What is a Balance Transfer? Understanding Credit Impact & Fees

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If you’ve found yourself carrying debt on a high-interest credit card, you may want to consider a balance transfer to a card with a lower rate. A balance transfer may help you save money on an existing debt you’re still paying down. With that said, transferring your outstanding balance involves certain costs, and there are plenty of considerations you should fully understand before diving in.

Below, we’ve outlined common FAQs surrounding balance transfers. Navigate directly to the section related to your question or keep reading for a comprehensive overview.

What is a balance transfer?

Basic balance transfer definition: A balance transfer moves your outstanding debts from an old credit card to a new one with a lower interest rate.

The possible benefit: Depending on the balance transfer credit card you choose, a lower interest rate or an introductory 0% interest rate may help you save money while you’re paying down your balance.

What is a balance transfer fee?

A balance transfer fee is what a credit card company charges on the amount you are transferring over to the new card. Typically, it will be between 3-5% of the amount you transfer. So, if you’re transferring a balance of $3,000, a 3% balance transfer fee would cost you $90. The most economical option is for you to find a card that has no balance transfer fee at all.

A major drawback of a balance transfer fee is that it adds to your overall debt, especially if you are transferring over large debt and you have a higher balance transfer fee.

For example, if you’re moving over a $10,000 balance to a new card with a 5% transfer fee, you’re new total debt is now $10,500.

It is worthwhile to weigh the pros and cons before using a balance transfer to mitigate your indebtedness. And remember, the larger the balance you’re transferring and the higher the percentage balance transfer fee, the more money you’ll owe on top of your pre-existing debt.

How long does a balance transfer take?

The time it takes for a balance transfer to fully settle depends on the credit card issuer. But it could take anywhere from 14 days to a full month to process. To find this information for yourself, you may need to parse through your credit card disclosure.

If you don’t find the information there, you may want to call the credit card company to get your answer – especially if you are trying to time the transfer so that you don’t have to pay another month’s worth of higher interest charges on your old card.

You may be able to speed up the balance transfer process by submitting your application online rather than through the mail.

Is it worth transferring credit card balances?

It may be worth transferring your credit card balance in certain circumstances. Here are a few instances where it might be helpful for your overall financial health to use a balance transfer:

  • IF the amount you’ll save is still substantial even with the addition of a balance transfer fees.
    • You’ll have to sit down and do some serious math in order to figure out what makes the most sense in your individual situation.
  • IF you can avoid putting any new purchases on the balance transfer card and focus on simply paying off your old debt.
    • A balance transfer isn’t a Get-Out-of-Jail-Free card. If you will be tempted to put purchases on your new card, you may want to think twice about doing a balance transfer. If the reasons for debt on your old card is due in part to spending irresponsibly, you might want to reconsider
  • IF you can pay off your debt before your introductory interest rate ends and the regular APR starts.
    • Many cards have a teaser rate of 0% interest to get you to sign up, but if you can’t realistically pay off the debt before the regular interest rate kicks in, it might not be worth it.

Again, you’ll have to decide if a balance transfer is right for your individual circumstances and being honest about what monthly payments you’ll be able to afford before you can decide if it’s worth it.

Do balance transfers count as payments?

Yes – partially. While it’s true that during a balance transfer, you’ll be wiping one credit card clean, it won’t count as a “payment” until the transfer is complete.

Note: It’s important that you continue to make payments to the cards you’re transferring balances from until you get verification that the balance transfer has gone through. If you miss a payment on your card, you may be charged with a late fee and if you’re over 30 days late, your credit score may be impacted.

Can you do balance transfers back and forth?

Yes, but there’s a limit to how many times you’ll be able to continue opening new 0% interest cards. Why is this the case? Well, each time you transfer your debt to a new card you apply for, a “hard pull” is required on your credit, which temporarily lowers your credit score. If you try to transfer your debts to new cards several times, you run the risk of getting a lender’s attention for all of the wrong reasons.

A credit card company may flag your account which means it may be harder to get approved for the next credit card balance transfer you try to initiate — this, in turn, may lead to a higher interest rate while you’re still attempting to pay off your debt.

What happens if you don’t pay off a balance transfer?

It depends on your balance transfer credit card, but your introductory interest rate is probably not going to last forever. So, it’s typically in your best interest to pay off your balance within the timeframe of the introductory 0% rate (or other lower rate) which can range from 6 months to 21 months depending on the specific credit card issuer.

If you’re still struggling to pay off an outstanding balance after a balance transfer, it might be beneficial to start looking into other strategies for settling debts like researching government debt relief programs.

Do balance transfers hurt your credit?

Yes and no. In the short term, you’ll typically see a drop in your credit score because you’re applying for a new line of credit. When you apply for a new form of credit, the credit card company does a hard inquiry on your credit. This temporarily lowers your credit score but it should go back to normal within a short time period of regular payment.

In the long term, however, a balance transfer card can help you improve your credit health by lowering your credit utilization since you’re paying down debt on a faster timeline. It’s important to look at both the short term cost as well as the long term benefits when you’re deciding whether or not a balance transfer credit card is right for you.

What credit score do I need for a balance transfer?

It depends on the card issuer. However, if you have a poor credit score, it is typically more difficult to get approved for a balance transfer credit card. In addition, if you have a lower credit score, you might be faced with a higher interest rate because you’re a riskier borrower in the eyes of a lender. And if that’s the case, you’ll have to weight the costs and benefits of doing a balance transfer in the first place.

Before applying for a balance transfer card, you may want to spend some time improving your financial health and credit score. For example, your credit score may rise if you can lower your overall credit utilization and pay down at least part of your existing debt before applying for a new credit card.

How to do a balance transfer

Here are the steps you’ll need to follow to do a balance transfer:

1.   Decide what balances you want to move to a new card

Make a list of all the credits cards, their associated interest rates, and balances. Choose the ones that have the highest interest rates.

2.   Figure out the balance transfer fee

Check the up-front fee you’ll be paying to transfer money over to your new card. Make sure that you’ll still be saving money with the lower interest rate.

3.   Know your payment details

Find out and note the minimum monthly payment you need to make each month to keep the introductory interest rate.

4.   Keep track of the introductory period

Figure out if you will be able to pay off your entire debt in the introductory period. If you won’t, what’s the non-introductory rate you’ll be paying?

5.   Check the timeline for completing the transfer

Make sure you know exactly how much time after getting approved for a new card for the balance transfer to happen. You’ll need to know when that window closes.

6.   Figure out how much you want to move over

Remember: The amount you transfer to your new credit card can’t be over the credit limit.

7.   Wait for the transfer to be completed

Each credit card company is on its own timeline for when a balance transfer is completed. So, make sure to watch your accounts and don’t forget to get your free credit report online to monitor any credit score changes.


Moving money off your card to avoid high-interest charges may make sense in certain cases. However, you’ll have to decide if a balance transfer card still makes sense after factoring in variables such as the introductory period rate, the balance transfer fee, and the amount of debt you’re trying to resolve. After careful research and consideration of your own financial health, you’ll be on your way to overcoming your debt.

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Written by Mint

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