What Is a Balance Transfer?
A balance transfer moves debt from high-interest credit cards to a new card with a promotional 0% APR period, allowing you to pay down principal without accruing interest.
How Balance Transfers Work
Step 1: Apply for Balance Transfer Card
Look for cards with long 0% intro periods (12-21 months) and low transfer fees.
Step 2: Get Approved
Typically requires good to excellent credit (670+).
Step 3: Request Transfers
Provide account numbers and amounts to transfer (usually done at application or within 60 days).
Step 4: Pay Off During Intro Period
Calculate monthly payment to pay off balance before 0% ends.
Step 5: Avoid New Purchases
Don't use the card for new purchases during payoff period.
Key Features
Intro APR Period
- Typical length: 12-21 months
- 0% on transfers only (purchases may have different rate)
- After intro: Regular APR applies (15-25%)
Balance Transfer Fees
- Standard fee: 3-5% of transferred amount
- Example: $10,000 transfer at 3% = $300 fee
- Rare: Some cards offer 0% fee promotions
Credit Limit
- Transfer amount limited by available credit
- Fees count toward credit limit
- May not be able to transfer entire balance
Calculating Potential Savings
Example: $10,000 Debt
Current Card (22% APR):
- Minimum payments: $30,000+ paid over 10+ years
- Interest: $20,000+
Balance Transfer (18 months at 0%):
- Transfer fee: $300 (3%)
- Monthly payment: $572 x 18 = $10,300 total
- Interest saved: $19,700+
Best Cards for Balance Transfers
What to Look For
- Longest 0% intro period (18-21 months)
- Lowest transfer fee (3% or less)
- No annual fee
- Reasonable regular APR after intro
- Grace period on new purchases
Pros and Cons
Benefits
- Save significantly on interest
- Pay off debt faster
- Simplify payments (consolidate multiple cards)
- Breathing room without interest accruing
- Can improve credit utilization
Drawbacks
- Requires good credit for approval
- Transfer fees (3-5%)
- High APR after intro period
- May not transfer full balance
- Temptation to accumulate new debt
- Hard inquiry on credit report
Qualification Requirements
- Credit score: 670+ (good to excellent)
- Income: Sufficient to support payments
- Debt-to-income: Under 43% preferred
- Credit history: At least 2+ years
- Recent inquiries: Not too many recent applications
Strategy for Success
Calculate Required Payment
Balance ÷ Intro months = Monthly payment needed
Example: $9,000 ÷ 18 months = $500/month
Set Up Autopay
Never miss payments or you may lose intro rate.
Don't Use for Purchases
New purchases may not have 0% rate and complicate payoff.
Mark Calendar
Note when intro period ends to avoid surprise regular APR.
Have Backup Plan
If you can't pay off in time, have plan for remaining balance.
Common Mistakes to Avoid
- Not calculating if you can pay off during intro period
- Making only minimum payments
- Continuing to use old cards (accumulating new debt)
- Missing payment and losing intro rate
- Transferring more than you can afford to pay off
- Closing old cards (hurts credit utilization)
- Not reading terms carefully
When Balance Transfers Make Sense
- Good credit score (670+)
- Manageable debt amount (under $15,000)
- Stable income to make payments
- Committed to payoff plan
- Won't accumulate new debt
- Can pay off during intro period