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Should You Do a Balance Transfer? 

Find out if a balance transfer card is right for your financial situation.

Chris Scott

Contributing Writer at Tally

June 16, 2021

If you’re looking for ways to pay down debt quickly, one of the things you may consider is a balance transfer. Balance transfer cards are becoming increasingly popular, which could lead you to wonder, “Should I transfer my credit card balance?” 

We’re here to answer that question. Plus, we’ll touch on both the positives and negatives of a balance transfer so that you can determine whether it’s the right choice for your financial situation.

What is a Balance Transfer? 

balance transfer occurs when you move your existing credit card debt to a card with a lower annual percentage rate (APR). The best balance transfer offers from credit card companies typically include 0% APR for an introductory period, which is often 6 to 18 months. 

Even if your balance transfer card does not have a 0% APR, the interest rate may be lower than your current APR. If it’s not lower, then transferring the balance won’t serve much benefit. 

Let’s say that you currently have credit card debt on a card with an APR of 27%. You are approved for a balance transfer card with an APR of 5%. By transferring your balance from the card with a 27% APR to a card with a 5% APR, you’ll minimize the impacts of compounding interest. Because you get rid of your high-interest rates, you aren’t accruing as much debt from interest. As a result, repayment could become a lot easier. 

What are the Benefits of a Balance Transfer? 

Balance transfer cards give you a chance to pay down debt quickly, especially if you secure a great introductory rate. Below are the primary benefits associated with using a balance transfer card. 

You have an opportunity to pay down debt at a lower interest rate 

Hands down, the biggest benefit of balance transfer cards is paying down debt faster. Credit card interest is tricky because it compounds. Essentially, this means that your credit card issuer charges you interest on your interest. 

Consider interest charges on a $500 credit card balance. As a result, your new balance is $505. Your next interest charge is based on the $505 balance, which includes the added interest. You are not just charged interest on your principal balance and purchases you’ve made. 

If your intro APR is 0%, you will not be charged interest during the promotional period. You only need to pay down the transferred balance, and you can do so interest-free. 

You only have to manage one card 

Another benefit of balance transfers is that you might only need to worry about managing one credit card. If you have three credit cards, you’re worried about minimum payments on all three. If you miss one of these monthly payments, you will be charged late fees. 

By consolidating your debt onto one card, managing your personal finances becomes easier. You still need to make minimum payments on your new credit card, but you now only need to worry about one date instead of multiple. If you’re frequently charged late fees and penalty APRs because you miss minimum payments, a balance transfer may help. 

You can build your credit score 

Balance transfers provide an excellent opportunity to improve your credit report, as you: 

  • Build a history of making on-time payments 

  • Reduce your credit utilization ratio, which measures the percentage of your credit limit you’re using 

  • Increase your available credit

  • Reduce or eliminate your outstanding debt 

Carrying debt and balances on credit cards can bring down your credit score. A balance transfer card offers an opportunity to start rebuilding your score, improving how you look in the eyes of lenders. 

This, in turn, can open doors down the road. Perhaps you build your credit and are one day approved for a cash-back credit card or mortgage. 

What are the Downsides of a Balance Transfer? 

To fully understand how balance transfers work, you should also have an idea of the risks associated. Below are the primary things to be mindful of when asking yourself, “Should I do a balance transfer?” 

There are balance transfer fees 

You’ll need to pay a fee when transferring your old credit card balances. The fine print of your new agreement will outline how much this fee is, as it varies from company to company. Typically, however, the fee is between 3% and 5% of the transferred balance. 

Consider transferring a $500 balance to a card with a 5% fee. That makes the fee $25, which means the balance you need to pay off is $525. The balance transfer fee percentage should be less than the APR on your old credit card, meaning that it still could make sense financially to move the balance. But, the fact that there is a fee is worth noting.

You need at least good credit to receive the best credit card offers 

The best balance transfer credit cards are reserved for those with excellent credit. If you have excellent credit, you can expect a 0% interest rate for the intro APR period. If you have good credit, you can still receive a worthwhile offer or a 0% APR. However, there may be other stipulations, such as a mandatory annual fee. 

If you don’t have great credit, there are other debt consolidation options available. 

There will be a hard inquiry required to open the card 

Lenders will need to conduct a hard inquiry to see your credit history when applying for a new balance transfer card. This is standard whenever you are opening a new account. Hard inquiries may harm your credit score, so you may see a temporary drop. However, if you make timely payments and work to pay off your entire balance, you’ll likely have a more positive impact on your credit score than the negative impact of the hard inquiry. 

You still need to make minimum payments 

A common misconception about balance transfer cards is that you do not need to make minimum payments on your balance until the introductory period ends. However, this is often not the case, and you need to be mindful of monthly payments. 

If you miss a minimum payment, your introductory low-interest rate will likely be eliminated. Your lender will charge you late fees and a penalty APR, making it harder to become debt-free. You should still be mindful of due dates and minimum required payments with a balance transfer card, just as you would with any other credit card account. 

You have a limited time to pay down debt 

The introductory period only lasts for a certain amount of time. After this period is over, your APR will increase. So, balance transfer cards are more beneficial if you can pay off the balance when the promo period ends. 

Are There Alternatives to Balance Transfers? 

If you do not qualify for a balance transfer card or are looking for an even easier way to pay down debt, there are two alternatives you can consider. The first is a personal loan. You can take out a loan and use the principal to pay down your balances. Then, you are responsible for paying back the loan. 

The second alternative is to use a credit card payoff app like Tally. Tally offers a line of credit1 that you can use to pay down your existing balances. While Tally does not consolidate your debt, it automatically manages your credit cards to pay off your balances in the most efficient way possible, including making all minimum payments on your cards. 

Should I Transfer My Credit Card Balance? 

Balance transfers can be an excellent option for cardholders. They offer an opportunity to pay down existing debt with a low-interest rate. If you have a good credit score or better, there’s a chance that the APR on your balance transfer card could be 0%, which means you can pay off debt without accruing additional interest. In turn, you may improve your credit score. 

However, there are a few things that could make you reconsider a balance transfer card. You need to have a good credit score, at minimum, to be approved. In addition, there are balance transfer fees, and you need to make minimum payments every month. 

An alternative worth considering is Tally. Tally automates the debt payoff process, strategically getting you out of debt as quickly as possible. The automation requires little management on your end, making it a viable option to help pay down an outstanding credit card balance.


1To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) Will be between 7.90% – 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate.