If you have outstanding debt on a credit card, you may be wondering if you can save more with a new credit card, or by transferring your balance to another card. Much like refinancing an auto loan to a different financial institution with a better rate, a credit card balance transfer allows people to move their debt to a credit card with a lower interest rate and/or better benefits, such as a rewards program to earn cash back.

Curious as to how a balance transfer works? Credit card companies will sometimes offer a promotional period of time in which no interest is charged on sums transferred to the card from another card. This allows the credit card holder to have more time to pay off their debt, without being charged high interest fees.

For example, if you currently have a $1,000 balance on a credit card with a 20% annual percentage rate (APR), paying it off at $250 a month would take 5 months due to the interest being charged, but if you moved that debt to a card with 0% APR, it would take 4 months to pay off (plus any balance transfer fees, if applicable).

Of course, if you choose to go this route, you are still committing to making on-time payments of at least the minimum balance on your current card, plus any new purchases you make.

To transfer your balance, you may contact the card company to which you are transferring the balance, and they will arrange the transfer of funds to pay the account.

Keep an eye out on the old account with the balance being paid off to make sure the transfer clears, and don’t miss any outstanding payments on that account in the meantime. This may take anywhere from two to ten days.

How Will a Credit Card Balance Transfer Affect My Credit Score?

Transferring your credit card balance can be a good way to pay down credit card debt, which will help improve your credit score. However, be mindful that applying for several different cards with low introductory rates can negatively impact your credit score, as can closing accounts after a short period of time.

To avoid a negative impact on your credit score, find the best offer and only apply for one card.

Balance transfer cards can be a great debt management tool, as long as you use them wisely. Research your options, and plan for how much you can put aside each month to pay off your debt. You’ll soon be on your way to better credit and more money back in your pocket!