<meta property="cq:wcmmode" content="disabled"/><meta property="articleFeedData" content="{&#34;nextPageMobile&#34;:false,&#34;nextPageNumberMobile&#34;:-1,&#34;nextPageUrl&#34;:&#34;/articles/the-pros-and-cons-of-a-credit-card-balance-transfer.2&#34;,&#34;prevPageNumber&#34;:-1,&#34;bottomArticles&#34;:[{&#34;date&#34;:&#34;Fri Nov 10 00:00:00 PST 2023&#34;,&#34;author&#34;:&#34;/content/dam/cob-corp-acquisition/content-fragments/authorbio/marc-klein/jcr:content/data/master&#34;,&#34;imagePath&#34;:&#34;/content/dam/cob-corp-acquisition/images/articles/2023/11/230439_DA_CoverageLimits_SEOA_FINAL.jpg&#34;,&#34;previewDescription&#34;:&#34;Insurance can help protect you financially when you need it most. But is there a limit to how much it will pay? &#34;,&#34;title&#34;:&#34;How Do Insurance Coverage Limits Work?&#34;,&#34;pagePath&#34;:&#34;/articles/how-do-insurance-coverage-limits-work&#34;,&#34;imageAlt&#34;:&#34;A close up shot of an insurance bill, with most of it blurry except for the word \u201ccoverage,\u201d signifying the coverage limit for the insurance plan.&#34;,&#34;tags&#34;:[&#34;creditonebank:PersonalFinance&#34;,&#34;credit-one-central-topics:insurance&#34;]},{&#34;date&#34;:&#34;Wed Nov 08 00:00:00 PST 2023&#34;,&#34;author&#34;:&#34;/content/dam/cob-corp-acquisition/content-fragments/authorbio/heather-vale/jcr:content/data/master&#34;,&#34;imagePath&#34;:&#34;/content/dam/cob-corp-acquisition/images/articles/2023/11/230640_CM_HolidayOnlineShopping_ART_Header_Final.jpg&#34;,&#34;previewDescription&#34;:&#34;While millions of Americans search for the internet\u2019s best deals this holiday season, cybercriminals are hard at work targeting those online shoppers. &#34;,&#34;title&#34;:&#34;6 Online Holiday Shopping Safety Tips&#34;,&#34;pagePath&#34;:&#34;/articles/6-online-holiday-shopping-safety-tips&#34;,&#34;imageAlt&#34;:&#34;A woman\u2019s hands are seen using her laptop and holding a credit card as she does her holiday shopping online with wrapping paper on the desk.&#34;,&#34;tags&#34;:[&#34;creditonebank:PersonalFinance&#34;,&#34;credit-one-central-topics:financial-tips&#34;,&#34;credit-one-central-topics:identity-theft&#34;,&#34;credit-one-central-topics:shopping&#34;]},{&#34;date&#34;:&#34;Tue Oct 31 16:08:38 PDT 2023&#34;,&#34;title&#34;:&#34;Topics&#34;,&#34;pagePath&#34;:&#34;/articles/topics&#34;,&#34;tags&#34;:[]}],&#34;authorArticlesMobile&#34;:[],&#34;prevPageMobile&#34;:false,&#34;nextPage&#34;:true,&#34;prevPage&#34;:false,&#34;prevPageUrl&#34;:&#34;/articles/the-pros-and-cons-of-a-credit-card-balance-transfer&#34;,&#34;prevPageUrlMobile&#34;:&#34;/articles/the-pros-and-cons-of-a-credit-card-balance-transfer&#34;,&#34;prevPageNumberMobile&#34;:-1,&#34;topArticles&#34;:[{&#34;date&#34;:&#34;Tue Nov 14 00:00:00 PST 2023&#34;,&#34;author&#34;:&#34;/content/dam/cob-corp-acquisition/content-fragments/authorbio/heather-vale/jcr:content/data/master&#34;,&#34;imagePath&#34;:&#34;/content/dam/cob-corp-acquisition/images/articles/2023/11/230568_DA_RisingAutoInsurance_SEOA_Final.jpg&#34;,&#34;previewDescription&#34;:&#34;Generally speaking, you have to pay car insurance. But what causes your auto insurance rates to go up?&#34;,&#34;title&#34;:&#34;Why Do Auto Insurance Rates Go Up?&#34;,&#34;pagePath&#34;:&#34;/articles/why-do-auto-insurance-rates-go-up&#34;,&#34;imageAlt&#34;:&#34;A toy car is climbing a stack of coins, representing auto insurance rates going up.&#34;,&#34;tags&#34;:[&#34;credit-one-central-topics:insurance&#34;,&#34;creditonebank:FinancialPlanning&#34;]},{&#34;date&#34;:&#34;Mon Nov 13 00:00:00 PST 2023&#34;,&#34;author&#34;:&#34;/content/dam/cob-corp-acquisition/content-fragments/authorbio/marc-klein/jcr:content/data/master&#34;,&#34;imagePath&#34;:&#34;/content/dam/cob-corp-acquisition/images/articles/2023/11/230567_DA_ComprehensiveCollisionAuto_SEOA_Final.jpg&#34;,&#34;previewDescription&#34;:&#34;Looking to find more coverage in case of damage to your car? Learn all about the differences between comprehensive and collision auto insurance.&#34;,&#34;title&#34;:&#34;Comprehensive vs. Collision Auto Coverage&#34;,&#34;pagePath&#34;:&#34;/articles/comprehensive-vs-collision-auto-coverage&#34;,&#34;imageAlt&#34;:&#34;A storm has caused a tree to fall on an SUV, which requires comprehensive coverage to pay for the damage.&#34;,&#34;tags&#34;:[&#34;creditonebank:PersonalFinance&#34;,&#34;credit-one-central-topics:insurance&#34;]},{&#34;date&#34;:&#34;Sat Nov 11 00:00:00 PST 2023&#34;,&#34;author&#34;:&#34;/content/dam/cob-corp-acquisition/content-fragments/authorbio/heather-vale/jcr:content/data/master&#34;,&#34;imagePath&#34;:&#34;/content/dam/cob-corp-acquisition/images/articles/2023/11/230544_DA_SubscriptionEffectsLBA_SEOA_FINAL.jpg&#34;,&#34;previewDescription&#34;:&#34;Everything from entertainment media to home decor is increasingly becoming subscription-based. As this trend continues, it\u2019s important to understand how subscriptions can impact your finances.&#34;,&#34;title&#34;:&#34;How Subscription Services Are Expected To Impact Personal Finances in the Coming Decade&#34;,&#34;pagePath&#34;:&#34;/articles/how-subscription-services-are-expected-to-impact-finances&#34;,&#34;imageAlt&#34;:&#34;A man\u2019s hand uses a remote to navigate various subscription services on a smart TV, which could impact his personal finances.&#34;,&#34;tags&#34;:[&#34;creditonebank:PersonalFinance&#34;,&#34;credit-one-central-topics:financial-tips&#34;,&#34;credit-one-central-topics:saving-money&#34;,&#34;credit-one-central-topics:shopping&#34;]}],&#34;lastPageNumberMobile&#34;:0,&#34;currentPageNumber&#34;:1,&#34;nextPageNumber&#34;:2,&#34;lastPageNumber&#34;:71,&#34;nextPageUrlMobile&#34;:&#34;&#34;,&#34;articlesTopics&#34;:[&#34;insurance&#34;,&#34;financial tips&#34;,&#34;saving money&#34;,&#34;shopping&#34;,&#34;identity theft&#34;],&#34;currentPageNumberMobile&#34;:1}"/>
Credit One Bank Logo
  • Accept Mail Offer
  • See If You Pre-Qualify
  • Customer Service
Sign In

Credit One Central

  • Credit Education
  • Personal Finance
  • Life Events
  • Financial Planning
  • Glossary
Personal Finance

How Balance Transfers Work

Author: Jennifer Brozic

October 10, 2019

Topics:

Credit Card

Pros and cons of credit card balance transfers

Credit card balance transfers are often touted as a low- (or no-) interest way to quickly pay down high-interest credit card debt. And if you have a plan for keeping your spending in check, reducing your expenses, or earning extra money, a balance transfer may be a good option to help you pay down credit card debt.

But this debt-consolidation method is not a cure-all for wiping out credit card debt. If you’re considering using a balance transfer to consolidate multiple credit card balances, here are a few things you should know first.

How Balance Transfers Work

Some credit card companies periodically offer you the opportunity to transfer other credit card balances to your account with them. Or you may apply for a new credit card that allows you to move the balance from an existing card (or cards) to the new credit card. The balance on your original credit card is reduced or eliminated, depending on how much of the outstanding balance you transfer, and you are then responsible for repaying the balance that was transferred to the credit card that offered and brokered the transfer.

Benefits of a Balance Transfer

Combining multiple balances onto a single credit card can help simplify your finances. Instead of making several credit card payments each month, you make only one payment for all of the balances that you transferred to the new card. In addition, as a promotion, banks may offer a low- or no-interest introductory rate on balance transfers—often for 12, 18, or 24 months—if they’re made within a certain timeframe of opening a new credit card account with them. The promotional period is essentially the equivalent of a no-interest loan, which allows you to pay down debt interest-free.

Another benefit is that, when you open a new credit card account, you’ll have more credit available to you. With more available credit, your credit utilization ratio may decrease, which can contribute toward increasing your credit score. Your credit utilization ratio is a major factor used to calculate credit scores, and keeping it low—typically below 30%­—can be an important step in keeping your credit score high.

Drawbacks of a Balance Transfer

Unfortunately, most credit card banks don’t allow balance transfers between two cards that they issue. So, if you want to qualify for a balance transfer, you may need to apply for a second credit card with a different card-issuer. Since you won’t already be a card member with a third-party card-issuer, which means they have no history with you, it could be more difficult to get a card from them. And applying for a new credit card with any bank typically results in a hard inquiry, which typically lowers your credit score by a few points.

Although paying down debt interest-free sounds good, the introductory rate offered on most balance transfers doesn’t last forever. If you don’t pay the balance in full before the promotional period ends, the balance that remains will accrue interest at the annual percentage rate (APR) specified in the terms of your credit card agreement. What’s more, again depending on the terms of your agreement, your credit card company may revoke the low- or no-interest offer on your balance transfer if you make even one late payment.

While you may not have to pay interest on the amount you transfer, you may be required to pay a balance transfer fee, which is typically around 3% to 5% of the amount you transfer and gets added to your balance in the transfer. In addition, depending on how much credit card debt you have, a balance transfer may not be practical because the amount you transfer plus the fees you’re charged must be lower than the credit limit on the new card.

If you use your balance transfer card to make purchases or get cash advances, you may not pay off the amount you transfer as quickly as you planned. That’s because the CARD Act of 2009 requires credit card companies to apply payments above the minimum amount due to the balance with the highest interest rate.

Balance transfers often have the lowest interest rate during the introductory period. If you pay more than the minimum and have other charges on your card in addition to the balance transfer amount, the extra money will typically be allocated to the balances with higher interest rates. If you’re going to complete a balance transfer to consolidate debt, consider not using the card for anything else until the amount you transfer is paid off.

 

A balance transfer can be a good way to reduce high-interest credit card debt—if you pay it off by the time the promotional period expires and don’t continue to accumulate more debt. But it’s important to read the fine print before you sign up for a balance transfer to ensure that you understand the credit card company’s policies and are prepared for any additional fees you may be charged to make the transfer happen.

 


Photo of the author

About the author:

Jennifer Brozic

Jennifer Brozic began her writing career at seven years old, when she scribed the epic tale of her kite-flying (and skyward-looking) uncle crossing paths with a deep hole in a sandy beach. After earning a degree in journalism, Jen worked in the insurance and financial services industries before earning a master’s degree in communication management. She left the nine-to-five corporate world in 2010 and has been freelance writing ever since. Her areas of expertise include insurance, financial planning & budgeting, and building credit.

Recommended Articles

Things to Consider with Balance Transfers
Taking Advantage of Balance Transfers

One of the benefits credit cards offer is convenience. They make it easier to pay for everyday expenses and larger purchases that would otherwise require carrying a lot of cash. But, if you’ve settled into making only the minimum required payment each month on your credit card, you may find you’re paying an excessive amount of interest and your outstanding balance seems to be decreasing at a snail’s pace.

Credit Card Balance Transfers
Credit Card Debt Consolidation

If you’re tired of juggling multiple credit card payments and want a simpler way to pay down debt and get your finances back on track, credit card consolidation may be the solution. A balance transfer is one of the most common types of credit card consolidation. It works by transferring your existing credit card balances to a new credit card, so you only need to make one payment each month on one credit card.

Woman withdrawing money from an ATM machine
How a Cash Advance Works & Pros and Cons

Sometimes payday feels just too far away. When your account balance is dangerously close to zero but you need some extra cash, it can be tempting to use a cash advance to bridge the gap. But what is a cash advance, and when is it a good idea to get one?

Credit Cards

  • Browse Credit Cards
  • See If You Pre-Qualify
  • Accept Mail Offer
  • Application Status
  • Support

  • FAQs
  • Contact Us
  • Accessibility
  • Credit One Central
  • About Us

  • Company
  • Partnerships
  • Community
  • Careers
  • News
  • Cell Phone Icon Credit One Bank Mobile App
    Facebook IconX IconInstagram IconYouTube IconLinkedIn Icon

  • Privacy
  • Terms of Use
  • Security & Fraud
  • Card Agreements
  • © 2023 Credit One Bank, N.A. All Rights Reserved. Member FDIC. This is a secure site.