What is a Balance Transfer Credit Card?

A balance transfer credit card usually offers a special promotion that allows you to move another source of debt to your credit card, ideally at a lower cost. Some balance transfer credit cards may provide a period where you can transfer the balance without paying a balance transfer fee. Others may give you a period to pay off the balance transferred without paying interest on that balance.

Many people use balance transfer credit cards to transfer debt from one credit card to another to lower their costs. However, some lenders may allow you to transfer balances from other types of loans to your credit card, as well. Consider the following before deciding if a balance transfer credit card may work for you.

Pros & Cons of a Balance Transfer Card

As you can imagine, balance transfer credit cards come with benefits and drawbacks depending on your circumstances.

Pro: You could save money

Balance transfer credit cards could save you money on interest payments if you transfer debt from a source with a higher interest rate to a card offering a lower interest rate and you pay off the debt quickly. 

Pro: You may pay off debt faster

Interest payments can make up a considerable amount of your monthly minimum credit card payments. Transferring a balance you owe to a credit card offering an introductory 0% APR lets your entire payment amount go toward paying down the balance owed during that period.

Con: You may need an excellent credit score

While balance transfer credit card offers could save you money, you typically need a good to excellent credit score to get approved. You may be able to get balance transfer credit cards with less than stellar credit, but the terms that come with the cards may not be ideal.

Con: The promotions expire

The promotions offered to get you to sign up for a balance transfer credit card don’t last forever. The 0% introductory APR offers usually last for a few months to as long as 20 months. To claim these limited-time promotional rates and special promotions offering no balance transfer fees, you generally must transfer any balances within the first 30-60 days of opening the account.

Con: Balance transfer fees

Banks still need to make money on balance transfer credit card promotions. Lenders often charge balance transfer fees that range from 3-5% of the balance transferred or a specific dollar amount, whichever is greater. While paying a 3% fee may be better than paying an 18.99% APR on another credit card, you need to consider these costs.