Balance transfer credit cards allow you to move high-interest debt to a new card with a 0% APR promotional period. This strategy saves you money by making sure every dollar of your payment goes directly toward reducing your principal balance. In this guide, you will learn exactly how to use a balance transfer to clear your debt fast.
How Do Balance Transfer Credit Cards Work to Save You Money?
When you open a balance transfer card, the new bank pays off the balance on your old credit card. Your old debt moves to the new card, where it sits at a 0% interest rate for a set time, usually between 12 and 21 months. For example, if you owe $5,000 on a card with a 24% interest rate, you pay over $100 a month just in interest. Moving that debt stops those heavy fees instantly.
Most banks charge a one-time fee to make this move. This balance transfer fee is usually 3% to 5% of the total amount you transfer. If you move $5,000 with a 3% fee, you add $150 to your balance. That small fee is much lower than paying hundreds of dollars in interest over a full year. You win because your monthly payments actually shrink your debt.
What is the Best Way to Pick a Balance Transfer Card?
You need to look closely at three main things before you apply for a new card. First, check the length of the 0% APR offer. Second, look at the balance transfer fee percentage. Third, check the regular APR that kicks in after the 0% offer ends. Here are the main features to compare:
- 0% APR Duration: Look for cards offering 15 to 21 months of zero interest.
- Transfer Fees: Choose cards that charge a 3% fee instead of a 5% fee if possible.
- Credit Score Requirement: Most top balance transfer cards require a FICO score of 670 or higher.
- Application Window: Many banks require you to complete the transfer within 60 days of opening the account to get the 0% rate.
How Can You Transfer a Balance in Five Easy Steps?
First, add up your current credit card debts and write down their interest rates. Apply for a new balance transfer card that offers zero percent interest. Once the bank approves your application, log into your new online account and request a balance transfer. You will provide the account number and the exact amount you want to pay off on your old card.
Second, keep making payments on your old card until the new bank confirms the transfer is complete. This process usually takes between 5 and 14 days. After the old balance hits zero, focus all your extra money on paying down the new card. Divide your total balance by the number of interest-free months so you hit zero before the regular interest rate starts.
How Does a Balance Transfer Impact Your FICO Score?
Applying for a new credit card creates a hard inquiry on your credit report. This hard pull might drop your FICO score by a few points for a short time. However, getting a new card also raises your total available credit limit. A higher credit limit lowers your overall credit utilization ratio, which can boost your FICO score significantly within a few months.
Closing your old card right after the transfer can hurt your credit history length. Keep your old account open with a zero balance unless it charges an expensive annual fee. Just make sure you do not use that old card to run up new debt while you are trying to pay off your balance transfer card.
Frequently Asked Questions About Balance Transfers
Can I transfer a balance between two cards from the same bank? No, banks do not let you transfer debt between their own cards. For instance, you cannot move a balance from one Chase card to another Chase card. You must move debt from one bank to a completely different bank to get the zero percent promotional rate.
What happens if I do not pay off the balance before the 0% period ends? If you have a remaining balance when the offer ends, the bank starts charging the standard variable interest rate on that remaining amount. Unlike store financing cards, standard balance transfer credit cards do not charge deferred interest on the amount you already paid off.
What Should You Do Next to Get Out of Debt?
Take out a notebook and list every credit card balance you carry alongside its current interest rate right now. Look for a balance transfer card that matches your current FICO score and offers at least 15 months of zero percent APR. Apply today, transfer your highest-interest balance immediately, and set up automatic monthly payments to clear the debt before the promotional rate expires.
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