What Is a Balance Transfer?

If you’re carrying credit card debt at a high interest rate, a balance transfer can feel like finding a financial life raft. The idea is simple: move your existing debt to a new credit card with a 0% introductory APR and use that interest-free period to pay down your balance. It’s a powerful strategy — but only if you go in with your eyes open.

How a Balance Transfer Works

A balance transfer moves debt from one credit card (or sometimes another type of account) to a new credit card. The new card offers a promotional 0% APR for a set period, usually 12 to 21 months. During that window, no interest accrues on the transferred balance, so every dollar you pay goes directly toward reducing what you owe.

Here’s the basic process:

1. Apply for a balance transfer card. You’ll need good to excellent credit (typically a score of 670 or higher) to qualify for the best offers.
2. Request the transfer. You provide the account details of the debt you want to move. The new card issuer pays off your old balance.
3. Pay down the balance. During the 0% APR period, make consistent payments to eliminate as much of the debt as possible.
4. The promotional period ends. Any remaining balance starts accruing interest at the card’s regular APR.

The Balance Transfer Fee

Almost every balance transfer comes with a fee, typically 3% to 5% of the amount transferred. This is charged upfront and added to your new balance.

For example, if you transfer $6,000 with a 3% fee, you’ll pay $180 — making your new balance $6,180. That might seem like a lot, but compare it to what you’d pay in interest at 20% APR over the same period: potentially $1,000 or more. The fee is usually well worth it.

A few cards occasionally offer no-fee balance transfers, but they’re rare and often come with shorter promotional periods or other trade-offs.

How to Calculate if It’s Worth It

Before applying, do some quick math:

1. Calculate the transfer fee. Multiply your balance by the fee percentage (e.g., $5,000 x 3% = $150).
2. Calculate the interest you’d pay otherwise. Use your current APR and the number of months you’d carry the balance.
3. Compare the two. If the fee is less than the interest you’d avoid, the transfer makes sense.

For example, $5,000 at 22% APR costs about $917 in interest over 12 months (if you’re making payments). A 3% balance transfer fee is $150. That’s a savings of over $750.

Common Gotchas to Watch Out For

Balance transfers are a great tool, but there are pitfalls that catch people off guard:

The Promotional Period Has an Expiration Date

Once the 0% APR period ends, the regular APR kicks in — and it’s often 18-26%. Any remaining balance will start accruing interest at that rate. Mark the end date on your calendar and have a plan to pay off the balance before it arrives.

New Purchases May Not Be at 0%

Many balance transfer cards only apply the 0% rate to the transferred balance. New purchases you make on the card might accrue interest at the regular APR right away. Some cards do extend the 0% rate to new purchases, but don’t assume — read the terms carefully.

Payments Apply to Low-Rate Balances First

If you have both a transferred balance (at 0%) and new purchases (at the regular APR) on the same card, your minimum payments go toward the lower-rate balance first. Anything above the minimum goes to the higher-rate balance. This means new purchases can quietly accumulate expensive interest while your payments chip away at the interest-free debt.

The best strategy: don’t make new purchases on your balance transfer card.

Late Payments Can Kill the Deal

If you miss a payment, you may lose your promotional rate entirely. The 0% APR could be replaced by a penalty APR of 29.99% or higher. Set up autopay to protect your promotional rate — even if it’s just for the minimum payment.

You Can’t Transfer Between Cards From the Same Issuer

Most card issuers won’t let you transfer a balance from one of their cards to another. If you have a Chase credit card with debt, for example, you generally can’t transfer it to a new Chase balance transfer card.

Making the Most of a Balance Transfer

To get the maximum benefit from a balance transfer:

• Divide your balance by the promotional months. If you transfer $6,000 to a card with an 18-month 0% period, plan to pay $334 per month to clear it before the promotion ends.
• Set up autopay. This prevents late payments that could void your 0% rate.
• Don’t use the card for new purchases. Keep it dedicated to paying off your transferred balance.
• Don’t close your old card. Keeping it open (with a zero balance) helps your credit utilization ratio and the average age of your accounts.
• Have a backup plan. If you can’t pay it all off in time, start looking into your options before the promotional period ends.

Who Should Consider a Balance Transfer?

A balance transfer works best if you:

• Have good credit (670+ score)
• Carry credit card debt at a high interest rate
• Can realistically pay off the balance within the promotional period
• Have the discipline to avoid making new purchases on the card

It’s less ideal if your credit score won’t qualify you for a good offer, or if you’re not confident you can pay off the balance before the regular rate kicks in.

Bottom Line

A balance transfer lets you move high-interest credit card debt to a card with a 0% introductory APR, giving you a window to pay down your balance without interest piling on. Watch out for transfer fees, promotional period deadlines, and the temptation to use the card for new purchases. When used with a clear payoff plan, a balance transfer can save you hundreds or even thousands of dollars in interest.