Written by Tamar Satov
Published Sep 19 | 6 minute read
If you've got a credit card that's charging interest like nobody's business—or a savings account that's giving you next to nothing in returns—it may be time to look into a balance transfer.
A balance transfer is when you move money—either debt or savings—from one account to another. The goal? To pay less interest on money you've borrowed, to earn higher yields on cash you've saved or just to make your finances easier to manage.
Let's walk through the different types of balance transfers, how they work and what to watch out for before making a move.
At its core, a balance transfer is the act of moving funds from one type of financial account to another.
There are several good reasons to transfer a balance, depending on the type of account and situation. These include:
The most common type of balance transfer you'll hear about is moving credit card debt from one card to another. But that's not the only kind, as explained in more detail below.
Balance transfers come in a few different flavors, depending on what you're trying to accomplish—whether it's cutting down interest, boosting returns or streamlining your finances. Let's start with the basics:
The process for balance transfers may differ slightly from bank to bank and depend on the type of balance you're moving. In general, however, you can follow these six steps.
Before you start shifting funds around, make sure you're eligible. Some offers are for new customers only. Others require a good credit score.
For savings, find out which banks offer the highest APYs with the lowest fees and fewest strings attached. Synchrony's high yield savings account, for example, has no minimum deposit or balance and no monthly fees.
For credit cards, shop around for intro 0% APR offers—but also consider how long the introductory offer applies, what the regular APR is after that period ends, and the card's fees and benefits.
Credit cards may have limits on how much you can transfer, depending on the issuer's policies and your creditworthiness. Once you know your limit, you can calculate the transfer fee—typically around 3% to 5% of the amount transferred.
When it comes to bank accounts, make sure you understand all the terms and whether a minimum balance is required. Some savings accounts, for example, may add fees or lower the APY if your balance falls below a specified limit. There could also be service or wire transfer fees, especially for large sums.
Have the following handy:
Apply for the balance transfer credit card or new bank account online in your banking app, over the phone or in person at a branch. Regardless of the method, you'll likely need to fill out application forms and submit any necessary supporting documents.
Once you're approved, the transfer can take place. The new card issuer usually handles the process of paying off the old card. For bank accounts, you need to transfer the funds yourself.
READ MORE: 4 Ways to Transfer Money from One Bank to Another
Credit card transfers typically take anywhere from a few days to several weeks, depending on the credit card company.
Bank account transfers can sometimes happen instantly, especially between accounts at the same bank. If you're transferring money from one bank to another, it depends on the method used. For example, wire transfers are often completed within one business day (but charge a fee), while Automated Clearing House (ACH) transfers—the system banks use to move money electronically—are usually free but can take up to three business days.
Keep an eye out for confirmation emails or app notifications. Then log in to both your new and old accounts to make sure that the correct deposit/credit balance amounts were transferred.
Before you jump into a balance transfer, make sure you know what you're signing up for. A few missteps can cost you more than you save.
Make sure you understand all the terms and conditions—both during and after the promotion period.
A 3% credit card balance transfer fee on $5,000 is $150—likely worth it for a long 0% APR period. But the fee may not be worthwhile for smaller balances. Similarly, an account with a higher APY won't necessarily boost your savings if it also charges high monthly or transaction fees.
Keep making the minimum payments on your old credit card until you see that the balance is gone. Know when the promotional APR expires on your new card and pay down your balance before then.
For bank account transfers, make sure you have enough in your old account to cover any automatic bill payments, or cancel those pre-authorized transactions and set them up with your new account.
Usually, yes—but not always. Some banks restrict transfers between their own cards, and some promotions are for new customers only.
Credit card transfers can take up to six weeks, but are often within three to 14 days. Bank transfers are often faster, especially if both accounts are at the same institution.
It can, slightly. Applying for a new credit card triggers a hard inquiry, and shifting debt can affect your credit utilization ratio, which is part of your score. Opening a new bank account, however, involves a soft check that won't affect your credit score.
A balance transfer isn't just a money shuffle—it's a smart strategy when used the right way. Whether you're shaving off interest charges or boosting your savings, it can give your finances a welcome tune-up. Just make sure you understand the rules, read the terms and make the most of the promotional period.
READ MORE: 42 Important Credit Card Terms You Need to Know
Tamar Satov is a freelance journalist based in Toronto, Canada. Her work has appeared in The Globe and Mail, Today's Parent, BNN Bloomberg, MoneySense, Canadian Living and others.