What is a balance transfer card and how does it work?
A balance transfer involves moving credit card debt to another credit card. It can help account holders consolidate debt, pay off debt faster and save on interest, especially if the other credit card has a lower interest rate.
But how do balance transfers work? And is a balance transfer right for you? This guide offers a step-by-step look at the balance transfer process and what to consider before you get started.
Key takeaways
- A balance transfer allows account holders to transfer credit card debt to another card to consolidate debt, simplify payments and potentially pay less interest.
- Some financial institutions, like Capital One, let customers transfer balances from credit cards as well as from personal, student and car loans.
- You’re not typically allowed to transfer balances between two cards from the same issuer.
- Card issuers may charge a flat balance transfer fee or a percentage of the transferred amount.
What to consider with a balance transfer
A balance transfer can be a useful tool for lowering the interest rate on your debt and making it simpler to pay off. But it might not be right for everyone. Before applying for a balance transfer credit card, it may be helpful to consider these questions:
- Will it make repaying the debt easier? A balance transfer might make more sense for people with high-interest debt or those who want more time to repay. It can also be helpful for people who want to consolidate multiple debts into a single monthly payment.
- Will I qualify for a balance transfer? Many balance transfer cards offer a low or even 0% introductory annual percentage rate (APR) period. People with good or excellent credit scores are more likely to qualify for a longer introductory APR period, which can make it easier to repay the debt without accruing additional interest. Applicants with lower credit scores may still qualify for an introductory APR, but the promotional interest window may not be as long.
How to choose a balance transfer credit card
Balance transfer offers can vary depending on things like the credit card issuer, the card and the applicant. Here are some things to consider when comparing balance transfer cards:
- Introductory APR period length: Longer introductory APR periods might mean more time to repay debt without incurring additional interest charges. Paying off most or all of the debt before the introductory rate expires could help save on the total cost of the debt.
- Standard interest rate: Regular interest rates will generally apply to balance transfers and new purchases after the introductory period ends. So a lower APR or interest rate might help if the plan is to keep using the balance transfer card after repaying the debt.
- Potential transfer fees: Credit card issuers may charge a flat balance transfer fee or a percentage of the transferred amount. The savings on interest should ideally outweigh potential fees.
- Transfer terms: Most credit card companies only allow cardholders to transfer external credit card balances, meaning you typically can’t transfer balances between two cards from the same issuer. But it may be possible to consolidate balances from student loans, car loans and personal loans. That’s the case at Capital One.
How to transfer a credit card balance: A step-by-step guide
Balance transfers aren’t complicated, but there are several steps involved. Here’s how the process may go:
1. Decide how much to transfer
Typically, credit card issuers determine how much an applicant can transfer to a new credit card. This is done via a credit limit on the new card and a balance transfer limit.
In most cases, credit limits aren’t set until an application is approved. And transfer limits may be lower than the cardholder’s total amount of debt.
With that in mind, it could be a good idea to make a list of any existing balances, their interest rates and the repayment terms. That way, it’s easier to prioritize which debts to transfer—like those with higher interest rates, for example—if you can’t do them all.
2. Apply for a balance transfer card
Some credit card issuers have online applications for balance transfer credit cards. The process may only take a few minutes and typically requires basic personal and financial information—like the applicant’s full name, address, income and Social Security number.
Keep in mind that applying for a new credit account can trigger a hard inquiry, which can cause a slight drop in your credit scores. You could consider getting pre-approved before applying, which doesn’t affect your credit scores.
3. Initiate the balance transfer
You may be able to request a balance transfer during or after the application process, although many banks won’t process the balance transfer request until the account is at least 10 days old. In most cases, card issuers let cardholders start the process online or over the phone. Cardholders can provide the details of the account they wish to transfer from and how much of the debt they want to move to their new account.
4. Wait for the transfer to go through
Balance transfers could take a few days to several weeks. Capital One cardholders can generally expect a balance transfer to take between three and 15 days, depending on the ability to send the transfer electronically or by check. View important rates and disclosures.
It’s a good idea to continue making at least the minimum payment while waiting for the old account balance to transfer to the new account. And if you transferred the full balance, contact your original lender to ensure the account has a zero balance after the transfer is complete. Otherwise, the lender may continue to charge interest or fees on missed payments and unpaid balances.
5. Start paying off the balance
A repayment strategy could help you pay off credit card debt before the introductory period ends, which can save on interest.
Balance transfer FAQ
Still curious about balance transfers? Consider the following frequently asked questions:
How much does it cost to transfer a credit card balance?
Balance transfer fees can vary depending on the card or the issuer. And some don’t have any fees at all. But transfer fees are typically a flat fee or a percentage of the amount transferred.
Can a balance transfer be denied?
In some cases, balance transfers can be denied. This may happen if:
- The proposed transfer amount exceeds the transfer limit or the credit limit on the card.
- The transfer attempt is initiated outside the transfer window outlined in the card’s terms.
- The account isn’t in good standing.
- The proposed transfer is to a new account from the same credit card issuer. Some issuers don’t allow debt transfers from different internal accounts.
What credit score is needed for a balance transfer?
Generally, applicants with good or excellent credit scores are more likely to get approved for balance transfer credit cards with the terms they want. If you have a lower credit score, it may still be possible to be approved. But you might have a shorter introductory period.
Can you get a balance transfer card if you have bad credit?
People who have below-average credit scores—under 579, for example—could find it harder to qualify for a balance transfer credit card with low interest.
Those who don’t qualify for a card with 0% interest may still qualify for a card with a lower interest rate than that of other cards. And that could help them save money on interest.
Secured credit cards are another option to consider. This type of card requires a cash deposit as collateral to open an account. While some lenders allow secured cards to be used for a balance transfer, it might be better to use the funds you’d use for the deposit to pay down debt.
Balance transfer credit cards in a nutshell
A balance transfer could help you streamline your finances, consolidate debt to a credit card and save money on interest. By knowing how the process works, you can maximize your benefits.
Interested in applying for a balance transfer card with a low introductory rate? Explore your options and get pre-approved without harming your credit.