What It Means
A balance transfer involves moving debt from one or more credit cards to a new card, usually one offering a promotional 0% APR period. This strategy can save significant money on interest charges and help you pay down debt faster. Balance transfer cards typically offer promotional periods of 12 to 21 months at 0% APR. Most cards charge a balance transfer fee of 3-5% of the transferred amount. To maximize this strategy, you should have a plan to pay off the transferred balance before the promotional period ends, as the regular APR that kicks in afterward is often quite high.
Frequently Asked Questions
Is a balance transfer worth it?
A balance transfer is worth it when you have high-interest debt and a plan to pay it off during the promotional 0% APR period. Even with a 3-5% transfer fee, the interest savings usually far outweigh the cost.
Does a balance transfer hurt your credit score?
Initially, yes - the hard inquiry and new account can cause a small, temporary dip. However, reducing your utilization on the original card and paying down debt can improve your score over time.