Definition
Moving debt from one credit card to another, often to use a lower promotional rate, usually for a fee.
What it means
A balance transfer moves what you owe on one card to a new or existing card, often with a low or 0% introductory APR for a set period, such as 12 to 21 months. Card issuers usually charge a transfer fee, commonly 3% to 5% of the amount moved. After the promotion ends, any remaining balance is charged the regular APR. Under the CARD Act, a promotional rate must last at least six months, and payments above the minimum go first to the balance with the highest rate. A transfer can save interest if you pay down the balance during the promotion, but new purchases on the card may be charged a higher rate and can lose the grace period. Opening a new card also adds a hard inquiry and a new account to your report.
Example
Moving $6,000 at 24% APR to a card with 0% for 18 months and a 3% fee costs $180. Paying $344 a month clears it before the promotion ends; the same payments at 24% would cost about $1,400 in interest over 18 months and still leave about $1,200 owed.
Illustrative numbers only. Your situation will differ.