Understanding balance transfers

Before transferring your credit card balance to a new or existing credit card with a lower interest rate, know how balance transfers work and the questions you need to ask.

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If you have a high-interest credit card, a balance transfer can help you pay down your debt faster and potentially save you money.

Say you have a credit card balance of $5,000 and plan to pay it off in a year using either your high-interest credit card or a card with an introductory or promotional 0% annual percentage rate (APR) on balance transfers for 12 months. The balance transfer offer can save you hundreds of dollars in interest.

High-interest card
15% APR

Total you pay

Balance transfer card
12 month, 0% intro APR + 3% fee

Total you pay

You save: $265

Sources: CreditCards.com, Bankrate, 2017

4 questions to ask to get the most out of a balance transfer

1. When is the promotional rate over?
Promotional or introductory new card rates often end 9–21 months after they start.
To maximize your savings, determine how long the low rate lasts and how much you can pay off before it ends.

Some introductory rates can expire in as little as 9 months

2. What are the upfront fees?
When transferring a balance to a credit card, generally you pay a transaction fee of 3–5% of the transferred amount. However, the long-term savings from the lower promotional rate can outweigh the cost of this fee.

transaction fee

3. What happens when the promotional rate expires?
Once the introductory or promotional rate ends, the contractual rate kicks in. Going from 0% to 15% in one month can be an unwelcome surprise if you’re not prepared. Read the fine print of the offer before you transfer.

4. What are the various APRs?
In general, balance transfers have one APR, while other transactions—purchases, cash advances and fees incurred—have their own interest rates. Knowing all the APRs is useful when comparing offers.

0% APR
13% APR
20% APR

Other things to consider

A little bit can make a big difference
Transferring a portion of your debt to a lower rate can be helpful because of the money you can save on interest.

Other benefits
Even if you don’t qualify for a low promotional or lower contract APR, a balance transfer still can help. Combining debts can simplify your life by giving you fewer bills to pay and fewer creditors to deal with. Applying for new credit can impact your credit score, so be aware how hard and soft credit inquiries work.


Don’t forget ...
Paying down high-interest debt is smart. Balance transfers are a good step down that path, but it’s important not to incur more debt in the meantime.

Dealing with debt can be tricky, but these four strategies can help you pay off credit card debt fast. Ready to get started transferring your card balance? Bank of America has credit cards that offer low introductory APRs on qualifying balance transfers.

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The material provided on this website is for informational use only and is not intended for financial, tax or investment advice. Bank of America and/or its affiliates, and Khan Academy, 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 and tax advisor when making decisions regarding your financial situation.

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