Balance Transfer
Moving debt from one credit card to another, typically to take advantage of a lower promotional rate.
What is Balance Transfer?
A balance transfer is the process of moving an existing credit card balance to a new card, usually to take advantage of a low or 0% promotional APR for a defined period (typically 12–21 months). This can save significant interest if the balance is paid down before the promotional period ends. Balance transfers usually carry a fee of 3–5% of the transferred amount. At the end of the promotional period, any remaining balance reverts to the card's standard APR. Balance transfers are most effective as part of an aggressive debt paydown plan, not a way to repeatedly defer payments.
Example
A consumer transfers a $6,000 balance from a 24% APR card to a new card offering 0% APR for 18 months with a 3% ($180) transfer fee. Paying $340/month clears the balance before the 0% period ends, saving approximately $1,300 in interest.
Source: Consumer Financial Protection Bureau — Balance Transfers