What is a balance transfer credit card and how does it work?
A balance transfer involves moving debt from one account to another. And a balance transfer credit card is any card account where that debt is moved.
Learn more about balance transfer credit cards, the balance transfer process, some possible benefits of balance transfer cards and what to consider before you get started.
What you’ll learn:
-
A balance transfer credit card lets you consolidate debt from multiple cards, simplify payments and potentially pay less interest.
-
Card issuers may charge a flat balance transfer fee or a percentage of the transferred amount.
-
If you’re considering transferring a balance, you might budget and compare options based on fees, promotional rates and promotional periods.
What is a balance transfer credit card?
A balance transfer credit card is a type of card that enables you to move debt from one or multiple credit cards to another account. Balance transfer cards aren’t a special type of card. The description has more to do with whether the card is used to consolidate or transfer debt.
If there’s a promotional rate, a low or 0% annual percentage rate (APR) might apply to new purchases or balance transfers for a certain length of time. If a promotional rate is tied to a new card offer, it might be called an introductory rate or intro rate.
How do balance transfer credit cards work?
When debt moves to a balance transfer credit card, it’s added to the account balance. Once the debt is transferred, the card works like most other credit cards in the sense that you can make purchases up to a certain credit limit and pay down the balance repeatedly.
Transferring a balance doesn’t eliminate debt. But ideally, the new account has better repayment terms, a lower interest rate or both.
How to transfer a credit card balance
A balance transfer can typically be arranged during the application process for a balance transfer credit card. Or you can do it with an existing card.
You can read about transferring balances to your Capital One card. In general, the process might look something like this:
1. Decide how much to transfer
Knowing your total balances and their interest rates can give you an idea of the credit limit you’ll need for a balance transfer card—and whether you’re getting a better rate. It can also help you prioritize which debts to transfer first if there’s a balance transfer limit and you can’t do them all at once.
2. Apply for a balance transfer credit card
Many issuers have online applications for balance transfer credit cards. Like other credit card applications, you’ll be asked to provide some basic information, including your name, address, income and Social Security number (SSN).
3. Initiate the balance transfer
You can request a balance transfer after—and sometimes during—the application process by providing the details of the account you wish to transfer from and how much of the debt you want to move.
4. Wait for the balance transfer to go through
While you wait for the transfer to process, you may need to continue paying at least the minimum amount due. If you transferred a full balance, make sure the account is zeroed out to avoid interest charges and missed payments.
5. Start paying off the balance
A low introductory APR can help save on interest charges. It’s still important to make payments on time every month if you want to keep the account in good standing and avoid late fees and penalties.
Pros and cons of balance transfer credit cards
Here are some potential benefits and drawbacks to consider to help determine if a balance transfer credit card is right for you.
Pros
-
Save on interest: If you have high-interest debt, a balance transfer credit card could offer access to a lower interest rate. This means you could potentially save money by paying less in interest over time.
-
Simplify payments: A balance transfer can be helpful if you want to consolidate multiple debts into a single monthly payment.
- Help pay debt faster: When used responsibly, a balance transfer credit card could help you pay down debt faster if more money goes to the principal balance instead of the principal plus interest.
Cons
-
Debt is still owed: Balance transfer cards can be a helpful tool to repay debt. But they don’t erase debt.
-
Fees: Balance transfer fees typically range from 3% to 5% of the amount transferred. You can compare those costs to the potential savings to find out if the fees are worth it.
- Promotional rates: If you have a promotional interest rate, check to see how long it lasts so you’re prepared when the standard APR kicks in.
How to choose a balance transfer credit card
Balance transfer offers vary depending on the credit card issuer, the card and the applicant. Here are some factors to consider when choosing a balance transfer credit card:
-
Promotional APR periods: Longer promotional periods can mean more time to repay high-interest debt without additional interest charges. Paying off most or all of the balance before the promotional period ends could help save on the total cost of the debt.
-
Standard interest rates: Regular interest rates generally apply to balance transfers and new purchases after the promotional period ends. So applying for a card with a lower APR or interest rate might help—especially if you plan to keep using the card after repaying the transferred debt.
-
Credit score requirements: If you have good credit scores or excellent credit scores, you’re more likely to qualify for a card offering a longer promotional period. People with lower credit scores may still qualify for a card with an introductory rate, but the promotional interest window may not be as long.
-
Potential fees: Credit card issuers may charge a flat balance transfer fee or a percentage of the transferred amount. And some cards may also charge an annual fee. So the projected savings on interest should ideally outweigh these potential costs.
- Transfer terms: Most credit card issuers only allow cardholders to transfer external credit card balances, meaning you typically can’t transfer balances between cards from the same issuer. And generally, balance transfers can’t be more than the credit limit on the new credit card account.
Balance transfer credit card FAQ
Still curious about balance transfers? The answers to the following frequently asked questions might help.
Do balance transfers impact your credit score?
Opening a balance transfer credit card may affect your credit scores for a number of reasons. Just like applying for other credit cards, it can trigger a hard inquiry that can cause a small but temporary drop in your credit scores. Balance transfers could also lower the average age of your credit accounts, which is something lenders look at when assessing your creditworthiness.
But when done responsibly, using a balance transfer card to pay down debt can have a positive impact on your credit scores by decreasing the total amount you owe on accounts.
Can a balance transfer be denied?
Lending decisions are ultimately up to the individual credit card issuers. An issuer could deny a balance transfer for reasons such as:
- The proposed transfer amount exceeds the transfer limit or the credit limit on the card.
- The transfer attempt was initiated outside the transfer window outlined in the card’s terms.
- An existing account isn’t in good standing.
- The proposed transfer is to another account from the same credit card issuer. Most issuers don’t allow balance transfers from different internal accounts.
Can you get a balance transfer card if you don’t have good credit?
If you have what’s considered bad credit scores, it could be harder to qualify for a balance transfer credit card with a 0% APR. Even if you’re not offered a 0% rate, a lower rate than what you have could still be beneficial if you qualify.
How long does a balance transfer take?
Balance transfers typically take five to seven days, according to Bankrate. But it could take longer depending on the issuer’s policies and processes.
If you’re approved for a balance transfer at Capital One, it will be processed within four to six days.
Key takeaways: Balance transfer credit cards
A balance transfer could help you streamline your finances, consolidate debt and save money on interest. Before you apply, it might be helpful to consider factors like promotional periods, balance transfer fees and card terms. You can also compare balance transfer credit cards from Capital One.
You can also:
-
See whether you’re pre-approved without hurting your credit scores.
-
Explore travel and miles rewards credit cards with unlimited miles you can actually use.
-
Earn unlimited 1.5% cash back on every purchase, every day with a cash rewards credit card.
- Earn unlimited cash back, whether you’re going out or staying in, with a dining and entertainment credit card.
