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What Is a Balance Transfer on a Credit Card?

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Balance Transfer on a Credit Card

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If you find yourself struggling with high-interest debt, a balance transfer on a credit card can be a powerful tool to help you manage your debt and potentially save money. This article aims to provide you with an overview of balance transfers, how they work, the types of debt that can be transferred, and their impact on your credit score. By understanding the benefits, risks, and considerations involved in balance transfers, you can make informed decisions to improve your financial health.

How Balance Transfers Work

  • Definition of Balance Transfer: A balance transfer involves moving existing debt from one credit card to another, often with a promotional low or 0% interest rate for a specified period.

  • Transferring Debt: You can transfer balances from credit cards, store cards, personal loans, and sometimes even overdrafts or lines of credit.

  • Potential Savings: By taking advantage of a lower interest rate or promotional offer, you can save on interest payments and pay down your debt faster.

Managing Debt with a Balance Transfer Card

  • Assess Your Debt: Evaluate your current debts, interest rates, and payment terms to determine if a balance transfer is a suitable option.

  • Find the Right Card: Look for balance transfer credit cards with favorable terms, such as a low or 0% introductory APR, a long promotional period, and low or no balance transfer fees.

  • Transfer Process: Follow the card issuer's instructions to complete the balance transfer, which typically involves providing the necessary information and initiating the transfer request.

  • Make Timely Payments: Ensure you make regular payments on your balance transfer card, ideally paying more than the minimum required to pay off the debt within the promotional period.

Considerations for Choosing a Balance Transfer Card

  • Introductory Period: Look for cards with longer promotional periods to maximize the time you have to pay off your transferred balance without accruing interest.

  • Balance Transfer Fees: Some cards may charge a fee for balance transfers, typically a percentage of the transferred amount. Consider the fee in relation to potential interest savings.

  • Ongoing Interest Rate: After the promotional period, the interest rate may increase. Understand the regular APR and factor it into your repayment plan.

  • Credit Limit: Ensure the credit limit on the balance transfer card is sufficient to accommodate the transferred balance and any additional charges.

Debt Consolidation Loan vs. Balance Transfer Credit Card

  • Debt Consolidation Loan: Consider the option of consolidating debt with a personal loan, especially if you have a significant amount of debt or need a longer repayment term.

  • Balance Transfer Credit Card: A balance transfer card is often suitable for smaller amounts of debt and when you can commit to paying off the balance within the promotional period.

Impact on Your Credit Score

  • Applying for a Balance Transfer Card: The application process may result in a temporary decrease in your credit score due to the hard inquiry made by the card issuer.

  • Credit Utilization Ratio: Transferring debt can impact your credit utilization ratio, which is the amount of available credit you're using. Aim to keep it below 30% to maintain a healthy credit score.

  • Closing Accounts: Closing the original accounts from which you transferred balances can affect your credit history length and overall credit mix. Consider the potential impact before closing accounts.


Balance transfers offer an opportunity to manage debt more effectively and potentially save money on interest payments. By understanding how balance transfers work, choosing the right card, and managing your debt responsibly, you can take control of your financial situation. Assess your needs, evaluate your options, and make informed decisions to achieve a healthier financial future.

Note: KOHO product information and/or features may have been updated since this blog post was published. Please refer to our KOHO Plans page for our most up to date account information!


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