What is a balance transfer — and is it a good idea for debt?

Credit cards are powerful financial tools that offer an opportunity to build your credit score, accumulate rewards, manage your cash flow and make secure purchases. It’s no secret, though, that they can also pave the path to a mountain of debt.

A March 2024 Bankrate survey on credit card rewards found that 44 percent of cardholders carry a credit card balance from month to month, a potentially expensive habit with the average credit card interest rate sitting at more than 20 percent.

The good news is that many credit cards feature a handy option for helping you dig out from under that pile of debt and avoid hefty interest charges: a balance transfer.

Learn what a balance transfer is and how it can help you get on a stronger path to healthier finances.

What is a balance transfer?

A balance transfer is a transaction that moves existing debt from one source of debt to a different credit card. If you transfer the balance from a credit card with a higher APR to a card with a lower rate, or even an introductory 0-percent APR period, you can save money on interest as you work to pay down the debt.

Ultimately, your goal should be to pay off the debt you transferred entirely during any introductory period.

What is a balance transfer credit card?

A balance transfer credit card features a 0-percent intro APR period on balance transfers. The longest 0-percent APR periods are usually on cards that offer little more than that lengthy intro period in terms of cardholder benefits. However, some of the best rewards credit cards also tout decent, if slightly shorter, balance transfer offers.

But, if your goal is to get out from under debt without distractions or the temptation to earn rewards, focus on choosing a card based on the length of the balance transfer period you need and leave the rewards-earning for another time.

How does a balance transfer work?

A balance transfer works as a debt payoff strategy, allowing you a period of time to pay down debt without paying interest on what you owe. For example, if you have a $5,000 debt on a card with a 19.99 percent APR, you would pay about $691 in interest to pay off that debt in 15 months, with payments of about $379 monthly. On the other hand, if you transfer that debt to a 0-percent intro APR card with a 3 percent balance transfer fee, you can pay $344 monthly to pay off your debt in the same time frame without racking up any interest.

The general process looks like this:

1. Apply for a balance transfer card. Choose a balance transfer card that offers the length of intro 0-percent APR you need to fully pay down your debt (or get as close as possible). Use Bankrate’s balance transfer calculator to compare options. One note: you usually can’t transfer a balance from one card to another card with the same issuer. If you have a balance on a Chase card, for example, you won’t be allowed to transfer it to another Chase card.
2. Request the balance transfer. Sometimes you can initiate this process as part of your card application. If you signaled in your application that you have a balance to transfer and are instantly approved for the new card, the system may prompt you to set up your balance transfer. You’ll need to provide the amount you want to transfer, the name of the issuer, your account number and other details.
3. Wait for the transfer to complete. Once the issuer approves your transfer, it can take two weeks or more for the process to be completed. When you request a balance transfer, the bank to which you’re making the transfer will usually simply pay your existing balance. That effectively moves the balance from your current account to the new one. While you wait, make sure you continue making payments on your old account so you don’t accrue late fees or other penalties. Soon, you’ll see the new balance, along with any associated balance transfer fee, in your new card account.
4. Make a plan for paying off your balance. Now that the balance is on your new card, do the math and make a plan for paying off as much of the balance as possible during the intro period. Remember to add in your balance transfer fee and divide the total balance by the number of months you have to pay it off in order to find your needed monthly payment.

What types of debt can you transfer to a credit card?

Some balance transfer cards allow you to transfer more than credit card debt — including car loans, student loans and personal loans. Currently, Chase and American Express are the only major issuers that don’t allow transfers of non-credit-card debt.

That said, keep in mind that you shouldn’t transfer any debt that you aren’t going to be able to pay off fully during the 0-percent promotional window if it has a lower interest rate than the balance transfer card’s regular APR. For example, if you have a car loan with a 7 percent interest rate, transferring it to a balance transfer credit card with a 29.99 percent regular interest isn’t likely to make sense if you’ll need longer than the promo period to pay your debt in full.

Is a balance transfer a good idea?

You can do a balance transfer in response to debt you accrued unexpectedly, such as in emergencies, or simply because of poor budgeting you’re now working to correct. However, you can also take a proactive approach.

For example, if you have a large purchase coming up as part of a planned home improvement project, you could pay for the purchase with a rewards credit card and then transfer that balance to a balance transfer credit card. That way, you earn rewards on your big purchase and take advantage of an intro 0-percent APR period to pay it off interest-free.

Deciding if a balance transfer is the right move depends on your specific situation and financial goals. Ask yourself these questions:

Do you have a lot of high-interest credit card debt?

The primary benefit of balance transfers is avoiding interest while you pay down debt. Therefore, they are best for people with a lot of high-interest debt to pay down. By moving debt to a new credit card with a 0-percent intro APR offer, you get the chance to save money on interest and pay down the balance at a faster pace.

Do you need time to pay off a recent large purchase?

If you need extra time to pay off a big credit card purchase, transferring the balance to a balance transfer card can be a smart move. If you manage to pay off your balance before the intro period ends, you can successfully dodge interest that may otherwise have been added to your balance.

Would you rather focus on one balance?

If juggling multiple balances becomes too much, consolidating multiple balances to one card means you have only one payment to keep up with. Even better, it may come with a potentially lower monthly payment. Since you aren’t paying high interest anymore, you can also potentially pay off your debt more quickly.

Will you be able to pay off your balance during your introductory period?

If you sign up for a balance transfer credit card and aren’t able to fully pay off the amount you transferred before your 0-percent introductory APR period ends, you will begin accruing interest on your unpaid balance at the card’s regular APR. At this point, you may want to prioritize paying off your remaining debt more quickly, seeing if you can negotiate a lower interest rate with your lender or applying for another balance transfer card.

Are you ready to commit to a debt payoff plan?

Some people get balance transfer credit cards with good intentions but find themselves racking up new balances on their cards, even as they work to pay off their old debt. If you can’t commit to paying off your credit card debt without taking on new debt, a balance transfer credit card might not be the right option for you, as it could land you in even more debt overall.

Would a personal loan work better for your needs?

If the amount of debt you have is larger than the potential credit limit on a new card, or if you have a low credit score or need a longer debt repayment period, it’s worth considering a personal loan. Though you won’t find an interest-free intro period, the best personal loans from banks and other financial institutions tend to offer lower rates than credit cards do.

The bottom line

If you’re under a mountain of high-interest debt, a balance transfer can help you save on interest and pay down what you owe more quickly. Before applying for a balance transfer card, analyze your bills to understand the types of debt you owe, how much you owe and to whom. Then compare the best balance transfer credit cards on the market to find a fit with your budget and debt-payoff plan.