At a Glance

Balance transfer cards are excellent tools for any financial arsenal as they can really help get your debt management on track. However, there are some things you need to be aware of when using a balance transfer credit card, as they might not be right for every situation.

In this article, you’ll learn:

What is a balance transfer credit card?

Balance transfer credit cards are cards created by an issuer that offers a promotional APR for a certain period of time, usually 0% for 12-18 months. The purpose of these cards is to transfer outstanding credit card balances to them so you can pay your debt off without any interest charges.

Advantages of balance transfer

1. 0% interest

The best part of a balance transfer card is the promotional rate, typically 0% APR, for a number of months.

2. Debt consolidation

If you’re someone who’s ready to get their debt under control, there’s no better debt consolidation tool than a balance transfer card. Depending on the balance available, you should be able to merge multiple credit card balances under one card with 0% interest, letting you knock multiple debts out with a single payment.

3. Lowers credit utilization

Any new credit card you open will automatically increase your total available credit line on your credit report. The higher your available credit, the lower your credit utilization (assuming you don’t max out your cards, of course), which will improve your credit score quickly.

4. Transfers debt to a different account

Some cardholders like to use balance transfer offers to move outstanding debt from one card to another so they can use their old card for certain purchases. For example, the Platinum Card from American Express offers return protection and doubles the warranty of any purchase made on the card, making it useful for when it’s time to replace large items like appliances and electronics. For someone with an outstanding balance, using a balance transfer to another card could free up much-needed credit, allowing them to use their Platinum card to get their included benefits.

5. Better features and perks

Some balance transfer cards also offer reward point-earning options and cardholder perks that work just like a regular credit card. Many of the benefits may only be available for purchases and not balance transfers, though, since card issuers will want to entice you to keep the card active after paying off the balance.

6. May improve credit score

Freeing up an interest-accruing balance can help improve your credit utilization and help you lower your outstanding debt quickly, both of which will help raise your credit score significantly.

Disadvantages of balance transfer cards

1. Balance transfer fees

Most balance transfer cards will have a small transfer fee of around 3% – 5% of the total amount you’re planning to transfer. While this fee is relatively small, it will lower the total available credit that you can use.

Learn more: What Is a Balance Transfer Fee?

2. Penalty APR

If you’re not able to pay off your balance by the time the promotional period expires you will accrue interest on the remaining balance. Check your terms and conditions to find the variable market rate you can expect to incur.

3. Termination of offers

If you miss a payment deadline or make a payment less than the minimum due you could lose your promotional offer completely, making the outstanding balance subject to the variable market interest rate plus penalty fees and interest.

4. Limited credit

Balance transfer credit cards work the same as any other credit card and will have a credit line that’s based on your credit score, income, and other factors. Consequently, you might get a lower credit line than you need or expect, making it difficult to get all of your debt consolidated under one card.

5. Credit inquiries

Applying for a new balance transfer credit card will add a new hard inquiry to your credit report, possibly lowering your score. However, this hit will be canceled out by the improvement to your credit utilization if you’re approved, so it’s not as big of an impact as you might expect (again, as long as you’re approved).

6. You may accrue even more debt

Freeing up a credit line may make old spending habits come back into play, getting you further into debt than before. Don’t use a balance transfer offer if you’re not able to keep yourself away from impulse purchases or if you’re prone to seeing the card as “extra” money.

7. Requires excellent credit

Opening a new credit card of any type will require good-to-excellent credit, so you may need to work on raising your credit score before applying for a new balance transfer card. If that’s not feasible, check your current credit cards to see if they have any balance transfer offers available, as these won’t incur an inquiry to your credit report.

When should I transfer my credit card balances?

Typically you’ll want to transfer balances as early in your statement period as possible since it will take a few days for your balance transfer to complete. Transferring balances closer to your statement deadline could mean you’ll still have to make minimum payments until the transfer completes.


The biggest downside to a balance transfer is that it can get you into trouble quickly if you’re not serious about getting out of debt. By moving your outstanding balances to a new card you’ll free up your old credit lines, which can be a temptation to get into bad spending habits again. Use this opportunity as a way to get out of debt permanently instead of seeing your credit cards as “extra” money.

It’s a good idea to transfer any balances you can that are incurring a higher interest rate than the one offered with the balance transfer card. Even if you’re not able to transfer your entire balance, every little bit that doesn’t get charged interest will be easier to pay off quickly, letting you devote more money toward the interest-earning debts and clear them faster.

You’ll only be able to transfer balances that are equivalent to your balance transfer card’s credit line, less balance transfer fees. Any amount over that will most likely be rejected or incur additional fees.

Balance transfer fees might be a headache to pay, but they’re significantly lower than the interest rate you’re paying on your market rate card now, making it a small fee that’s worth the cost to get your debt under control.

Not necessarily. Many card issuers will give promotional balance transfer offers to cardholders with good standing. Check your promotional offers in your credit card’s online portal to see if there are any available that won’t require you to open a new card.

Absolutely! Balance transfer offers are excellent ways to get your credit card debt under control. However, it’s important you take this as an opportunity to correct past mistakes and not as a way to get more credit you can spend. Otherwise, you could end up even further in debt quickly.