According to CNBC, the average credit card debt per person in the United States has reached nearly $6,400—a three percent increase from the last year.

Debt is on the rise—hitting nearly $1 trillion in 2017.

But credit scores are going up, too.

This would imply that people are getting smarter about their credit and their debt. If that’s the case, then we may start to see more and more people trying to pay their debt down.

And with that, means more balance transfer offers.

What does “balance transfer” mean?

A balance transfer is when you move a balance from one credit card to another, effectively paying off one with the other.

For example, let’s say you have two credit cards—Credit Card A and Credit Card B. Credit Card A has a balance of $10,000 at 15 percent APR and a credit line of $15,000; while Credit Card B has a $20,000 credit line and no balance, but has a 0 percent promotional rate with a 3 percent fee.

You can do a balance transfer onto the card that has the promotional rate (Credit Card B), and pay off Credit Card A by doing so. This means the balance would now sit on Credit Card B at 0 percent for the duration of the promotional period.

Balance transfers always have promotional periods. It’s a way for banks to get your business. If you don’t pay off the balance by the time the promotion ends your remaining balance is subject to whatever the interest rate is at that time—which is where a lot of credit card issuers make their money.

How to do a balance transfer

Doing a balance transfer is easy. The hardest thing you’ll have to do is a little research on the offer that suits you best.

Here are the steps to completing a balance transfer:

Step 1: Determine the balance and interest rate of the card you want to pay off (“transfer”)

This is a fairly straightforward process. Just log into your credit card account online and look at the current balance. If you go into somewhere that shows your account details, it will show you the interest rate you’re paying.

Write down the total current balance, the interest rate (expressed as an Annual Percentage Rate, or APR), and make sure you stop using it (because you don’t want the balance to increase).

Step 2: Find the right offer

The one thing to know is that you’ll almost always have to pay a transfer fee, so you’ll want to make sure you’re accounting for that in your total cost. For example, a bank won’t just give you 0 percent interest without making some money—so they might charge you 3 percent of the total balance as a transfer fee to cover the cost.

Some offers are short-term but offer a lower rate or fee, while others may be long-term and have a higher fee and rate. It really depends on the card and the time of year. Offers are changing all the time. For now, just think about how much you can afford each month and how long you think it’ll take you to pay the balance off. If you think it’ll take you a long time, you might want to look for something with an 18-month offer. If not, you might find something shorter term and get a better rate.

Step 3: Understand what you’re getting yourself into

Before selecting a card and an offer, make sure you read the fine print. Most banks are pretty easy going with their promotional offers now, but some are still strict.

You’ll want to understand what the promotional offer is, in detail. Know what the promotional rate is and how long it’s good for. Find out if there are any restrictions (like not being able to transfer one balance to another with the same card issuer) and what type of credit limits are offered. Then you’ll want to move into the fine print.

For example, if you are a day late on a payment, do you lose the promotional rate? I’ve seen banks do this (in fact I used to work for one). Can you pre-pay or pay the balance off early? What is the rate your balance will go to once the promotion ends? These are all questions you’ll want to find answers to at this stage.

Step 4: Apply for a new balance transfer card

Once you’ve done your research and you know how much you want to transfer and where you want to move it to, it’s time to apply for the card. By now you should have figured out if it’s a card you’ll qualify for or not (some require excellent credit, for instance) and the process is as easy as clicking a link and filling out some information.

Alternative step 4: Use an existing card

The easiest way to do this is by using an existing credit card you already have that has a promotional offer. In nearly every case, the offer won’t be as good for an existing customer as it would be for a new customer (so you’ll get better deals with a new card) but that shouldn’t stop you from checking your freed up accounts anyway.

Log into all of your credit card accounts online (particularly ones that have no balances) and look for (or search for) “Balance Transfer.” I can usually do this from the home screen on my Discover card online, and they almost always have an offer.

Why use an existing card? While you won’t get the best offers, you will save yourself a hit on your credit report by not applying for a new card. Plus, it can take a few weeks to get the new card processed and the balance transfer paid with a new card, versus having it done right away with a card that already exists. It’s not for everyone, and as I said before, the offers won’t be the best. But it doesn’t hurt to check it out before you explore new offers.

Step 5: Set up the BT and pay off your balances

In most cases, when you sign up for a new credit card to take advantage of the balance transfer offer, the online application will ask you to input the account numbers and balances of the cards you’d like to pay off. My advice is to put every card you want to pay off on this application—don’t be shy—because your card issuer will take it into account when approving your credit line.

I know this because I used to review these types of applications, working for a large bank that shall go unnamed. A credit analyst can see the debt on your credit report, so if you’re showing that you want to pay it all off by moving everything to their card, it tends to look better.

Now, some of these are auto-decisioned by an algorithm and have no human eyes on it, but my advice is to still put all the balances you want to transfer on the application.

When you should get a balance transfer card

So when should you look at getting a balance transfer card? If you have credit card debt that is in the double-digit rates, then I would encourage you to look into transfer options. But make sure you have a plan to pay the debt off in the time of the promotion because the rate can skyrocket after it’s over.

Assuming you have a plan in place and you qualify for a good balance transfer offer, it’s typically a no-brainer to do the transfer and save yourself some money. Balance transfers are an excellent tool for those who want to pay off their credit card debt aggressively.

When you shouldn’t get a balance transfer card

Everyone will have a different situation, but my number one rule with balance transfers is that if you’re doing it to clear off spending room on another card, you’re doing it for the wrong reasons.

If you have a spending problem with credit cards and your debt is consistently increasing, a balance transfer won’t help you. It will just move the problem somewhere else. 

Part of doing a balance transfer is psychological—because for a minute it will look like your debt is completely wiped away—when in reality it’s just been moved to another place.

Best balance transfer credit cards

Make sure to check out our full page on the best balance transfer cards available, but for now, I will briefly highlight two of my absolute favorites.

The Discover it® Balance Transfer is and has been one of our favorite credit cards for doing balance transfers. You’ll get an excellent See Terms See Terms introductory period on balance transfers. After the introductory period ends, the regular APR is See Terms.

The Citi® Diamond Preferred® Card doesn’t require a ton of explanation for a card with no annual fee. For balance transfers, you get a , which is one of the longest promotions out there right now (a balance transfer fee of $5 or 5% applies, whichever is greater). The ongoing rate of applies after the intro rate expires. The Citi® Diamond Preferred® Card is an excellent pick for someone who is looking to pay off high-interest debt or finance a large purchase.

Balance transfer FAQs

Here are some of the most commonly asked questions about balance transfers we’ve found:

Is a balance transfer right for me?

If you’re looking to pay off your debt, a balance transfer is a great option. But you need to make sure you have a firm plan in place to pay it off. If you don’t, you could end up accumulating more debt again.

How much should I transfer?

There is some debate over this, but experts will tell you to not go above 30 percent of your credit line when carrying a balance. I disagree with this as I was a credit analyst and know that banks look at your overall utilization. If you max out a credit card to do a balance transfer and it gives you a better shot at paying off your debt, but your other cards have no balance, and your overall ratio is under 30 percent, I think you’re fine.

Will I save money with a balance transfer?

That’s the goal of a balance transfer, aside from paying off debt faster. Make sure you look at the rate you’re given, the length of time for the promotion, and any fees you have to pay to complete the transfer.

For example, you might have to pay a 5 percent transfer fee to get 0 percent interest for nine months—that’s not really a good deal because the effective annual rate is more like six to seven percent when you factor in the amount of time you have the promo for and the fee you pay.

I strongly recommend you utilize our balance transfer calculator to determine how much you’ll save before making any moves.

What is a rate surfer?

A rate surfer is someone who continually flips their balance to a new promotion once the other one ends. They don’t always pay their debt down, but they play offers against one another to get a consistently good rate.

This may sound like a good idea and might work in the short-term, but over time banks will pick up on this trend from your credit report and stop offering you deals. Pick a promo and stick to it—then work to pay down your debt as aggressively as possible. The goal is debt paydown, not moving balances around to buy time.

What are the average rates for balance transfers?

Typically, with new cards, you’ll see 0 percent offers, but you’ll end up paying a transfer fee, so it’s not really 0 percent. You might find a better overall offer by looking for something that has a higher rate with a capped or small fee.

Why do I have to pay a transfer fee?

The short answer is so your credit card issuer makes money. There’d be no benefit to a credit card issuer giving you no interest without a fee—that’s free money. There’s no guarantee you won’t transfer the balance elsewhere, and there’s no guarantee you’ll pay the debt back. Since it’s unsecured debt, there’s only so much they can do to recover the debt. Thus, banks will charge a transfer fee to make sure it’s still profitable whether you pay or not.

Can I still spend on my balance transfer card?

You can, but I don’t advise it. It makes things messy and complicated, and you’ll have balances in multiple categories.

Your balance transfer might be 0 percent for the promotion, but it might go to 27.99 percent and be categorized as a cash advance after the promotion ends. In this case, you’d be stuck with a balance at a high rate if you were to add purchases on top of it.

What other options do I have?

If you are stuck with debt and a balance transfer isn’t for you, you have a couple of other options.

First, you can work with a debt counseling agency. These companies are non-profits and will work to negotiate lower rates on your behalf, with the promise you’ll close your credit cards and not use them anymore.

You can also look into debt consolidation loans, such as Payoff, who will give you a lump sum to pay your debt. It’s like a balance transfer, but it’s considered a personal loan.

Summary

Doing a balance transfer is an excellent option for paying down your debt if you do it the right way. The goal is to find a promotion that fits your debt level and timeframe, then aggressively pay it off. You don’t want to add to that debt, so you shouldn’t use the card for purchases. In fact, I would stop using credit cards altogether until you can get your debt under control.

Make sure to use our balance transfer calculator and check out the rest of our favorite balance transfer cards so you can start saving money today.

Read more

• How To Transfer A Credit Card Balance To Another Card
• How Do Balance Transfer Credit Cards Affect Your Credit Score?