You may have heard of a balance transfer. But how does one work? And how could it save money on my next credit card bill?
These are the questions we get from people new to the world of credit cards. So keep reading to find out — plus how balance transfers work, what fees may be involved in balance transfers, and how long does a typical balance transfer take. long.
What is balance transfer?
A balance transfer is a type of transaction in which debt is transferred from one credit card account to another. If approached properly, they can save you money on interest payments, meaning if you transfer your balance from a high-interest card to a lower-interest card.
For example, debt transfers from a credit card that accrues interest to a credit card that transfers balance with 0% Referral Annual Percentage (APR) can be paid in full without interest.
What is a balance transfer credit card?
ONE credit card balance transfer is any credit card that allows you to transfer balances from other accounts. They usually offer a 0% introductory APR, which encourages transfers.
Some issuers also allow you to transfer other types of debt, such as auto, student, and personal loans, to your balance transfer card.
However, keep in mind that transferring balances comes with a few costs and limitations. Generally, you will be charged a balance transfer fee, usually 3%-5% of the total amount transferred. And your card may have a balance transfer limit, making it impossible for you to transfer the entire balance of your card or loan.
Additionally, transfers from the same issuer—for example, transferring a Chase debt to another Chase card—are generally not allowed.
How to transfer credit card balance
The exact steps to transfer a credit card balance vary by issuer, but in general you’ll want:
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First, sign up for (and get) a balance transfer credit card, preferably with a 0% introductory APR. Check out our list of the best balance transfers personal card And business card for options.
Then initiate balance transfers with your card issuer. This can usually be done online or by phone and you will need to provide details such as the name of the issuer and the type and amount of debt you are looking to transfer. Some balance transfers can also be initiated through a convenience check.
Once requested, wait to see if the transfer is approved. This may take two weeks or longer. If approved, the issuer will generally pay your old account directly. The old balance — plus the balance transfer fee — will show up in your new account.
Finally, pay off the balance and save a significant amount (possibly) for interest payments.
bottom line
A balance transfer is when you transfer a debt from one credit card to another. It is best to do this with a balance transfer card. You’ll then contact your card issuer to transfer the balance, which can take two weeks or longer. The goal is for you to save on interest payments in the long run.
