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Balance transfer tips for saving on credit card interest

Why, when and how to make a credit card balance transfer.

If your credit cards carry high interest rate balances, the monthly charges may be costing you some serious money. If that’s the case, transferring debt from one or more high-interest cards to a single card with a lower rate could make a lot of sense. It could effectively reduce the amount you owe and simplify your life with one statement and one payment due each month. While most banks charge a fee for balance transfers, in the long run the savings on interest from the lower rate card could be worth it. It’s important to understand the process, so here are some balance transfer tips.


Look for a card with a long promotional period

Most new cards offer an introductory APR (annual percentage rate) for 12 months or more from the date the card is opened, and in some cases the introductory APR exists for purchases as well. Promotional APRs on existing credit cards are sometimes offered throughout the year and can range between 13 and 20 months. When evaluating balance transfer offers for new or existing cards, always look for those that offer the longest duration, since this will give you more time to save on interest and help you pay down the balance faster.


Know your interest rates

In general, balance transfers have one interest rate, and other transactions—like purchases and cash advances—have their own interest rates. This is important to know, because when you pay more than the minimum amount, issuers are required to apply that extra amount you paid to the debt with the highest interest rate (whether that be your balance transfer, purchases or access checks). Always check the interest charge calculation section of your statements.


Factor in the “go-to” rate

This is the standard rate on your account that will be applied to any unpaid portion of the balance transfer amount after your promotional rate expires. It’s important to be prepared and aware that your minimum payment and interest charges may increase based on the higher go-to rate.


Evaluate the balance transfer fee

Balance transfer fees are often 2–5 percent of the transferred amount up front, or a minimum of $10 (this fee is added to your total balance transfer). On a $5,000 balance transfer, that could mean a fee between $100 and $250. Include the fee in your calculations to figure out if you’ll save money over the long run. Remember, the savings from the lower interest rate will often be greater than the transfer fee.


Keep payments current on your old card

Processing a balance transfer can take two weeks or more if requested as part of a new credit card application. Processing time on an existing credit card may take up to five days. Don’t fall behind on your payments to the old card. And, once the debt is moved to the lower rate card, be careful not to incur more debt on the old card.


Maintain a solid credit score

The higher your credit score, the better your chances of receiving low promotional rate balance transfer offers. Improving your credit score starts with an understanding of what makes up your score and the agencies that create your credit report.

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The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America Corporation and/or its affiliates assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment management. ©2023 Bank of America Corporation.

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