What Is a Balance Transfer?

A balance transfer allows you to move your debt from a credit card or loan to another credit card or loan.

Ever feel like those minimum payments just aren’t cutting it? Or maybe you’ve got multiple loans and it’s becoming harder to remember each payment’s due date? A balance transfer might be something to think about.

How Does a Balance Transfer Work?

A balance transfer allows you to move a credit card or loan balance—within your credit limit—from one company to another in order to consolidate debt or get a lower interest rate. So how can it help you? And what are some things to consider?

Transferring debt from one or more credit cards to another card with a lower interest rate can help you apply more of your payments to your principal balance. By paying the principal down first—rather than the interest charges—you could potentially pay off your debt faster.

How Does a Balance Transfer Help?

Tackling Debt 

If you opt for a balance transfer, you have the ability to move all or some of your debt to a new or different credit card account. This could be an effective way to pay down an existing balance at a lower, more manageable rate. Credit card companies may offer you a reduced rate on transferred balances for a limited period of time. If you are opening a new credit card, this is known as an introductory rate. If you’re transferring a balance to an existing credit card, it’s called a promotional rate. A balance transfer won’t make your debt disappear. But consolidating it on a lower-interest credit card can simplify paying it off.

Simplifying Payments

Another reason you might choose a balance transfer is that it could help you reorganize your finances. If you have multiple credit cards or loans, it can be difficult to remember various payment due dates. But if you consolidated that debt onto one credit card account, you have to worry about only one payment, which means you may be able to keep track of payments a little more easily.

Saving Big

Perhaps the biggest benefit you could earn from a balance transfer is the ability to save money on interest. For instance, let’s say you transferred the debt you owed to a new credit card with a lower APR for the first 18 months. If you paid off the balance before the reduced rate expires, you could potentially save hundreds of dollars. Use a credit card calculator to determine how much a transfer might save you.

But before making a balance transfer, there are things to keep in mind.

Things To Know About Balance Transfers

Factor in Fees

Banks may not offer balance transfers for free. They might charge you a transfer fee to do so, typically a flat fee or within the range of 3%-5% of the transferred amount. For example, if you move a balance of $5,000 and the transfer fee is 4%, you’ll be charged $200. When the fee is a percentage of the amount transferred, the more you transfer, the higher the fee. To benefit from a balance transfer, the amount you save on interest should outweigh what you pay in fees. So before you make a transfer, make sure it’s worth it.

Know the Terms 

Remember, all good things must come to an end, and the same is true for promotional and introductory interest rates. Promotional rates typically last between 6 and 18 months, so during the promotional period, make payments responsibly. And be sure to identify what the APR will be once the promotional rate expires. Sometimes it can be even higher than the rate you were paying before the transfer.


There may be other terms and conditions that impact your decision to transfer a balance—you should always know exactly what you’re signing up for. Check for things like whether you might lose your grace period when you make new purchases after transferring a balance—not all credit card balance transfers are the same. For example, Capital One cardholders—excluding cards offered by our partners—can avoid interest on new purchases after transferring a balance by paying the “Interest Saver Payment” identified on their statement by the due date each month.

Mark Your Calendar

Set yourself up for success by marking important dates on your calendar. Note the date when your balance transfer takes effect, payment dates and the end of promotional periods. 

Be sure to keep making payments on your old card or loan until you receive confirmation that your debt has been transferred. There’s often a lag before a balance transfer goes into effect. And your credit score could take a hit—even if you unintentionally miss a payment. You might also consider cancelling your old card. Just know beforehand how that could affect your credit score.

Balance transfers can be really helpful in decluttering your financial life. Using a balance transfer to consolidate your debt to a new credit card with a lower interest rate may save you money—and a few headaches.

We hope that you found this helpful. Our content is not intended to provide legal, investment, or financial advice or to indicate the Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.

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