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What is a balance transfer?

Balance transfers allow credit card customers to move existing balances to new accounts.
Find out how you could save money from a balance transfer as well as whether there are any charges you might need to consider.

A balance transfer allows you to move existing credit card balances to a new credit account. You can use this as an opportunity to secure lower interest rates. Some credit card issuers offer a 0% balance transfer during a promotional period. Transferring balances from high-interest accounts to one with a lower rate of interest can reduce the overall cost of borrowing and help you clear your debt faster.

Consolidating multiple debts also gives you a more manageable repayment plan. This means you are less likely to miss or be late with payments, helping you avoid penalty fees. Balance transfers can be an effective way to manage debt, but it’s important to understand how they work before applying.

How do balance transfers work?

When you take out a balance transfer credit card, your new balance is used to clear the debt on your old card. You may be able to consolidate multiple debts into one monthly repayment to your new issuer. Consolidation can make debt management easier, and your new credit account may offer lower interest rates than your previous one.

Many credit card issuers have interest-free introductory offers on balance transfer accounts. Customers will not be subject to any interest throughout the promotional period, which could be as long as three years.

Repayments made during this time will go entirely towards clearing the credit card principal. This means you can repay your debt faster with zero interest, as long as you clear your balance within the interest-free period. Paying more than the minimum amount will help you achieve this. You will be subject to paying interest if you are unable to clear the balance within the promotional period.

Are there any fees for balance transfers?

A transfer fee usually applies for this service. This tends to be charged as a percentage of the total balance you are transferring and is typically around 3%. For example, if you were to transfer a $2,000 balance to a card with a 3% transfer fee, you would pay $60.

Some balance transfer cards offer lower transfer fees but will likely have shorter promotional periods. Take all fees into account when choosing a balance transfer credit card and check that you can repay your balance within the promotional period.

Many credit card issuers require that you transfer 90-95% of the credit limit on your existing card. This is to ensure you don’t have multiple debts on other accounts, which could result in missed payments. You cannot transfer 100% of the credit limit onto a new card, as your issuer will need to allow for any fees that may be due on your account.

More considerations for balance transfers

It’s a good idea to avoid spending on your balance transfer credit card if possible. Spending will add to your debt and may make it more difficult to clear your balance within the interest-free period. A higher interest rate may also apply to new purchases on your balance transfer card.

Most issuers do not allow you to transfer balances between credit accounts within the same banking organization. Upon acceptance, you will usually have 60 days to transfer your debts. Failure to do so can result in the issuer withdrawing promotional terms.

To secure the most competitive borrowing terms, you should ensure you have the best possible credit score. Multiple credit applications can negatively affect your score. Use online eligibility checkers to see if you are likely to be accepted before applying when shopping around for balance transfer cards.

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© 2019 Brex Inc. “Brex” and the Brex logo are registered trademarks.

The Brex Mastercard® Corporate Credit Card is issued by Emigrant Bank, Member FDIC. Terms and conditions apply. See the Brex Platform Agreement for details.

Brex Inc. provides a corporate card. Brex Treasury LLC is an affiliated SEC-registered broker-dealer and member of FINRA and SIPC that provides Brex Cash, a program that allows customers to sweep uninvested cash balances into certain money market mutual funds. Investing in securities products involves risk, including possible loss of principal. Neither Brex Inc. nor any of its affiliates is a bank. Please see brex.com/cash for important legal disclosures.