balance transfer
Moving the outstanding balance from one credit card to another, typically to take advantage of a lower or promotional 0% interest rate.
Example
“She transferred her $5,000 balance to a card with 0% APR for 18 months, saving hundreds in interest.”
Memory Tip
BALANCE TRANSFER = moving your debt balance to a new card — ideally at 0% interest.
Why It Matters
Balance transfers can save you significant money on interest charges if you are carrying high-interest credit card debt. Understanding how to use them strategically can help you pay down debt faster and improve your overall financial health.
Common Misconception
Many people think that a balance transfer eliminates their debt, but it simply moves the debt from one card to another. You still owe the full amount and must continue making payments to avoid interest charges after any promotional period ends.
In Practice
Suppose you have a 5,000 dollar balance on a credit card charging 20 percent interest, costing you about 100 dollars monthly in interest alone. You could transfer that balance to a new card offering 0 percent interest for 12 months, then pay approximately 417 dollars monthly to eliminate the debt before interest kicks in, saving you over 700 dollars.
Etymology
Plain English: TRANSFERRING your BALANCE (amount owed) to another card.
Common Misspellings
Check your credit score free — no impact
Related Terms
More in credit
Other credit terms you should know
See Also
Need financial definitions?
Clear definitions for 2,500+ finance, insurance, and investing terms.