How Balance Transfer Cards Work

Balance transfer cards are a way for consumers to migrate the total amount of revolving credit owed from one lender to another. When a balance transfer is issued the original lender effectively transfers the balance from the first card to the new card.

Balance transfers can decrease the amount of interest you pay over some time and may help you improve your credit score.  However, these credit cards may also present some other challenges including interest rate hikes and additional fees following introductory promotional offers. 

What Is a Balance Transfer Credit Card?

Balance transfer credit cards make it possible for consumers to move debt from high-interest credit card accounts to a new account with a lower annual percentage rate. These types of cards also make it possible to consolidate multiple credit card debts under one account that is payable to a single creditor. You should keep the following factors in mind when considering a balance transfer credit card:

  • APRs
  • Credit or transfer limits
  • Fees
  • Introductory or promotional offers

The best balance transfer cards have low-interest rates and fees, at least for an introductory period of several months or a year. Even if the credit limit on a balance transfer card is not equal to the entire amount owed on a high-balance card, transferring a portion or the majority of the balance can add up to substantial savings on interest for the duration of an introductory period. You can continue to benefit from the right balance transfer credit card if the APR is lower than the card or cards from which you have transferred balances.

How to choose a balance transfer card

Compare APRs

Some promotional incentives may involve introductory zero percent APR for a limited time and waived fees. The lowest APR is ideal for any type of credit card since it will reduce the amount of money paid toward interest instead of principal. The savings can be considerable and help you save money on paying off your debt.

Watch Out for Transfer Fees

Most balance transfer credit cards charge fees for transferring balances. The amounts charged by card issuers and any introductory, limited-time incentives to transfer balances with low or no fees set the best balance transfer cards apart from the rest. In theory, a consumer could keep transferring balances to avoid paying interest, but doing this is difficult without very good credit.

Balance transfer credit cards compete with other credit cards by offering the best introductory APRs to attract new cardholders. The better your credit, the more options you may have for low or no interest or transfer fees during and after a promotional period. 

Be Aware of Promotional Periods

The length of a promotional period is also important to consider when comparing balance transfer credit cards. It is easy to be enticed by offers for cards with sufficient limits and incentives for transferring a balance and not pay attention to the limitations of balance transfer offers. A zero percent APR introductory period may only last for months or a year before a new rate applies that may be the same, higher or lower than the interest rate on the credit card from which you transferred the balance.

There are several things to consider if you are unable to pay off the entire balance on a new balance transfer credit card before the end of a period with low or no interest charges. If you still plan to transfer your balance to pay down on principle rather than simply covering interest, you should make sure that the standard interest rate following the promotional period is the same or less than the cards from which you plan to transfer balances. You can still end up reducing the overall amount of money you repay and shortening the duration of a repayment period with the right balance transfer card.

Another thing to keep in mind is that if you don’t pay off the balance in full that you transferred before the promotional APR period is over, any remaining balance may be subject to the new interest rate. 

Check the Requirements

Creditors can be selective about which consumers qualify for balance transfer credit cards. Depending on your credit score and payment history, you may be approved for one of these cards. If your request to open an account is approved, and a card is issued, you should still confirm the amount of balance transfer fees and costs associated with maintaining an open account. The right credit card account can stay on your credit history for years to come and offset the consequences of good credit history dropping off of your report from any closed accounts.

While any balance transfer credit card with a low APR and fees will probably save you money in the short run, these cards can affect your financial standing in significant ways over time. You should consider your credit utilization, the length of your credit history, the types of debt you owe, the amount of interest and principal balance you pay monthly and whether you plan to carry a balance after the promotional period. If you do not pay off the balance during a special low-interest or low-fee offer, you should make sure that you can live with the interest rate and fees associated with a new card.


Transferring balances may make it possible to pay creditors less in the immediate future and over time. Whether you are struggling with high payments on large balances or building your credit, a balance transfer card may make it easier to achieve your financial goals.