A balance transfer credit card can be a powerful tool for paying off debt faster, saving money on interest, and consolidating multiple payments into one. But before you apply for a balance transfer card, there are a few important things to know to avoid costly mistakes.
In this guide, we’ll cover 8 key things you need to know before using a balance transfer card, including:
✔️ How balance transfers work
✔️ The hidden fees to watch out for
✔️ What happens to your credit score
✔️ How to maximize your 0% APR period
✔️ The risks of new purchases on a balance transfer card
By the end, you’ll be fully prepared to use a balance transfer card the right way and avoid common pitfalls.
1. Balance Transfers Aren’t Always Free
Many people assume that balance transfers are free, but that’s not always the case.
Most credit card issuers charge a balance transfer fee, which is typically 3% to 5% of the transferred amount. That means if you transfer $5,000, you might pay $150 to $250 in fees upfront.
Here’s an example of how balance transfer fees work:
| Transferred Amount | 3% Fee | 5% Fee |
|---|---|---|
| $1,000 | $30 | $50 |
| $5,000 | $150 | $250 |
| $10,000 | $300 | $500 |
💡 Tip: Look for a credit card with a 0% balance transfer fee to save money. Some issuers occasionally offer no-fee balance transfers as a promotional deal.
2. The 0% APR Period Is Temporary
Most balance transfer credit cards offer a 0% introductory APR for a limited time—usually 12 to 21 months. However, once the promotional period ends, the card’s regular interest rate (which can be 15% to 25% or more) will kick in.
This means if you don’t pay off your balance before the 0% period expires, you could end up with high interest charges.
📌 Example:
- You transfer $6,000 to a balance transfer card with 0% APR for 18 months.
- You only pay $200 per month instead of paying it off in full.
- After 18 months, your remaining balance of $2,400 starts accruing interest at 20% APR.
- You could end up paying hundreds of dollars in interest.
💡 Tip: Divide your balance by the number of months in your 0% APR period and make equal monthly payments to ensure you pay off the full amount before the promo expires.
3. Transferring Debt Won’t Fix Bad Spending Habits
A balance transfer card won’t help if you continue overspending. It’s easy to fall into the trap of thinking, “I have more available credit now, so I can spend more.”
This can lead to a cycle of transferring balances from one card to another without actually paying down debt.
📌 Avoid this trap by:
✔️ Stopping new credit card purchases while paying off your transferred balance.
✔️ Creating a budget to track expenses and avoid unnecessary debt.
✔️ Using auto-pay to ensure you’re paying down the transferred balance on time.
💡 Tip: A balance transfer is not a long-term solution—it’s a temporary interest-free window to help you get out of debt faster. Use it wisely!
4. Your Credit Score May Drop (Temporarily)
Applying for a balance transfer card can cause a temporary dip in your credit score for several reasons:
📉 Hard Inquiry: When you apply for a new credit card, the issuer performs a hard credit check, which can lower your score by 5 to 10 points.
📉 Lower Average Age of Accounts: A new credit card shortens your credit history length, slightly impacting your score.
📉 High Credit Utilization: If your old card is maxed out and your new card also has a high balance, it can increase your credit utilization ratio, which may lower your score.
However, your score can improve over time if you:
✔️ Pay off the balance before the 0% APR expires.
✔️ Keep your old credit cards open to maintain a long credit history.
✔️ Avoid maxing out your new card and keep a low utilization rate.
💡 Tip: If you’re planning to apply for a mortgage or auto loan soon, avoid opening a new balance transfer card right before your application to prevent a temporary credit score dip.
5. Not All Debt Can Be Transferred
Balance transfer credit cards are usually limited to credit card debt, but you can’t transfer every type of debt.
Here’s what you can and cannot transfer:
| ✅ You Can Transfer | ❌ You Cannot Transfer |
|---|---|
| Credit card balances | Auto loans |
| Store credit card debt | Personal loans (some exceptions) |
| Some personal loans | Student loans |
| Medical bills (some issuers allow it) | Mortgage payments |
💡 Tip: Check with your credit card issuer before applying to make sure they allow transfers for your type of debt.
6. Minimum and Maximum Transfer Limits Apply
Every balance transfer card has a minimum and maximum transfer limit:
📌 Minimum Transfer Amount: Usually around $100 to $500.
📌 Maximum Transfer Amount: Typically 75% to 100% of your credit limit on the new card.
Example:
- If your new card has a $10,000 credit limit, your balance transfer cap might be $7,500 to $10,000.
- If you have $12,000 in debt, you might not be able to transfer the full amount.
💡 Tip: Before applying, ask the credit card issuer about their transfer limits to ensure they meet your needs.
7. Payments on Your Old Card Don’t Stop Immediately
A common mistake is assuming your old credit card account balance is paid off instantly after a balance transfer. In reality, it can take 5 to 21 days for the transfer to complete.
During this time, you must continue making payments on your old card to avoid:
🚨 Late fees
🚨 Interest charges
🚨 Negative marks on your credit report
💡 Tip: Check both your old and new accounts to confirm the transfer is complete before stopping payments.
8. You Shouldn’t Make New Purchases on a Balance Transfer Card
Even though your balance transfer card has 0% APR on transferred balances, many issuers still charge interest on new purchases.
This happens because:
- The 0% APR only applies to the transferred balance, not new spending.
- The grace period on new purchases may be lost if you carry a balance.
📌 Example:
You transfer $5,000 to a 0% APR balance transfer card and then charge $500 in new purchases.
- That $500 could start accruing interest immediately, even if you’re paying off your transferred balance.
💡 Tip: Use a separate card for new purchases and reserve your balance transfer card only for paying down your debt.
Final Thoughts
Balance transfer credit cards can be a great financial tool—but only if you use them wisely.
✅ They can save you money on interest
✅ Help you pay off debt faster
✅ Improve your credit score over time
However, be aware of hidden fees, credit score impacts, and transfer limits before applying.
💡 The best strategy? Use a balance transfer card as part of a bigger debt payoff plan—not as an excuse to keep spending. If you do it right, you can become debt-free much faster! 🚀
Also Check:
- Are Balance Transfer Cards Worth It?
- 7 Myths About Balance Transfer Cards Debunked
- 10 Tips and Tricks You Need to Help You Manage Your Balance Transfer
