Credit & Debt

What is Balance Transfer?

A balance transfer moves debt from one credit card to another—usually to a card with a lower introductory rate (like 0% APR for 12 to 21 months). It's a way to reduce interest while you pay down your balance.

Balance transfers can help you pay off debt faster, but they come with a fee—typically 3% to 5% of the amount transferred, added to the new balance.

The key is to pay off the balance before the intro period ends. After that, the remaining balance gets hit with the card's standard APR, which is usually much higher. You also need to qualify for the new card based on your income and credit.

Quick Facts

Introductory Rate TargetTypically 0% APR promotional rate

Standard Fee Range3% to 5% of the transferred balance amount

Promotional WindowUsually lasts 12 to 21 months

Impact on LimitSubject to the new card's approved credit limit

PRACTICAL EXAMPLE

A borrower transfers $5,000 of debt from a card with a 24% APR to a card with a 0% APR for 18 months. The new card charges a 3% transfer fee ($150), making the initial balance $5,150. By paying $286 monthly, they pay off the debt interest-free, saving over $1,200 in interest.

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RELATED TERMS

Learn More Key Concepts

Credit ScoreA three-digit number that tells lenders how likely you are to repay borrowed money.

APRA broader measure of the cost of borrowing mortgage money, incorporating the interest rate, broker fees, and closing costs.

Interest ChargeThe monthly cost of borrowing funds on credit, calculated using the Annual Percentage Rate and the average daily balance.

Debt ConsolidationCombining multiple outstanding debts into a single payment, typically using a personal loan or balance transfer card.

Secured DebtDebt that is backed by collateral, which the lender can seize if the borrower defaults on payments.

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