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A balance transfer is the transfer of (part of) the balance (either of money or credit) in an account to another account, often held at another
institution Institutions are humanly devised structures of rules and norms that shape and constrain individual behavior. All definitions of institutions generally entail that there is a level of persistence and continuity. Laws, rules, social conventions a ...
. It is most commonly used when describing a credit card balance transfer.


How it works

Balance transfer allows people to move their debts such as credit card balances, student loans, home loan medical bills, car loans to a zero or lower interest rate credit card for a promotional or limited period. The overall amount and the types of balances that can be transferred depends on the
credit card A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder's accrued debt (i.e., promise to the card issuer to pay them for the amounts plus the o ...
as well as
credit score A credit score is a numerical expression based on a level analysis of a person's credit files, to represent the creditworthiness of an individual. A credit score is primarily based on a credit report, information typically sourced from credit bu ...
. Moreover, balance transfer should be done as per the timings allocated by the credit card company. While many credit card issuers offer 0% interest balance transfers, it is important to note that some issuers also charge a transfer fee, which could range from 0–5%. As a result, consumers should evaluate the balance transfer interest rate during the promotional period, the length of the promotional period, and the balance transfer fee when deciding on which balance transfer promotion is best.


Types

There can be transfers between two similar types of accounts or different ones. These include: *
Credit card A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder's accrued debt (i.e., promise to the card issuer to pay them for the amounts plus the o ...
accounts *Bank
savings accounts A savings account is a bank account at a retail bank. Common features include a limited number of withdrawals, a lack of cheque and linked debit card facilities, limited transfer options and the inability to be overdrawn. Traditionally, transac ...
*Bank
checking accounts A transaction account, also called a checking account, chequing account, current account, demand deposit account, or share draft account at credit unions, is a deposit account held at a bank or other financial institution. It is available to the ...
*Trading accounts at
financial institution Financial institutions, sometimes called banking institutions, are business entities that provide services as intermediaries for different types of financial monetary transactions. Broadly speaking, there are three major types of financial insti ...
s Transfers are sometimes facilitated by companies trying to recruit new
consumer A consumer is a person or a group who intends to order, or uses purchased goods, products, or services primarily for personal, social, family, household and similar needs, who is not directly related to entrepreneurial or business activities. ...
s. Sometimes transfers are accompanied by
transaction cost In economics and related disciplines, a transaction cost is a cost in making any economic trade when participating in a market. Oliver E. Williamson defines transaction costs as the costs of running an economic system of companies, and unlike pr ...
s paid by the consumer.


See also

* Credit card balance transfer


References

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