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Balance Transfer
Definition
A balance transfer is moving debt from one credit card to another, typically to take advantage of a lower introductory interest rate.
Explanation
Balance transfers can help consolidate credit card debt and save on interest. Many cards offer 0% APR for 12-18 months on transferred balances, with a transfer fee of 3-5%. The key is to pay off the balance before the promotional period ends.
Balance transfers don't eliminate debt — they move it. Without a repayment plan, the debt can grow once the promotional rate expires.
Example
Transferring $5,000 at 22% APR to a card with 0% for 15 months and a 3% fee costs $150 upfront but saves over $900 in interest if paid in 15 months.