Balance transfers are a popular way to reduce the interest you pay on a credit card balance. When you do a balance transfer, you take advantage of a special promotional offer from a credit card company. Sometimes this offer is made by a card you already have, but other times you sign up for a new card.
This special promotional offer allows you to pay 0% APR on balances transferred from another card. So, if you moved money from an American Express card to a Chase card with a balance transfer offer, you’d pay 0% APR on the money you moved onto the Chase card.
This 0% APR doesn’t last forever — there’s a limited number of months it’s in effect. And some credit cards charge a fee to transfer a balance. Still, the ability to reduce the interest rate on high interest debt down to 0% — even for a limited time — can allow you to make a lot of progress on paying off what you owe.
If you think a balance transfer may be a good way for you to deal with your debt, you probably have a lot of questions. This guide will answer all those questions and give you the information you need to understand how a balance transfer works and if a balance transfer is right for you.
- How much does it cost to do a balance transfer?
- How much money should I (or can I) transfer?
- How long does a balance transfer take?
- Will a balance transfer hurt my credit score?
- Can I transfer my balance more than once?
- How do I know if a balance transfer is right for me?
- Where can I find the best balance transfer credit cards?
How much does it cost to do a balance transfer?
Balance transfer fees are charged as a percentage of the amount you transfer. The fee is usually between 3% and 5% of the transferred amount. This means the higher the balance you transfer, the higher the fee you will pay. If you transfer $1,000 and pay a 3% fee, your fee would equal $30. But you transferred $5,000 and paid a 3% fee, it would equal $150. Most cards do charge a minimum fee — but this could be as low as $5 or $10.
Be aware that when you’re charged a balance transfer fee, this is added onto the credit card balance. So, if you transferred a $1,000 balance and paid a $30 fee, your balance on your new card would be $1,030.
The good news is, there are some credit cards that don’t charge a fee to transfer a balance. Most of the time these no-fee transfers are only offered for a limited time, though — such as within 60 days of opening your account. So, if you hope to take advantage of a no-fee balance transfer offer, make sure you’re ready to move the money over to the new card before you open the account.
How much money should I (or can I) transfer?
While you may want to move as much of your debt as possible to your new balance transfer card, you can’t just move an unlimited amount of money. You’ll be constrained by the credit card limit. If you have $5,000 in available credit, for example, the absolute maximum you’d be able to transfer is $5,000 — and that’s assuming there are no fees charged.
Many card issuers also set lower balance transfer limits than the total line of credit available to you. You might have $10,000 in available credit, for example, but a balance transfer limit of just $5,000. Card issuers may also impose an aggregate limit on what you’re allowed to transfer. Chase, for example, won’t allow you to transfer more than $15,000 over any 30-day period.
You should also consider whether it makes sense for you to transfer the full amount allowed. If doing this would max out the card you’re transferring to, you could hurt your credit score. That’s because your credit utilization ratio, or the amount of your balance owed relative to credit available, should ideally be 30% or less to earn the best credit score.
If you can’t pay off the amount of the transferred balance by the time the 0% promotional rate ends because the balance you transfer over is too high, you may also want to think twice about transferring the full amount. If you’re still carrying a balance when the 0% rate ends, you’ll have to pay interest on that balance at the card’s standard interest rate.
For example, if you transfer a $10,000 balance to a card with a 0% promotional rate that lasts for 12 months but you can only afford to pay $500 per month, you’d have a remaining balance of $4,000 at the end of the promotional period. If the new card’s standard interest rate is higher than the rate on your current card, you’d have been better off not transferring this $4,000 and only transferring the $6,000 you could pay off.
Or, if the interest rate on the new card is the same as the old one but you had to pay a fee equal to 3% of that $4,000 balance, you’d have been better off just leaving that $4,000 where it was.
How long does a balance transfer take?
The amount of time a balance transfer takes can vary by card issuer. The table below shows the typical timeline for a balance transfer from some of the major credit card companies.
|Credit card issuer||Typical length of time for a balance transfer|
|American Express||5 to 7 days|
|Capital One||3 to 14 days|
|Chase||7 to 21 days|
|Citi||2 to 21 days|
|Discover||7 days or less for existing accounts; 14 days or less for new accounts|
Be aware these are typical times and your transfer may take longer. For example, while American Express indicates most balance transfers can be completed in five to seven days, the card issuer also warns that some transfers could take as long as six weeks to process.
Don’t stop making payments on your current credit card or count on a balance transfer to relieve you of your responsibility to pay your monthly bill. You don’t want to be late in paying because a transfer takes longer than you expect.
Will a balance transfer hurt my credit score?
A balance transfer could help your credit if it improves your credit utilization ratio. Say you had a $5,000 credit card you maxed out. Your credit utilization ratio would be 100% — which is a red flag that hurts your credit score. But, if you open a new balance transfer card with a $20,000 limit and transfer that $5,000 over, your new credit utilization ratio is now well below 30% because you’re using $0 out of $5,000 in available credit on your old card and $5,000 out of $20,000 on your new card.
You could also help your credit score by paying off that transferred balance ASAP. Because all of your money goes toward principal if you have a 0% offer, you’d be able to pay off what you owe more quickly and reduce your credit balance — and thus your credit utilization ratio — much faster.
Unfortunately, a balance transfer could also hurt your credit. Opening a new credit card results in a hard inquiry on your credit report and too many hard inquiries lower your credit score. The new card reduces your average age of credit as well, which also brings your score down because lenders prefer to see a long credit history.
And finally, if your balance transfer maxes out your new account — because you transfer a $5,000 balance to a card with a $5,000 limit, for example — this could actually hurt instead of help your credit utilization ratio, which also makes things worse.
Can I transfer my balance more than once?
You’re allowed to transfer your balance more than once if you want to. But there’s no guarantee you’ll qualify for another balance transfer card when the 0% promotional rate expires on your current card, so you shouldn’t count on doing this.
Repeatedly transferring your balance can also be a bad idea if you aren’t actually paying your debt down. Don’t use balance transfers as a band-aid when you really need to focus on getting your spending under control and allocating your spare cash to getting out of credit card debt.
How do I know if a balance transfer is right for me?
To decide if a balance transfer is right for you, it’s important to consider:
- Whether you can qualify for a balance transfer card: If your credit isn’t very good, you may not be able to qualify for a good balance transfer card.
- Whether you can be responsible with your spending: When you transfer a balance, credit becomes available on the card that previously carried that balance. If you aren’t responsible with your spending, you may find yourself using that card again without the ability to pay it off. You could end up in much more debt if you have the new balance transfer card to pay off and you max out existing credit cards again.
- Whether you can afford to make payments on the transferred debt: Ideally, you’ll want to be able to pay off the full balance transferred to the card before the 0% rate expires.
- Your motivation for transferring the balance: Are you moving the money over as part of a plan to become debt-free, or are you just moving debt around without an actual goal in mind?
If you are committed to paying off the balance transferred on a reasonable schedule, are confident you won’t charge up your cards again after transferring the balance, and can qualify for one of the best balance transfer cards, then transferring a balance could be a very good way to pay off your debt faster.
Where can I find the best balance transfer credit cards?
There are some great balance transfer credit cards that have long 0% APR periods and no fees. To find them, check out our picks for the five best balance transfer cards.
You can also start your search with our top pick:
- Citi Double Cash Card: With this card, you get a 0% intro APR on balance transfers for 18 months (then 14.74% to 24.74% (variable)). This card also has a $0 annual fee. Plus, it comes with generous rewards, including up to 2% cash back on all purchases: 1% as you buy and 1% as you pay. So, once your balance transfer is done, you’ll be able to take advantage of the chance to earn generous cash back.