What is a balance transfer on a credit card?

Summary

• A balance transfer allows you to move credit card debt to a card with a lower interest rate, sometimes one with a low intro APR.
• You’ll benefit most if you can pay off your transferred balance within the promotional period.
• Most cards charge a transfer fee of 3%–5%, so weigh the cost against your potential savings.
• Using a balance transfer card strategically may help you stay ahead of debt and improve your financial flexibility.

A balance transfer is when you shift debt from one credit card to another. It can be a smart financial strategy if you want to simplify your finances, save on interest or pay off a balance more efficiently. Think of it like switching lanes on the highway – you're on the same road, but the move may help you get to your destination faster.

But just like changing lanes, you need to know if a balance transfer can really help you move forward. Let’s look at how balance transfers work, when they make sense and how to make the most of a balance transfer.

How do you do a balance transfer on a credit card?

The steps below give you a general outline of how a balance transfer works. However, details like transfer fees, promotional time frames, and eligible balances can vary, so always review the terms before you begin.

1. Choose a credit card with a balance transfer offer.

When you’re considering a balance transfer, the goal is to find a card that costs you less in interest than your current card. That may mean applying for a card with a 0% introductory annual percentage rate (APR), where you pay no interest on balance transfers during the promotional period.

Another option is to transfer your balance to a card with a lower ongoing APR than your current one. Part of your payment will still go to interest, but your overall costs will shrink – and more of what you pay can go toward reducing your balance. Just remember that most cards charge balance transfer fees, so be sure to weigh that cost against the potential savings on interest.

2. Request a balance transfer.

You may be able to request a balance transfer when you apply for a new card. If not, most card issuers let you initiate a transfer later through their website, mobile app, or by calling the customer service number on the back of your card.

To complete the request, you’ll need the account number and the amount you’d like to transfer. Check that the card you’re transferring to has enough available credit to cover the balance plus any transfer fee.

3. Wait for the transfer to process.

Once a balance transfer is approved, the new card provider will send payment to your old account. This process can take anywhere from a few days to a couple of weeks. During that time, keep making payments on your old account to avoid late fees.

Don’t worry if you see both balances while the transfer is in progress. However, you want to double-check that the final amount is correct once the transfer is complete. Keep in mind that if your new card’s limit doesn’t cover the full amount, only part of the balance may be transferred.

4. Focus on repayment.

Timely payments are always important, but they’re essential after transferring a balance – especially if your new card has a 0% intro APR. Missed payments could end the promotional rate early. But if you stay on track, you can avoid interest altogether.

Repayment is just as important if your new card doesn’t have a promotional rate. In that case, interest will accrue, and late or minimum payments will cut into your savings. Paying on time — and paying more than the minimum when possible — is the best way to make your transfer worthwhile.

How do you know if a balance transfer is right for you?

A balance transfer can be a good idea, but it isn’t the right choice for everyone. To see if it makes sense for you, consider the following questions.

Does the new card offer a lower rate than your current one?

You want a credit card with a significantly lower interest rate than what you're paying now. Ideally, that would be one that offers a low introductory APR, like the U.S. Bank Shield™ Visa® Card.

If you don’t qualify for a promotional rate, check that the card’s ongoing APR is still lower than your current card’s rate, so you can save money over time.

Do you have a good enough credit score to qualify?

Balance transfer offers with a low intro APR – whether on a new or existing card – are usually reserved for applicants with good to excellent credit. A lower score may mean you won't qualify for the best promotional rates, so your savings may be smaller.

Can you pay off the balance within the promotional period?

If you’re transferring to a card with a low intro APR, you’ll save the most if you can pay off your balance before the promotional rate ends. Once it expires, the standard APR will apply to the remaining balance.

Will the savings outweigh the fees?

Most balance transfers charge a fee of 3%–5% of the amount you move. Compare that cost with how much you expect to save in interest to see if the transfer is truly worthwhile.

What's the best way to take advantage of a credit card balance transfer?

A balance transfer isn’t just about shifting debt around. When used strategically to pay off balances and minimize interest, it can be a powerful tool for staying ahead of debt.

Here are a few ways to make the most of a balance transfer:

Pay down your balance aggressively.

With low or no interest, more of your dollars go toward reducing what you owe, so pay more than your minimum monthly payment whenever you can. You can calculate how much to pay each month by dividing what you owe (including the balance transfer fee) by the number of months in your promotional period.

Avoid adding to your balance.

Promotional rates may not apply to new purchases. Even if they do, treating your balance transfer card strictly as a repayment tool, not a spending card, can help you stay focused so you can pay off your balance faster.

Track the promotional period.

Set reminders for when your low intro APR ends. That way, you’ll know when you need to have your transferred balance paid off – or at least greatly reduced – and when the standard APR kicks in.

Keep your old account open.

Credit history length affects your credit score, so it may be best to leave the old account open even after the balance transfer. Unless the card charges a high annual fee, keeping it active can help maintain your score.

A balance transfer may help you effectively manage your debt.

Like switching lanes, a balance transfer only makes sense if it helps get you where you want to be. With the right strategy, a credit card with a balance transfer intro offer like the U.S. Bank Shield™ Visa® Card may help you pay off balances more efficiently and put you on a faster track to your financial goals.