What Is a Balance Transfer?

When you do a balance transfer, your new card issuer pays off the balance on your old card. You then owe that amount to the new card instead, usually at a lower interest rate.

Many balance transfer cards offer promotional rates of 0% for 6-12 months. During this period, every payment you make goes directly toward reducing your principal, with no interest charges eating into your progress.

Most balance transfer cards charge a fee of 1-3% of the amount transferred. On a $5,000 transfer, that's $50-$150. While this seems like a lot, compare it to the interest you'd pay at 19.99% APR: roughly $1,000 per year.

Some cards occasionally offer no-fee balance transfers as a promotional perk. These are rare but worth watching for.

1. Have a payoff plan. Calculate if you can pay off the balance before the promotional period ends. 2. Don't use the new card for purchases. Payments may be applied to the lower-interest balance first. 3. Don't close the old card. Closing it reduces your available credit and can hurt your score. 4. Set up autopay. Missing a payment could void your promotional rate. 5. Read the fine print. Know what rate kicks in after the promotional period.