A balance transfer can be a smart way to reduce interest costs when used as part of a plan. Think of it like moving your debt from a “high-interest neighborhood” to a “lower-interest neighborhood” … but you still have to pay the rent on time.
Balance Transfers 101: How to Save on Interest
What they are, how they work, and the fine print that matters
What Is a Balance Transfer?
A balance transfer lets you move an outstanding balance from one credit card to another, sometimes for a fee, and sometimes with a promotional (introductory) APR for a limited time.
The goal is simple: pay less interest so more of your payment goes toward the principal balance.
How Balance Transfers Save You Money
If you’re currently carrying a balance at a higher APR, a balance transfer offer with a lower (or 0%) promotional APR can reduce the interest charged during the promo period. The big “win” happens when you use that window to pay the balance down aggressively.
The catch: a promotional APR is temporary, and balance transfer fees are allowed, even on 0% offers.
The 4 Things to Check Before You Transfer
1) The balance transfer fee
Many offers charge a fee that’s typically a percentage of the amount transferred (sometimes with a minimum fee).
- If you transfer $5,000 and the fee is 3%, that’s $150 added to the cost of the move.
- If the fee is high, it can erase a chunk of the interest you hoped to save.
2) The promotional APR length
Intro rates don’t last forever. In general, an introductory rate has to stay in effect for at least six months (unless you’re more than 60 days late).
Translation: the promo period is a runway, know exactly how long you have, and plan your payoff around that end date.
3) The APR after the promo ends
Once the promotional period ends, any remaining balance typically begins accruing interest at the card’s regular APR. That post-promo rate matters a lot if you won’t pay the balance off in time.
4) The “new purchases” trap
Even with a 0% balance transfer promo, new purchases on the card may start accruing interest right away (depending on the card’s terms and grace period).
Best practice: treat the balance transfer card like a “payoff-only” card until the transferred balance is gone.
Step-by-Step: How to Do a Balance Transfer the Right Way
Step 1: Add up what you want to transfer
List each balance and its APR. Transfers are most powerful when you’re moving high-interest debt.
Step 2: Do the quick math (fee vs. interest savings)
Ask: “Will the interest I avoid during the promo period likely be more than the transfer fee?” If yes, it may be worth considering. If no, a different payoff strategy may be better.
Step 3: Set a payoff target that beats the promo clock
To pay the balance off before the promo ends:
- Monthly payoff goal = (Transfer amount + fee) ÷ number of promo months
Example: $5,000 transfer + $150 fee = $5,150. Over 12 months, that’s about $429/month.
Step 4: Automate your payment
Promotional offers often require you to make at least the minimum payment on time. Automation helps prevent a “whoops” moment that costs you.
Step 5: Don’t rack up new debt
The fastest way to turn a balance transfer into a headache is to keep spending on the old card (or the new one). Old-school advice that still works: pay it down, then keep it down.
Will a Balance Transfer Hurt My Credit Score?
It can have mixed effects:
- Possible short-term dip: applying for new credit may trigger a hard inquiry and may lower your average account age.
- Possible long-term improvement: if the transfer helps you pay down balances and lowers your overall utilization, your score may benefit over time.
When a Balance Transfer Might NOT Be the Best Move
- You can’t realistically pay it down before the promo ends.
- The fee is too high relative to the interest you’d save.
- Your spending isn’t under control yet. (No shame, just solve that piece first.)
- You’re considering “debt relief” companies that promise big results for a fee. Be cautious with offers that sound too good to be true.
Alternatives to Consider
Sometimes the “best” solution isn’t a balance transfer. Depending on your goals, you may also look at:
- Debt consolidation to simplify multiple payments into one
- A fixed-rate personal loan for predictable payoff timing
- Share/CD secured borrowing (if you have savings you don’t want to spend) for potentially lower rates
Want Help Picking the Right Payoff Strategy?
A balance transfer can work well with the right plan—but it’s not the only option. If you’d like help comparing approaches, we can walk through what you’re trying to accomplish and point you toward a solution that fits.
Balance Transfer FAQs
Is a balance transfer the same as a debt consolidation loan?
Not exactly. A balance transfer moves debt to another credit card (often with a promo APR). A debt consolidation loan is typically an installment loan with fixed payments and a set payoff timeline.
Can I transfer multiple cards onto one balance transfer card?
Often, yes—up to your approved credit limit and subject to the card issuer’s rules.
What happens if I miss a payment?
You may lose the promotional APR and/or be assessed fees, depending on the issuer’s terms. Promotional offers commonly require on-time minimum payments.
Should I close the old credit card after transferring?
Not automatically. Closing a card can reduce your available credit, which may affect utilization. Consider your overall plan and spending habits before making that call.
Can I do a balance transfer if my credit isn’t perfect?
Approval depends on the lender’s criteria. If a balance transfer isn’t available or doesn’t pencil out, a different payoff option may still help.
Disclosure: This article is for informational purposes only and is not financial, tax, or legal advice. Balance transfer offers, fees, APRs, and terms vary by card issuer and are subject to credit approval. If you’re considering a credit product, review the full disclosures and terms before applying. Membership eligibility required for People Driven Credit Union products and services. Federally insured by NCUA.
