How Credit Card Balance Transfers Work

Time To Read 2 MIN READ

If you're tired of paying extremely high interest rates on your credit card balance, a balance transfer might be for you. You might even qualify for a special low introductory rate if you have a good credit score. Even if your credit isn't perfect, you might still be able to get a lower interest rate than the rate charged by your current card.


Balance Transfer Mechanics

To initiate a balance transfer, contact the bank you want to transfer your balance to and give the account information for the credit card you want to pay off. Tell them how much of your balance you want to pay off. Don't stop making payments on your old card until you have received confirmation of the balance transfer. Transfers typically take between two weeks and a month to get credited to your old account.



Transferring your balance from one credit card to another can help you save money if the new card has a lower interest rate. Some credit card companies offer special introductory rates for balance transfers to get you to open a new credit card account. By law, these rates must stay in place for at least six months, but promotional rates often last longer.


Costs of Transfers

Even if you secure a 0-percent interest rate on your balance transfer, it's still not free. Most transfers come with a fee of between 3 and 5 percent of the amount transferred. If you transfer $3,000 and you pay 4 percent, you'll owe $120. Look for an offer that caps the transfer fee if you're transferring a substantial sum. 

Opening a new credit card to facilitate the balance transfer could ding your credit score a bit. However, your credit score will likely improve over time if the transfer allows you to pay your debt off sooner. Consider keeping your old card open and paying it on time each month to minimize the impact.



If you open a new card with a promotional balance transfer rate, don't make any purchases on the new card. The promotional interest rate generally only applies to the amount transferred. The higher standard interest rate is charged on any purchases you make. Make sure you pay on time every month. Depending on the terms of your balance transfer, just one late payment could cause your interest rate to jump substantially.