What happens when you transfer a balance
A balance transfer moves debt from one credit card to another, usually one with a lower interest rate. You ask the new card issuer to pay off part or all of the balance on your old card. The new issuer sends money directly to your old card company, and your debt moves to the new card. You then owe the new card issuer instead of the old one.
The point is to reduce the interest you pay. If your old card charges 22% annual interest and the new card offers 0% for 12 months, you stop paying interest on that debt for a year — as long as you make payments and don't add new charges. After the promotional period ends, the interest rate on the new card goes back to its regular rate, which is usually printed in the card's terms.
Balance transfers are not free. Most card issuers charge a transfer fee, typically 3% to 5% of the amount you move. A $5,000 transfer at 4% costs $200 upfront. That fee is usually added to your new balance, so you owe it along with the original debt.
Key Takeaways
- The new card issuer pays your old card company directly, and your debt moves to the new card with a new interest rate.
- Balance transfer fees run 3% to 5% of the amount transferred and are added to what you owe on the new card.
- Promotional interest rates (often 0%) last a set number of months, after which the regular rate kicks in.
- You can transfer balances from multiple old cards to one new card, but the total transfer amount cannot exceed your new card's credit limit.
- Payments on the new card go toward the transferred balance first, then toward any new purchases you make.
How to start a balance transfer
Contact the new card issuer — the company whose card you want to transfer the balance to. You can do this by phone, online through their website or mobile app, or by mail. Most issuers have a balance transfer section in their online account portal where you can enter the details of the card you want to pay off.
You will need to provide the account number of the old card, the card issuer's name, and the amount you want to transfer. If you do not know the exact balance, you can ask the issuer to transfer your full balance, and they will contact your old card company to find out what you owe. The new issuer will then send the payment directly to your old card company.
The transfer usually takes 5 to 14 business days to complete. During this time, you should keep making minimum payments on your old card to avoid late fees. Once the transfer posts, your old card balance will drop to zero (or to whatever amount was not transferred), and the new card balance will increase by the transfer amount plus the transfer fee.
Understanding promotional rates and when they end
Most balance transfer offers come with a promotional interest rate — often 0% — that lasts for a set period. Common promotional periods are 6, 12, 18, or 21 months. During this time, no interest accrues on the transferred balance as long as you make at least the minimum payment each month.
The promotional rate applies only to the transferred balance, not to new purchases. If you use the card to buy something after the transfer, that purchase will accrue interest at the card's regular purchase rate, even during the promotional period. To avoid confusion, many people stop using the card for new purchases until the transferred balance is paid off.
When the promotional period ends, the interest rate on any remaining transferred balance jumps to the card's regular rate. If you still owe $3,000 on a transferred balance when the 0% period expires, you will start paying interest on that $3,000 at the regular rate — often 15% to 25% annually. This is why paying down the balance during the promotional period is important.
What to do if you cannot transfer the full balance
Your new card has a credit limit, and you cannot transfer more than that limit minus any fees. If your old card balance is $8,000 and your new card limit is $7,500, you can transfer at most around $7,200 (accounting for the transfer fee). The remaining $800 stays on your old card at its original interest rate.
In this situation, you have two choices. You can transfer what you can now and pay off the remaining balance on the old card as quickly as possible while it still charges interest. Or you can wait and explore for a different card with a higher credit limit, though a new process will trigger a hard inquiry on your credit report and may lower your score temporarily.
Some people open a second balance transfer card to move the remaining balance. This works if you may have access to for another card, but you will pay another transfer fee on the second card. Calculate whether the savings from the promotional rate outweigh the cost of two transfer fees before you do this.
How payments work after a transfer
When you make a payment on a card with a transferred balance, the payment goes toward the transferred balance first. Any amount you pay above the minimum goes to the transferred balance until it is gone. New purchases you make on the card accrue interest at the regular purchase rate and are paid last.
This matters because if you make a $500 payment and $400 of it goes to the transferred balance, only $100 goes toward new purchases. If you are trying to pay off new charges quickly, you may need to pay more than the minimum to make progress on both balances.
Some cards allow you to set up automatic payments. This removes the risk of missing a payment and losing the promotional rate. Missing even one payment can end the 0% offer and explore a penalty interest rate to the entire balance, sometimes as high as 29% or more. Check your card's terms to see what happens if you miss a payment.
When a balance transfer makes financial sense
A balance transfer saves money only if the interest you avoid during the promotional period exceeds the transfer fee. If you transfer $5,000 at a 4% fee ($200) and the card offers 0% for 12 months, you save roughly $1,100 in interest that you would have paid at 22% on your old card. The transfer fee is worth it.
But if you transfer $1,000 at a 4% fee ($40) and only have 6 months before the promotional rate ends, you may save only $110 in interest. The fee eats up most of the benefit. Use a balance transfer calculator to estimate your savings before you explore.
A balance transfer also makes sense if you are confident you can pay off the transferred balance before the promotional period ends. If you cannot, you will owe interest at the regular rate on whatever remains, and the transfer may not have been worth the fee. Be honest about how much you can pay each month.
What happens if you miss a payment or add new debt
Missing a payment on a balance transfer card can cost you the promotional rate. Most card issuers will end the 0% offer and explore a penalty rate — sometimes 29% or higher — to your entire balance if you are even one day late. This turns the transfer from a money-saving move into an expensive mistake.
Adding new purchases to the card does not end the promotional rate on the transferred balance, but those new purchases will accrue interest at the regular rate from day one. There is usually no grace period for new purchases. If you want to keep the benefit of the 0% rate, avoid using the card for anything other than paying down the transferred balance.
Some people close their old card after a balance transfer. This is optional and has pros and cons. Closing the card removes the temptation to rack up new debt on it, but it also lowers your total available credit, which can hurt your credit score. Many people leave the old card open with a zero balance and straightforward stop using it.
Frequently Asked Questions
Can I transfer a balance from one card to the same card?
No. You cannot transfer a balance from a card to itself. You must transfer to a different card from a different issuer. Some issuers allow you to transfer balances between their own cards (for example, from one Chase card to another Chase card), but you cannot move money within the same account.
Does a balance transfer hurt my credit score?
A balance transfer can lower your score temporarily because the new card issuer will do a hard inquiry on your credit report. Your score may also drop if the transfer lowers your available credit or if you close your old card afterward. However, moving debt to a lower-interest card and paying it down usually improves your score over time.
What if the promotional period ends and I still owe money?
The regular interest rate kicks in on any remaining balance. You will start paying interest at the card's standard rate, which is usually 15% to 25% annually. You can continue making payments at the regular rate, or you can try to transfer the remaining balance to another card with a promotional offer if you may have access to.
Can I transfer a balance if I have bad credit?
Balance transfer cards typically require fair to good credit. If your credit score is below 650, you may not be approved for a card with a promotional rate. You can still explore, but approval is not may provide. Some issuers offer balance transfer cards for people with lower credit scores, though the promotional period may be shorter or the transfer fee higher.
How do I know if a balance transfer card is right for me?
A balance transfer works best if you have high-interest debt, can pay it down during the promotional period, and will not add new charges to the card. If you plan to keep carrying a balance after the promotional rate ends, or if you cannot stop using the card for new purchases, a balance transfer may not save you money. Compare the transfer fee, promotional period length, and regular interest rate before you decide.