Updated January 7, 2016

Why Transfer Balances on Credit Card: 5 Reasons

Top 5 Reasons to Transfer Your Credit Card Balance
Read more about Balance Transfer

Managed properly, transferring balances from credit cards with high APRs to one with a low interest rate will deliver 5 big benefits.

People with good credit scores are regularly besieged by direct-mail offers coaxing them to transfer their existing credit card balances to a new credit card. Cardholders who always pay their monthly balances tend to toss such offers in the recycling bin. But those who routinely carry balances should think twice before discarding balance transfer deals.

Why Balance Transfers are Good

Does it sound too good to be true?

Is It Smart to Transfer Credit Card Balances?

While balance transfers do come with some catches (such as an up-front balance transfer fee for some cards), you could in fact be tossing away big money by not considering it.

Balance transfers can give you a more effective way to catch up on your debt and at least reduce the overall amount you will pay for borrowing money. If any of the following scenarios match the one you’re in, you may want to reach back into that bin.

Related: How to Transfer Credit Card Balance to Another Card

Here are the top 5 reasons to transfer your balance to a new credit card:

1. I usually pay in full but can't right now

Look for 0% intro APR.
Save on interest payments. If you’re carrying a balance on a card that charges, say, a 15% APR, you’ll save money by transferring the balance to a card with a 0% introductory APR.

However, be sure to determine whether the new card imposes balance transfer fees, which typically average 3% of the transferred balance. Look for cards that offer low – or even zero – balance transfer fees during the introductory period.

2. I always carry a balance

Look for low interest rates.
If you carry a balance, then you might be better off with a credit card with a low interest rate.

3. I want to earn cash back for new purchases

Look for rewards
If a new credit card has a better rewards program than your current card(s), you might want to take advantage of the opportunity.

Keep in mind, if you plan to carry a balance and the credit card balance transfer offer you are considering does not have a similar introductory APR (including promotional length) on purchases, you may want to avoid using that card for new purchases. Promotional interest rate offers may cause you to lose the grace period on purchases if you do not pay the entire statement balance (including the amount subject to the introductory APR) by the payment due date. If you plan to carry a balance, check the credit card issuer's terms to find out about the effects of the promotional APR offers on the grace period for new purchases.

4. I carry a balance on multiple credit cards

Look for one simple credit card
Simplify your life and consolidate your debt. Transferring multiple credit card balances to a single card will make your financial affairs easier, especially if you tend to lose track of payment dates and are never sure which card should be paid off first.

5. I want to improve my credit score

Because your credit score is determined, in part, by the amount of credit card debt you carry compared with your credit card limits (the “credit utilization ratio”), transferring a balance to a new card can help you pay off debt and improve your credit score. For example, if you currently have a balance of $5,000 on a card with a $7,500 credit limit, your credit utilization ratio is nearly 67%, which is considered high. By opening a new credit card, your ratio will drop.


Keep in Mind
Transferring a balance isn’t something everyone should do. If you have a relatively low balance on a card, for instance, you may find the cost of making the move would be more than the amount of interest you’re paying on the current card. Do the calculations and weigh the pros and cons before you sign up. And make sure that you’ll be able to pay off the transferred balance before any introductory incentives expire. That’s the only way you can enjoy substantial savings.

Tip: Compare Balance Transfer Offers

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