Balance Transfer APR
Balance Transfer APR refers to the annual percentage rate charged on the amount of debt moved from one credit card to another, typically to take advantage of lower interest rates or promotional offers. This is evaluated within APR, Interest & Fees.
Plain-Language Meaning
This is the interest rate applied to balances that are transferred from one credit card to another. It determines how much interest will accrue on the transferred amount if it is not paid off within a specified period.
Practical Example
If you move $2,000 from one credit card to another with a 0% balance transfer APR for 12 months, you will not pay interest on that amount during the promotional period. After the period ends, the regular balance transfer APR will apply to any remaining balance.
What It Does Not Mean
Balance Transfer APR does not refer to the interest rate on new purchases or cash advances; it specifically applies to amounts moved from other credit cards.
How the System Uses It
The system evaluates the balance transfer APR to determine the cost of carrying transferred debt on a credit card. This rate is used to calculate interest charges on any unpaid transferred balances after any promotional period ends, impacting the total amount owed over time.
Common Misconceptions
- “Balance transfer APR is always 0%.” Many offers are promotional and revert to a higher standard rate after a set period.
- “Balance transfer APR applies to all card transactions.” It only applies to transferred balances, not to new purchases or cash advances.
- “Paying the minimum payment avoids interest on transferred balances.” Interest accrues on any unpaid transferred amount after the promotional period, regardless of minimum payments.
Related Pages
Related Glossary Terms
FAQ
- Does the balance transfer APR change after a promotional period? Yes, after the promotional period ends, the balance transfer APR typically increases to the card’s standard rate for balance transfers.
- Is there usually a fee for transferring a balance? Most credit cards charge a balance transfer fee, which is often a percentage of the amount transferred.