At a Glance

Credit card refinancing, also known as a balance transfer, refers to moving credit card debt from one lender or card to another. Credit card refinancing is useful for lowering interest rate payments. When deciding which card to use, make sure to consider:

  • Length of the promotional period
  • Balance transfer fees
  • Annual fees
  • Regular APR %

How Credit Card Refinancing Works

You can use a balance transfer credit card to pay off existing debt. If you move debt to a low interest or 0% interest rate card, you’ll pay less or even no interest during the duration of the promotional period. The money you’ll save can help you pay off more of your balance.

For example, let’s say you have $15,000 in credit card debt on a card that charges 20% interest. If you moved your debt to a 0% interest card and didn’t make any late payments, you would save around $3,000 in the first year.

Credit card refinance requirements

To qualify for a 0% APR card, you’ll need a solid credit history and a good to excellent credit score, often 690 or up. Both your score and history will affect the interest rate you pay on your card once the 0% promotion is up.

Pros and Cons of Credit Card Refinancing

There are pros and cons to credit card refinancing:

Pros of credit card refinancing

  • You’ll have the opportunity to pay off your balance without paying interest (most promotions run anywhere from 12-18 months).
  • You’ll have access to additional revolving credit as you pay your balance down.
  • You can get approved for a new card quickly (while getting approved for a loan could take days).

Cons of credit card refinancing

  • 0% or low-interest promotions don’t last long. And because credit cards have variable interest rates, the rate you pay after the promotional period could be higher than expected.
  • Some cards will charge balance transfer fees, which can amount to anywhere from 3%-5% of your entire balance.
  • If you’re unable to pay off your balance by the time the promotional period is over, the interest rate will go back up to its normal level and you’ll return to square one.

Bottom line: Credit card refinancing can help you save money on interest. But if you’re not careful, you could wind up moving debt back and forth without actually paying any of it off.

How to Decide Which Card to Choose

Some considerations when deciding which card to choose to include:

Length of promotional period:

Check that you'll have enough time to pay off your debt within the promotional period.

Balance transfer fee:

Most cards will charge a balance transfer fee, though some won't if you transfer your balance within the first 60 days.

Annual fees:

The majority of balance transfer cards don't charge annual fees, but make sure to double-check.

Regular APR:

Even if you're going to use a 0% APR card, make sure to compare the regular interest rates among cards since this is the rate you'll have to pay if you can't pay off your debt in time.

Is Paying a Balance Transfer Fee Ever Worth It?

Paying a balance transfer fee can make sense if you have a large amount of debt at a high-interest rate, and the only way you’ll be able to pay it off is to have both a surplus of time and zero to little interest owed.

Usually, cards that have balance transfer fees also have longer promotional periods. Sometimes the money saved from having a longer promotional period is greater than the amount you’ll owe in balance transfer fees.

How to calculate a balance transfer fee

To calculate a balance transfer fee, take the amount you plan to transfer and multiply it by the transfer balance fee percentage. If you’re planning to transfer $15,000 to a balance transfer card and your fee is 4%, you’ll owe $600.

Credit Card Refinancing vs. Consolidation

Another option to pay off credit card debt is credit card consolidation.

What is credit card consolidation?

Credit card consolidation is the process of paying off credit card debt with a low-interest loan, such as a personal loan. You can move several card balances over to one loan. Personal loans are typically given in a lump sum with a fixed interest rate that won’t vary over the loan’s lifespan. You’ll pay off your debt in fixed installments until it’s paid off.

Benefits of credit card consolidation

  • Interest rates might be lower than credit card rates.
  • There’s a fixed-term where you know your debt will be paid off. This can make it safer than trying to pay off credit card revolving debt.
  • If you have trouble managing your debt, this could be a better decision for you as you won’t be able to increase your loan debt the same way you could with revolving debt.

In general, credit card refinancing is better for lowering your interest rate, while credit card consolidation is a better choice for completely paying off your debt.