What Are Balance Transfer Credit Cards?

If you feel you're stuck with a bad, high-interest rate credit card account, you might want to consider balance transfers. A balance transfer involves transferring your existing debt to another card account. Preferably, the card you choose should have comparably better repayment terms and lower interest rates than your initial accounts.

However, bear in mind that opening a new balance transfer credit card is not a universal, one-size-fits-all plan for debt reduction. Do your homework first. Otherwise, you'll run the risk of dragging down your credit score by opening a new card account that offers no significant value to your overall credit standing.

What Are the Pros and Cons of Balance Transfers?

We've taken the liberty of making a side-by-side comparison of the reasons why you should and should not transfer your credit card debt to a balance transfer card.


  • Helps lower the interest rate
  • Escapes high-interest or terrible conditions
  • Provides customizable repayment terms
  • Removes the possibility of card debt consolidation


  • Helps possibly lower credit score
  • The savings might not be that big
  • Possible risk of creating a new source of debt
  • Tedious balance transfer process

How Does a Balance Transfer Work?

Step 1: Open a New Credit Card Account

First, find a suitable credit card for your balance transfer. It should generally have an annual APR that is at least 4% lower than your current card and has o% transfer fees. Otherwise, you'll only be breaking even.

Step 2: Transfer the Debt

Once you have opened a new account, commence with the transfer. This process could take anywhere from one to four weeks, so make sure to keep in touch with your new card-issuing bank.

Step 3: Repay the Debt

Now, it's time to proceed with the repayment. Make sure you stick to your new repayment plan to ensure that you fully utilize the benefits of this debt management strategy.

Should You Get a Personal Loan or a Balance Transfer?

If you don't think that the savings you get on balance transfers are worth it, consider getting a personal loan instead. Depending on your credit standing, you could qualify for a personal loan that has a low APR.

If the personal loan APR is at least 5% lower than what your credit card issuer is offering, go with the personal loan. You'll already be saving at least $50 per $1,000. Plus, personal loans provide debtors with more freedom, leeway, and flexibility on how to spend the money they loaned.

Will a Balance Transfer Save You Money?

Lower interest rates will definitely save you some money in the long run, but sadly, the savings won't always make the entire process worth it. Let's do a sample computation.

Statistics show that most credit cards in the U.S. have an annual percentage rate (APR) or annual fee ranging from 15.56% to 22.87%. For computation purposes, let's assume that card A has a 22% APR, while card B has 19%.

If you have $5,000 in debt on card A, you'll end up paying a total of $1,100 in interest per year, while card B would only have a $950 APR.

Now, it's time to add in the balance transfer fees. If card B has an average credit card balance transfer fee of 3%, you'll have to shell out $150. Add together the $950 APR with the $150 transfer fee, and you'll reach a total of $1,100, which is exactly the same as what you would have paid with card A.

Does this mean you shouldn't do balance transfers? No! In this situation, the cardholder would have to look for a balance transfer card with an annual fee lower than 19% and a 0% APR on balance transfers.

For example, if you found a card that has a 0% introductory period for balance transfers and has an annual fee of 16%, you'll bring down your total cost to just $800, which totals $300 in savings.

What Happens If You Don't Pay a Balance Transfer?

Late payment consequences depend on a case-by-case basis. However, most cards would force the cardholder to forfeit the 0% balance transfer fee after consecutive missed payments.

How Much Does a Balance Transfer Hurt Your Credit Score?

A balance transfer will only drop your score if your current credit standing cannot afford to open a new card account. If you have a good score, you should have nothing to worry about. Although, if you fail to make payments on your new account or you decide to close all your initial card accounts, expect your score to drop quite a bit.

Any Credit explains that even those with bad credit can qualify for a credit card. Check out our recommendations on which banks and lenders work with bad credit card applicants.

Frequently Asked Questions

Why do banks offer balance transfers?

A balance transfer is a way to move credit card debt from one credit card to another with the goal of saving money on interest. When you're paying interest on your current cards, transferring that debt onto a new low-interest offer can help speed up repayment and reduce how much in total fees you'll pay over time.

How long do balance transfers take?

A credit card balance transfer typically takes about five to seven days, but some major card issuers ask customers up to 14 or even 21 days.

Can you do two balance transfers from the same card?

In theory, there's no limit to the number of separate credit and store cards you can transfer over. However, in practice, you are limited by the limit on your card—which may vary depending on how much money is available on your card.

Can you be denied a balance transfer?

You may not transfer a balance from one card to another when the cards are issued by the same company. Some credit card issuers will deny you if you try and move your debt across accounts with them because they limit how many times an account can be transferred in any given year.

What happens to an old credit card after a balance transfer?

You can't just close your old credit card once you've finished transferring a balance. If the new card's limit is too low, then there will be some money left unpaid on that account.

You might not be able to transfer all of your debt over from one credit issuer onto another if their limits are different, and it may leave you with an outstanding balance owed on both cards.

For any debt reduction strategy to work, you need to have the right mindset. In the case of a balance transfer, your overall goal should be to open a balance transfer card that would help you save money on interest payments in the long run. This strategy might not work for debtors who simply want a lower monthly payment.

If you're still struggling to decide whether you should grab that balance transfer offer, you might want to consult with an accountant. Have them do the math for you. Remember: lower interest payments will only provide savings if the new card has a low enough APR.

Do you feel like you're losing control over your credit card bills? Any Credit has multiple resources on how the average cardholder can cope with debt and dues better. Check our tips and guides on managing your credit cards.

Here at AnyCredit, we aim to make the most complex financial issues and topics easy to understand. In our articles, we will be making analysis, smart finance judgments, and honest conversations to help you make sense of your financial capacities and options.
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