What Is a Balance Transfer and How Does It Work?

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According to the Government Accountability Office (GAO), 82% of American adults have at least one credit card and, in 2023, their debt so far has surpassed $1 trillion.

A balance transfer is a popular way to manage this kind of debt and reduce what consumers pay in interest. But what is a balance transfer and how does it work? Is it the best option to free yourself from debt?

Read on to learn more about balance transfers and to determine if it’s the right move for you.

Table of Contents

• What is a balance transfer?
• How do balance transfers work?
• What is a balance transfer credit card?
• How long does a balance transfer take?
• What Is a Balance Transfer FAQs

What is a balance transfer?

A balance transfer is moving existing credit card debt from one card to another. This is typically done to take advantage of a lower interest rate as many balance transfer-specialized cards offer an introductory period with no interest charges on transfers (and often on purchases too).

It’s important to note, however, that credit cards with this kind of balance transfer offer are meant for people with good to excellent credit. If your current credit is fair or poor, it might be better to look for debt consolidation loans with easier credit requirements or a debt relief company that can help you throughout the process.

How do balance transfers work?

Essentially, when you request a balance transfer (and it’s approved), the new issuer pays off the debt to your previous issuer. You’ll then owe the new lender the balance you transferred, which is now subject to the new card’s terms and conditions, including the due date and annual percentage rate (known as regular or variable APR). A balance transfer fee will also be added to your transferred balance, usually between 3% to 5% (or a minimum of $5 to $10, depending on the amount) of the total.

It’s important to note that you can’t transfer a balance between cards by the same credit card issuer. For example, you wouldn’t be able to transfer a balance from a Chase Freedom Unlimited® Credit Card to a new Chase Freedom Flex® Credit Card.

What is a balance transfer credit card?

A balance transfer credit card is a regular credit card with some specific features and benefits related to balance transfers. The most common — and arguably most attractive — feature is a 0% introductory APR on balance transfers during a given time period. Some cards might offer a lower balance transfer fee — or waive it completely — as well as a low regular APR aside from (or in place of) the intro APR.

If you’re in the process of selecting a credit card for your balance transfer, make sure to read our article on the best balance transfer credit cards which features some of the top 0% APR offers on balance transfers, new purchases and more.

How to do a balance transfer

Balance transfers are relatively simple to set up, especially on credit card companies’ websites and mobile apps. Here are the steps to follow:

Choose a balance transfer card

You don’t necessarily need a brand new credit card to carry out a balance transfer, as many credit cards offer this service. However, if you’re looking to pay off debt, a new card with an actual balance transfer offer could be a much better option.

Your best choice will depend on the amount of debt you’re carrying and your repayment plan, your credit score and credit history. Credit cards that focus on balance transfers have interest-free promotional periods of up to 21 months, but don’t offer many benefits beyond that.

Others might have shorter introductory periods (12 to 15 months), but include additional perks like insurance coverage and cash back rewards.

Determine the transfer amount

For the most part, you can transfer any amount you want from one card to another, though factors such as the new card’s credit limit and the balance transfer fee amount could limit the total you’re able to transfer.

For instance, if your new card has a $2,000 limit and a 5% balance transfer fee, you’ll be able to transfer only $1,900 since you’ll have a $100 fee added to the balance.

If the balance you want to transfer goes beyond the limit you were approved for, you’ll need to look at other alternatives, such as debt consolidation loans or debt relief companies. Or come up with a new repayment plan to get rid of the interest-accruing balances left on your old card as soon as possible, since it could be more difficult to find other options after opening a new account.

Initiate transfer

To initiate a balance transfer, all you need to do is log into your new card’s — or the recipient card — issuer platform and look for the “balance transfer” option. (It could also be named “transfer a balance” or “make a transfer”).

You can also request a balance transfer to your new card’s issuer by phone, by mailing a form or in person by going directly to a brick-and-mortar bank branch.

In all of these cases, you’ll need to provide the old card’s account number, expiration date and the CCV number in the back, as well as the amount you wish to transfer. After that, it’s all up to the issuer to take care of; you’ll get informed once the transfer is approved and then completed.

Pay off the debt

Once your transfer has been processed and you can see the new balance on the receiving card, it’s time to carry out your repayment plan. You’ll have to make monthly payments, like with any other card, at the end of each billing cycle. There is an established minimum payment but, if you can afford it, it’s a good idea to pay more than that in order to pay down most of the debt during the 0% interest period.

Be aware that once the 0% APR period is over, the balance will start accruing interest, which is why it’s important to pay most or all of your balance before it ends. It’s also possible that after the intro offer ends your new balance transfer card’s regular APR could be even higher than your previous card’s.

If you’re struggling to come up with a plan to pay off your balance, you can take a look at our article How to Pay Off Credit Card Debt for a clearer picture on how to start.

How long does a balance transfer take?

A balance transfer normally takes between 7 to 14 business days to be completed, but it could be both less or more than that.

Keep in mind that during the process, you might see the balance on both credit cards simultaneously, and this duplicate amount can even show up on your credit report. However, this is only temporary and won’t actually affect your credit score later on.

How does a balance transfer affect your credit score?

A balance transfer generally does not have a negative impact on your credit or FICO score. However, if you apply for a new credit card, there will be a hard inquiry reflected on your credit report, which can slightly decrease your score.

On the other hand, there are positive effects that can outweigh these drawbacks. A new credit card increases your available credit, which will very likely improve your credit utilization ratio which, in the end, results in a better credit score.

As to the old credit card, it’s wise to keep the account open since it increases your amount of available credit and maintains your credit age — both of which are important factors that impact your score. Closing it could cause a sharp decrease in your credit score. However, it’s best practice to not use it at all or use it sparingly to avoid incurring in more debt while you pay off the existing balance.

Summary of What Is a Balance Transfer and How Does It Work

Balance transfers allow you to move partial or entire balances from one card to another that has a lower or 0% APR. Balance transfer cards often provide a 0% APR introductory period from anywhere between 12 to 21 months, and are one of the best options for reducing the amount of interest you pay on your debt. Transfers are easily done through an issuer’s website or mobile app and take, on average, 7 to 14 days to process. Most cards do charge a balance transfer fee, but the interest savings during the intro period usually outweigh it.