What is a balance transfer? Updated: Oct. 11, 2018

While you may have heard the term before, you may be wondering “What is a balance transfer?” Even though it sounds like a complicated credit card transaction, a balance transfer is not only pretty simple to complete, but also a helpful tool to help you avoid paying credit card interest.

What is a balance transfer?

A balance transfer is a credit card transaction that allows you to move a full or partial balance from one credit card to another. For example, if you have a credit card with a $5,000 balance, you can open a new credit card, then transfer that $5,000 balance from your old credit card to the new one. The point of a balance transfer is to allow you to pay your card off with a lower interest rate or completely interest free! Although a balance transfer can be made to any credit card, it makes the most sense to transfer the balance to a new credit card offering a long 0% intro APR period because it will help you save the most money in the long run — you’ll be able to avoid credit card interest for an extended period of time. It should be noted that only credit card balances can be used to complete a balance transfer, and that a balance transfer cannot be completed within the same bank.

How to complete a balance transfer

Completing a balance transfer is as easy as 1, 2, 3. Don’t believe us? Keep reading to learn about the process.

1. Apply for a balance transfer credit card.

As we noted above, it usually makes the most sense to open a new credit card if you’re looking to complete a balance transfer because a new card will offer you the most competitive 0% intro APR period. When you look for a balance transfer credit card, you’ll want to keep an eye out for cards that offer a long 0% intro APR and a low balance transfer fee. While you might lament the idea of a balance transfer fee, you should be aware that paying a balance transfer fee isn’t necessarily a bad thing, depending on the card. To determine if the balance transfer fee is worthwhile, you’ll want to note how much the fee is (most range from 3% to 5% of the total transfer), then consider how much your current credit card interest costs. It’s likely that this one-time balance transfer fee is much lower than the ongoing interest you’d pay on your current credit card if you didn’t transfer the balance. If that’s not the case, that balance transfer credit card isn’t a fit for you.

Not sure which balance transfer credit cards are best? Here are some of our top options:

Longest 0% intro APR on Balance Transfers: Citi Simplicity Card – No Late Fees Ever

what is a balance transferWant to avoid credit card interest for over a year and a half? The Citi Simplicity Card – No Late Fees Ever (a NextAdvisor advertiser) makes that a reality with its whopping 21-month 0% intro APR on balance transfers made in the first 4 months! Although you will have to pay a balance transfer fee of 5% or $5 (whichever is greater), which is a bit high, this one-time fee may be worth it when you consider how long you’ll be paying no interest on the transferred balance. On top of its $0 annual fee, the Citi Simplicity Card has a 12-month 0% intro APR on purchases and charges no late fees or penalty APR. Similar to the other cards on this list, this card gives cardholders monthly access to one of their FICO credit score for free.

If you want a longer 0% intro APR on purchases: BankAmericard credit card

carry a credit card balanceIf you’d prefer a card with an equally long 0% intro APR on purchases and balance transfers, BankAmericard credit card may be the card for you. That’s because this card has an 18-month 0% intro APR on balance transfers made in the first 60 days (plus a 3% or $10 balance transfer fee), and the 0% intro APR for 18 months also extends to purchases. On top of that, cardholders will pay no annual fee, get no penalty APR, which means paying late won’t raise their APR, and receive a copy of their FICO score, updated on a monthly basis. The BankAmericard Credit Card is also available to those with good to excellent credit.

Best for less-than-perfect credit: Discover it Balance Transfer

what is a balance transferIf you have one or two marks on your credit reports, Discover it Balance Transfer is the card for you because it’s the only one on this list that’s available to those with average to excellent credit (usually considered a credit score of 670 or higher). Discover it Balance Transfer has an 18-month 0% intro APR on balance transfers and a 6-month 0% intro APR on purchases. Although this card has a 3% balance transfer fee, it does offer cash back rewards, which means it’s a card that you may want to keep in your wallet long after you pay off the transferred balance. In terms of cash back rewards, you’ll earn 5% cash back in rotating categories each quarter you activate (up to the quarterly maximum, then it’s 1%) and 1% on all other purchases. What’s more, Discover will match all of the cash back you earn at the end of your first year — this means if you earn $500 cash back throughout the first year, Discover will match that to give you a total of $1,000 back! On top of paying no annual fee, you’ll pay no foreign transaction fees, which is ideal for world travelers, and get your FICO credit score for free on your monthly statement and through Discover’s online portal or mobile app.

Want to see how long it will take you to pay off your balance with one of these cards? Enter your transfer amount, monthly payment amount and credit level into our free Balance Transfer Calculator to find out.

2. Initiate the transfer.

You can usually complete this step when you apply for a card, as most balance transfer credit cards allow you to input your credit card’s issuer, the transfer amount and account number, but if you missed that step or the card you applied for didn’t have this option, there are still two ways you can initiate the transfer. The first is to call the new card’s customer service number — it’s listed on the back of your credit card — and ask to complete a balance transfer. The customer service representative will then walk you through the balance transfer process. The other option is to complete it through your credit card’s online portal. Unfortunately, we can’t provide too much information about this option since all online portals are different, but you should see something like “start your balance transfer” when you log into your account. If you don’t see anything like that, you may just want to contact your credit card issuer via phone.

You should be aware that you’ll need to gather some information before you complete the balance transfer. This includes your credit card issuer, the account number and your account’s balance — it may be wise to call your card issuer to get the balance so you can be sure it’s the complete balance, including any interest for that month (if necessary). It should be noted that there may be an instance when your new credit card’s limit doesn’t match the amount you need to transfer. If you find yourself in that situation, you have a number of options.

3. Verify the transfer is complete.

Finally, you’ll want to transfer confirm the transfer is complete. Most balance transfers can take up to 7 days to complete, so you’ll want to be sure you continue to at least pay the minimum payment on your old credit card until the transfer is complete, as a late credit card payment will wreak havoc on your credit. After you receive a statement confirming your old credit card balance is at $0, you can concentrate on paying down the transferred balance before the 0% intro APR runs out.

Although it may be a foreign concept to you, completing a balance transfer isn’t nearly as challenging as you likely thought it would be. Visit our reviews of the best balance transfer credit cards to get started with your balance transfer today.

Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author’s alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This content was accurate at the time of this post, but card terms and conditions may change at any time. This site may be compensated through the credit card issuer Affiliate Program.