How Does a Balance Transfer Work?
After being approved for a balance transfer card, you provide the new issuer with your existing card account details and the amount you want to transfer. The new issuer pays off the old balance and adds it to your new account, usually charging a balance transfer fee of 3% to 5% of the transferred amount. Transfers typically take one to two weeks to complete.
What Are the Costs of a Balance Transfer?
Most balance transfer offers charge a fee of 3% to 5% of the transferred amount upfront. For a $5,000 transfer, that is $150–$250. Despite this fee, the math often favors transferring if you are paying 20%+ APR on existing debt. You must also be disciplined: if you do not pay off the balance before the promotional period ends, the remaining balance converts to the card's standard APR, often 20%+.
Who Should Consider a Balance Transfer?
Balance transfers are best for people with a concrete plan to pay off the debt during the promotional window. Divide your total balance by the number of promotional months to find your required monthly payment. If you can commit to that amount, a transfer can save hundreds or thousands in interest. They are less suitable for those who may run up new charges on the old card, doubling their debt problem.
Frequently asked questions
Can you transfer a balance from any card to any card?
No. You generally cannot transfer balances between cards from the same issuer. For example, you cannot move a Chase balance to another Chase card. You must transfer to a card from a different bank. Also, you typically cannot transfer more than your new card's credit limit allows.
Does a balance transfer hurt your credit score?
Opening a new card for a balance transfer triggers a hard inquiry and lowers the average age of your accounts slightly. However, if the transfer significantly reduces your utilization on the old card, the net effect on your score may be neutral or even positive. The key is not running up new debt on old cards.