credit Scorecard and with My LendingTree (which is offered by CompareCards.com’s parent company).
Plus, some issuers offer tools to check if you prequalify for their cards. Here are a few:
Checking if you prequalify is a soft pull, so you don’t have to worry about a hard inquiry that can temporarily lower your credit score. However, prequalification is not necessarily a guarantee of approval.
How will a balance transfer card affect my credit score?
There are a few factors that will affect your credit score when you apply for and are approved for a new balance transfer card:
- Hard inquiries. These appear on your credit report when you apply for a credit card or other credit product, and will temporarily cause your credit score to drop by a few points for each inquiry.
- Utilization ratio. This is a fancy term for how much of your available credit you’re using, and it’s calculated both on the individual card level and across all your cards.
- Length of credit history. When you get new credit cards, this decreases the average age of your accounts. For example, if you’ve got one credit card that you’ve had for 10 years, then you open a second credit card, your average age of accounts is five years.
When you apply for and are approved for a new balance transfer card, here’s what happens:
- You get a hard inquiry on your credit report (this knocks down your score by a few points for a year).
- You might max out the balance transfer card (this is bad for your utilization ratio), but as you pay down the balance, your score should improve.
- Your overall available credit will increase thanks to having an additional card (this is good for your utilization ratio).
- You’ll free up credit on your existing card after the transfer (this is good for your individual card utilization ratio).
- Your average age of accounts will decrease due to opening a new card (this hurts your score).
This means you should expect to see your credit score fluctuate after you get a new balance transfer card, but it will most likely improve as you pay down what you transferred (as long as you don’t add to your balances and pay on time).
If you take advantage of a balance transfer offer on an existing card rather than open a new balance transfer card, you don’t have to worry about a new inquiry or lowering your average age of accounts. Oftentimes, issuers will mail balance transfer checks or you can check your card’s online portal to see if a balance transfer deal is available. However, if you don’t open a new balance card, you also won’t get the bump of having more available credit. In the case of using an existing card’s balance transfer offer, any improvement in your score will come as you pay down the balance that you’ve transferred.
What is the best repayment strategy for a balance transfer?
It’s time to do some math. You need to look at your credit card balances, review how much you can afford to pay each month and calculate how long it will take you to pay the debt off. The great thing about using a balance transfer card with a 0% intro APR is that every dollar of your payment will go toward the principal of your debt during the interest-free period.
You’ll also want to look at your current APR on your original card and the balance transfer fee charged by the new card. In many cases, the balance transfer fee is minimal compared to what you’d pay in interest on the original card.
Here’s an example of a situation where you could save money with a balance transfer:
|Without a balance transfer||With a balance transfer|
|APR||24%||0% for 15 months|
|Time to pay off||19 months||15 months|
|Balance transfer fee of 3%||N/A||$90|
|Total amount paid||$3,602.32||$3,090|
|Net savings: $512.32 ($602.32 minus the $90 balance transfer fee)|
To make things easier, use our balance transfer calculator. You can plug in how much you want to transfer and how much you can pay monthly, and get an idea of how long it will take to pay down the balance, as well as what you’ll pay in interest if you’re unable to pay off the balance during the 0% intro period.
Common pitfalls of balance transfer deals
You don’t want to just kick the can down the road — you want to use a balance transfer deal to get out of debt. So let’s look at some pitfalls to watch out for when doing a balance transfer:
Your credit limit isn’t high enough. You may get approved for the balance transfer card you want, but your credit limit might not be high enough to transfer the full amount of your debt. Or the card issuer might have a maximum amount they allow you to transfer. For example, American Express won’t allow you to transfer more than $5,000, even if your credit limit is higher than that.
If you can’t transfer the full amount of your debt, one option is to transfer as much as you can and then keep whittling away at what’s left on the old card as well as begin paying down the balance on the new card. You could also apply for a debt consolidation loan, which might offer a lower interest rate than your credit card.
What about applying for yet another balance transfer card? Getting multiple balance transfer cards at once isn’t generally recommended as juggling three or more cards and balances can become difficult and can lead to missed payments. However, that is an option for someone whose 0% promotion is coming to an end and there is still a large balance remaining. Continually rolling over balances across cards can backfire as lenders don’t like to see too many hard inquiries on a credit report, so it’s best to stick to a strict repayment plan.
Using your new balance transfer card for purchases. The goal with a balance transfer card should be to pay off a balance, not add to it by making new purchases. Some cards offer a 0% intro APR on both purchases and balance transfers, but you should resist that temptation. Other cards will charge a regular APR for new purchases, which means you could accrue interest on new purchases even while your transferred debt is at 0% APR. Tuck the new card away and focus on paying off what you transferred.
Not sticking to a repayment plan. After your intro 0% APR period expires, you’ll start accruing interest charges on any remaining balance left on the card. If it just takes you one or two more payments after the intro period expires to pay off the card in full, that might not be a problem. But if you still have a large balance left to tackle, that could be costly.
If you don’t want to be one of those four in 10 consumers who fail to pay off their transferred balance during the interest-free period, the best thing to do is to make an honest assessment of what you can afford to pay each month, then be disciplined and stick to it. A balance transfer card can make it easier to climb out of debt, but it will only offer a limited window of opportunity.
The bottom line
A balance transfer card can save you a significant amount of money if used correctly. Just remember to make a plan and stick to it. If you fail to pay off your credit card debt before your intro APR period expires, you can end up right back where you started.
Resist the urge to make purchases on your new card. The goal should be to get a 0% intro APR period on balance transfers and pay off your transferred debt as quickly as you reasonably can.
Before applying, see if you prequalify with certain card issuers. This can help protect you from a hard inquiry on your credit report followed by possible rejection.
And, for recommendations, check out our list of the best balance transfer cards available.