It’s also important to note that certain balance transfer cards might waive the typical transfer fee. For example, a rewards card might offer 12 to 15 months of 0% interest, whereas a card designed for debt consolidation and balance transfers might offer a low interest for a longer promotional period lasting up to 21 months. Cards that are not designed solely for balance transfers have their drawbacks. Typically, these accounts fall into one of two categories: cards that are meant for the sole purpose of consolidating or restructuring debt and those that offer rewards programs and are meant for long-term use.īefore settling on one of those categories, consider how you intend to use the new account. Various banks and credit card companies offer balance transfer deals. Generally, payments will go toward the transferred balance first, if it has a lower interest rate, then new purchases.

When looking into balance transfers, you should understand how payments will work for the new card. Typically, your new account will specify two different interest rates: one for the transferred balance and another one for any new purchases you make with the card. Avoid these types of accounts as the annual fees could negate your overall savings.Ĭonsumers considering balance transfers should also determine whether the card issuer offers a 0% annual percentage rate on balance transfers alone or on both transferred balances and new purchases. Some cards might also involve an annual membership fee. That way, you don’t have to keep track of multiple accounts and monthly payments.Īlthough you could save money overall, you’ll probably have to pay a transfer fee, which is typically 3% of the balance you transfer. For example, if you transfer a $10,000 balance from an account with a 15% interest rate to a card with no interest for the first 12 months, you could save $1,500 during that initial year.Īdditionally, balance transfers can simplify your finances by letting you consolidate all of your credit card debt onto one card. For people struggling with credit card debt, a balance transfer offers the chance to pay down their balance without worrying about accumulating interest for a certain period of time.Ī balance transfer can result in significant savings. Generally, the 0% or low introductory interest rate on a new account will last for a limited amount of time (typically six to 18 months). How balance transfers workĪ balance transfer is just what it sounds like: You transfer the balance from an old credit card to a new one with better terms and a lower interest rate. However, before you pursue a balance transfer, be sure to understand how these options may impact your credit scores. Although the principal amount of debt remains the same, you save money in interest payments, which in turn could help you pay off your debt faster while improving your credit history and financial situation. A balance transfer involves moving debt from one account to a new one with a low or 0% interest rate. If you’re grappling with credit card debt, a balance transfer may help.

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