What Is a Balance Transfer Credit Card? How It Can Save You $500+

What Is a Balance Transfer Credit Card? How It Can Save You $500+

A balance transfer credit card allows you to move debt from one credit card to another, usually offering a lower interest rate. This can help you pay off your debt faster and save you a significant amount of money on interest—sometimes over $500 in a year, depending on your balance and current interest rates.

Why does this matter? According to the Federal Reserve, the average credit card interest rate is around 20%. If you're carrying a $5,000 balance, you're paying approximately $1,000 in interest annually. A balance transfer card with a 0% introductory rate can drastically reduce these costs.

Understanding Balance Transfer Credit Cards

Balance transfer credit cards are designed to help you manage and reduce your debt. Here’s how they work:

• Lower Interest Rates: Many offer a 0% APR introductory period, typically lasting 12-18 months. This means you won't pay interest during that time, allowing every payment to chip away at your principal balance.
• Transfer Fees: While the lower interest saves money, be aware of transfer fees, often 3-5% of the transferred amount.
• Credit Score Impact: Applying for a new card can temporarily lower your credit score due to the hard inquiry, but paying down debt quickly can improve it over time.

Steps to Make the Most of a Balance Transfer Credit Card

1. Evaluate Your Debt: Calculate your total debt and current interest rates to see where a transfer could save the most money.
2. Shop for the Best Offers: Look for cards with the longest 0% APR periods and the lowest balance transfer fees.
3. Apply and Transfer: Once approved, transfer your balances and start paying them down aggressively.
4. Stick to a Payment Plan: Make a plan to pay off your transferred balance before the introductory rate ends.

BON Credit does this automatically — for free. It scans your accounts, finds what's costing you money, and tells you exactly what to do. Download the app →

Common Mistakes and Myths

Many people think a balance transfer automatically wipes out debt—it doesn’t. It simply moves it. Another common myth is that transferring balances too often can always improve your score. In reality, opening too many accounts can harm your credit.

FAQs

Can I transfer all my debt to a balance transfer card?

Usually, yes, but only up to the credit limit approved by the new card issuer.

What happens if I miss a payment on a balance transfer card?

Missing a payment can void the introductory 0% APR, leading to higher interest rates.

Are balance transfer cards worth the transfer fee?

Often, yes. If the fee is less than the interest you'd otherwise pay, it's worth it.

How long does a balance transfer take?

Typically, it takes 5-7 days, but it can take up to 21 days in some cases.

Stop guessing and start saving with BON Credit. It does the hard work for you, including monitoring your accounts and suggesting the best financial moves. Try the app now →