How Does a Credit Card Balance Transfer Work?

What Is A Credit Card Balance Transfer?

Many credit cards offer short term 0-percent APR introductory or fixed low-percent APR on balance transfers for qualified consumers. This allows for higher percent APR credit card account balances to transfer into a new account with 0 percent fixed low introductory rate for the duration of the introductory period. Payments to this new account apply to the principal instead of interest and can dramatically lower your balance with steady payments during that period, giving you a better chance of paying off the remaining balance without added interest fees.


A balance transfer is one way a credit card company attracts new or ongoing customers to switch creditors and consolidate their debt payments under one card. The benefits for consumers are the better rates they receive from making the transfer. Credit card companies are then able to take advantage of higher interest payments once the introductory rate expires. A missed or late payment during the introductory period automatically voids the 0 to low percent offer, and a significant hike in the APR will be applied to the balance, as well as late fees that typically range from $30 to $50.


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Applying for a Balance Transfer

Some online applications have instant approvals, but balance transfers may take several days or weeks to process between creditors. During this interim, the balance holding account accumulates interest, which still needs to be paid. (After a balance transfer is fully processed, always check with the higher percent APR account for any remaining balances and pay them off before closing).

Consumers with good credit scores often receive offers in the mail from other creditors. Depending on a consumer's rating, creditors either offer 0-percent or low-interest offers contingent on patterns in credit history, income to debt ratio and the number of revolving accounts currently open. While online applications are instant, the mail-in process will take several weeks longer, and payments toward the higher APR account must continue during this time.



Creditors consider a number of factors from a consumer's credit history to determine the type of offer to send a prospective customer and the line of credit they eventually grant. If a balance transfer amount request exceeds the line of credit a creditor is willing to give an applicant, the balance transfer will reflect that and only the line of credit limit granted will transfer, leaving a remaining balance in the holding account.

Becoming Debt Free

Zero-percent introductory rates eventually expire. Some durations may last for 12 months, but most are six months before the regular APR begins to apply to the transferred balance. Pay off as much as you can during this period with the objective of becoming debt free. If a balance remains at the end of the introductory period, repeat the process again by applying for a new balance transfer into a new 0-percent APR introductory offer.


Credit Report

Make sure to check on your credit report periodically to ensure that the information in your credit history is accurate, as this will have an impact on what type of offers you receive. Also, it's a way for creditors to review how many accounts you have open, which determines the line of credit a consumer is qualified to receive.