Credit Card Balance Transfer: When Does it Make Sense?

3 MIN. READ

Key takeaways:

Balance transfers let you move debt to a new credit card, but there are some potential fees to watch out for.
Read on to learn more about how balance transfers work and how to figure out if it’s a good option for you.

You keep getting credit card balance transfers in the mail. You might be wondering, is it really worth it?

In some cases, moving a credit card balance to a different card can help you save big. It can also make debt easier to manage and reduce the stress of balancing your budget.

However, not all balance transfer offers are the same, and there are situations where you might not save much.

We’re here to break down how these offers work and help you figure out if it’s the right option for you.

What’s a Credit Card Balance Transfer?

With a balance transfer, you’re moving your current credit card balance to a new card.

Why do people do credit card balance transfers? There are a few reasons:

The savings can be interesting if you can get a new card with a lower APR.
Sometimes, balance transfers are great for consolidating two or more debts into a single monthly payment. This can make your finances easier to manage.

Balance transfers can be a good way to get out of debt faster. However, we recommend carefully comparing offers and picking one that actually helps you save money.

Are There Fees Associated With Balance Transfers?

The answer is usually yes. Here’s how balance transfers work and what you should watch out for.

Is the New APR Better Than the Old One?

The point of a balance transfer is to move debt to a new credit card with a lower APR (Annual Percentage Rate).

Some credit cards offer 0% intro APR on balance transfers. It means:

You’re likely to pay less in interest than you do with your current card.
What you’re not spending on interest can go toward repaying the balance, which may help you get out of debt faster.

To compare the APR:

Figure out what your current APR is. It should be in your cardholder’s agreement.
Read the balance transfer offer carefully. The new card may have a different APR for balance transfers and new purchases.

Special offers on balance transfers (like 0% APR) usually have a time limit. For instance, you’ll get that introductory rate for the first six months.

It means your balance won’t accrue interest for these first six months. When this introductory period ends, a higher APR kicks in.

Depending on the details of the offer, you may end up paying deferred interest on the remaining balance. This means six months' worth of interest on what you failed to repay will be added to your balance.

How Do Balance Transfer Fees Work?

Balance transfer fees may apply when you transfer a balance to a new credit card. It can be:

A flat fee
A percentage of what you’re transferring

These fees are usually added to the new balance you owe.

Should You Do a Balance Transfer?

If you’re not sure about whether a balance transfer is a good option for you, ask yourself a few questions:

What is the APR on your current credit card?
Is the APR on the new card better? If yes, is there a promotional period with a better APR? How much is the APR after that, and is it still better than your current card?
How much can you realistically pay on your balance during the promotional offer?
By how much will balance transfer fees increase your debt?

In the end, a balance transfer is worth it if getting a lower APR for a while allows you to pay off enough of your debt to offset balance transfer fees, and if the APR after the promotional period ends remains reasonable.

Balance Transfers With Power Financial Credit Union

At Power Financial Credit Union, our goal is to help you build a strong financial foundation so you can build a better future.

This foundation can be hard to build if you’re struggling with debt. It’s why we have some credit cards with great balance transfer options.

Learn more about our credit cards here, contact us online with questions, or stop by one of our South Florida branches for personalized advice on balance transfers.

FAQs

Do credit card balance transfers really save you that much money?

They can, but only if the new card offers a lower APR and the savings outweigh any transfer fees. A 0% introductory rate can significantly reduce interest costs if you pay down the balance during that period.