A balance transfer is the process of moving debt from one credit card to another, typically to take advantage of a lower interest rate. Many credit cards offer introductory 0% APR balance transfer promotions lasting 12-21 months, allowing you to pay down debt interest-free. Balance transfers usually incur a fee of 3-5% of the transferred amount. This strategy can save significant money on interest if the balance is paid off during the promotional period.
Balance Transfer
Definition
A balance transfer is the process of moving debt from one credit card to another, typically to take advantage of a lower interest rate. Many credit cards offer introductory 0% APR balance transfer promotions lasting 12-21 months, allowing you to pay down debt interest-free. Balance transfers usually incur a fee of 3-5% of the transferred amount. This strategy can save significant money on interest if the balance is paid off during the promotional period.
Example
Transferring a $10,000 balance from a card charging 22% APR to a card offering 0% APR for 18 months (with a 3% fee of $300) would save approximately $3,300 in interest if paid off within the promotional period.
Key Points
- 1Move debt to a lower-interest card
- 2Introductory 0% APR periods typically last 12-21 months
- 3Balance transfer fees usually 3-5% of the amount
- 4Must pay off balance before promotional period ends
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