Key insights:
- Balance Transfers let you combine multiple credit card balances onto one card, which can help to simplify payments
- Introductory Annual Percentage Rate (APR) offers may help reduce interest costs, but fees and standard rates after the promotional period can cut into potential savings
- Creating a repayment plan and comparing terms like fees, transfer limits and introductory APRs can help you get the most value from a Balance Transfer
It can be overwhelming to have multiple credit cards with large outstanding balances. A Balance Transfer lets you transfer an unpaid balance from one card to another to help you simplify your monthly payments and potentially reduce interest charges, but there are important considerations before starting the transfer process. Let’s look at how Balance Transfers work, fees you may encounter and tips to help you understand your options.
What are Balance Transfer credit cards?
A Balance Transfer credit card is a credit card that allows you to move existing debt from one or more higher interest credit cards to a new card with a lower introductory interest rate and a single monthly payment.
Let’s say you have 3 credit cards. One has a balance of $2,000, one has a balance of $1,000 and one has a balance of $500. Using a Balance Transfer credit card, you can combine them onto a single card with a balance of $3,500.
New Balance Transfer credit cards often come with low introductory interest rates, allowing you to pay off your debt for less than you would have with your previous cards.
If you’re a Citi®cardmember, a Citi Balance Transfer allows you to move an unpaid balance from a non-Citi account to an existing Citi credit card. The balance you transfer will then become a part of your Citi card’s monthly revolving balance.
How much can you transfer to a Balance Transfer credit card?
Generally, each credit card with a Balance Transfer offer has a Balance Transfer limit, which is the maximum amount you can transfer from another card to the new card. This is based on your creditworthiness, the card's credit limit and other factors.
You can typically transfer the balances of more than one credit card onto a Balance Transfer credit card, but the total amount can’t go over your credit limit or Balance Transfer limit. Your lender will tell you these limits in the card’s terms and conditions.
What costs are associated with a Balance Transfer credit card?
There are two main costs associated with Balance Transfers: interest and Balance Transfer fees.
Interest charges
Many Balance Transfer credit cards offer an introductory Annual Percentage Rate (APR) on transferred balances for a set period. That typically means a lower interest rate, which may make it easier to pay off your balance sooner. However, this promo APR may not apply to new purchases.
After this promotional period, the lender will apply a standard variable APR to any unpaid balance. Be sure you understand when your Balance Transfer APR can change and how it compares to the rates of your other cards. You don’t want to be in a situation where you end up paying more interest than you were previously.
Balance Transfer credit card fees
While Balance Transfers may help you save on interest on existing balances, it's common to be charged a fee when you make the transfer. These fees are typically 3-5% of each transferred balance or a set minimum fee, whichever is greater.
It’s important to weigh what you'll pay in fees against what you expect to save in interest.
Will you pay interest on new purchases with a Balance Transfer credit card?
Typically, credit cards have separate APRs applied to purchases and Balance Transfers. If your new credit card has a low introductory APR on Balance Transfers for a certain period, that APR may not apply to new purchases. You can avoid paying interest by paying off your full New Balance before the due date each month.
How do you transfer balances?
Once you’ve opened a Balance Transfer credit card, you can arrange the transfer with your card issuer. Provide the account information for the balances you want to transfer, and the issuer will pay them off for you. Once the process is complete, you’ll see the total balance reflected on the credit card you used for the Balance Transfer.
Some card issuers will allow you to complete this transaction online.
How can you save money on Balance Transfers?
Balance Transfer credit cards may be able to help you save money on interest, but it’s not always guaranteed. Keep these factors in mind to maximize the value of a Balance Transfer.
Consider your creditworthiness
One of the largest factors affecting your Balance Transfer APR is your creditworthiness. Having a stronger credit score may make you eligible for more promotional offers and Balance Transfers.
Weigh your options
Take the time to consider the details of potential Balance Transfer credit cards. Look at how long the promo APR lasts and the fee each card charges for Balance Transfers. Compare the two APRs, the fees, and the introductory rate period to make sure you won’t end up paying more in interest. Crunch the numbers to find the card that helps you maximize your savings.
Make a plan to pay off your balance
Balance Transfers make the most sense when you have a plan to address your debt. While a Balance Transfer credit card can give you an opportunity to pay down your debt, it may not help much if you still have a large balance by the end of the promotional APR period. Consider making a budget before you apply for a Balance Transfer and have a repayment plan ready as soon as the transfer is complete.
Avoid new purchases on your Balance Transfer credit cards
Some new Balance Transfer credit cards may also offer a low introductory rate on new purchases. This might be enticing, but one of the best strategies for tackling your debt is avoiding new spending. Consider focusing on paying down your balance before taking on new debt.
Find the Balance Transfer credit card that works for you
Finding the right Balance Transfer credit card for your needs involves carefully weighing your options. Consider the promo APR for Balance Transfers and its duration, as well as the Balance Transfer fee. By doing your research and carefully considering what’s right for your financial situation, you can choose a card that helps you effectively manage your debt.
Disclosure: This article is for general educational purposes. It is not intended to provide financial advice. It also is not intended to completely describe any Citi product or service. You should refer to the terms and conditions financial institutions provide for various products.
