What's a Balance Transfer and Why Should You Do One?

Credit card debt is notorious in the United States. 
With revolving debt, which includes credit cards, 
climbing from $5.8 billion to $8.9 billion in the past year, 
according to the Federal Reserve, 
it's clear that Americans need help paying off their debt. 
The key to paying off credit card is to try and have an interest rate 
that’s as low as possible — that way you can concentrate on paying the balance and not the interest. 
Many people have credit cards with purchase APRs ranging from 13% to 25%, 
meaning they pay a lot of extra money each month if they don’t pay their bill in full. 
That’s where a balance transfer can help you not only save money, 
but also give you more opportunity to pay off your debt.

What’s a balance transfer?

Simply put, a balance transfer is when you transfer the balance, 
either partial or full, from one credit card to another credit card. 
To be clear, transferring your balance from a card with a 20% APR to a 
card with a 15% APR might not be worth it, 
especially considering most cards charge 3% (usually with a $5 minimum) 
of the total balance your transferring. However, 
if you qualify for a credit card with 0% intro APR on balance transfers, 
you could save a lot of money.

Here’s an example: 
Let’s say you have $15,000 of credit card debt on a single credit card with an APR of 15%. 
If you are able to pay off the balance in full in 12 months by paying the same amount each month, 
you’ll accrue about $1,250 in interest charges. On the other hand, 
if you decided to transfer your $15,000 balance to a credit card with a 
12-month 0% intro APR on balance transfers, you’d pay only $450, 
assuming there’s a 3% balance transfer charge. 
That’s a savings of more than $800. Not only that, 
but some credit cards will allow you to transfer your balance for free!

It should be noted that if you have a rather large amount of credit card debt, 
a personal loan may be the best option for you. Use our guide to help you decide.

How does a balance transfer work?

Once you’ve applied and have been accepted for a new credit card, 
you’ll need to initiate a balance transfer from your old card to the new one. 
You can do this either online or by calling the new card’s issuer. Some cards, 
like Chase Slate, 
allow you to enter your balance transfer information from 
your old card on the application page so it will be initiated immediately should you be approved. 
To transfer your balance to a new card, you’ll need your old card’s number, 
the bank name and the amount you’d like to transfer. 
Make sure to verify that the transfer went through by checking both accounts either online or by calling. 
The balance transfer can take as long as seven days to complete, 
so it’s important to still make payments on your old card until the statement signifies the 
transfer has been made.

Best credit cards for a balance transfer

There are a number of credit cards that are designed for balance transfers. 
Here are four of the best options:

Best balance transfer card: Chase Slate

Chase Slate is the ultimate balance transfer credit card. 
For the first 60 days your account is open, 
you’ll be able to transfer a balance from other cards for free. 
That means you can save hundreds of dollars on balance transfer fees for two months! After that, 
you’ll be charged 3% on each transfer with a minimum of $5. 
You’ll also get a 15-month 0% intro APR on balance transfers, 
as well as a 15-month 0% APR on purchases you make with your Chase Slate card. 
What makes the card even better is that there’s no 
annual fee and you only need “good” credit to qualify instead of “excellent,” 
which is common for these kinds of cards.

Longest 0% APR: Citi Simplicity Card

If you’d like some extra time to pay off your transferred balance, 
the Citi Simplicity Card (a NextAdvisor advertiser) is the perfect choice for you. 
With a whopping 21-month 0% intro APR on balance transfers and purchases, 
you won't have to pay any interest until 2017! 
Although the card has a balance transfer fee of $5 or 3% of the total (whichever is greater), 
you'll never be charged late fees, penalty rates or an annual fee — ever!

Best balance transfer card with rewards: Discover it Card – Balance Transfer

What makes the balance transfer version of the Discover it 
Card so useful is that you get an 18-month 0% intro APR on balance transfers, 
as well as a six-month 0% intro APR on purchases. 
This will give you plenty of time to pay down your debt without having to worry about 
future interest charges. The balance transfer fee is 3% of each transfer, 
but unlike most other balance transfer cards, you’ll be able to earn rewards with this Discover it Card.
You’ll earn 5% cash back on select rotating categories on up to $1,500 worth of purchases, 
as well as unlimited 1% cash back on everything else. There’s no annual fee, 
and you’ll get your free FICO score every month.

Lowest long-term APR balance transfer card: Barclaycard Ring Mastercard

The Barclaycard Ring Mastercard is especially handy if you have a 
large balance that may take you a longer amount of time to pay off. 
While there’s no 0% intro APR, 
the card offers a considerably low APR (8% variable) on balance transfers and purchases, 
which means you'll likely have a low APR for as long as you pay your bill on time each month. 
In addition, the Barclaycard Ring Mastercard also has no balance transfer fee, 
which can save you 3-5% of your total balance.

Want to learn more about balance transfers? 
Use our balance transfer calculator to see how much money you could 
be saving and find the best card for your needs.