Balance-transfer APR is the annual rate at which interest is charged on a balance that transferred from one credit card to another. Some credit cards offer low or no introductory balance transfer APRs to encourage customers to transfer balances from other credit cards.

Transferring Balances

Balance transfer APRs are considered when looking to transfer credit card debt from a credit card with a high interest rate to a credit card with a lower interest rate to save money on interest. For instance, a $2,000 balance with a 16 percent APR will cost an additional $320 in interest annually, while a $2,000 balance with a 1 percent APR will cost only $20 in interest per year.

Debt Consolidation

Credit cards with desirable balance-transfer APRs are also helpful in consolidating debt. Transferring debt from multiple cards onto one card often results in lower monthly payments and makes debt easier to manage.

Grace Period

Typically, the balance-transfer APR applies only for a certain amount of time--usually six months to one year--before the remaining balance of the transfer is subject to the credit card's purchase APR, which is usually a higher rate. To avoid paying higher finance charges, pay off the transferred balance within the specified grace period.

Qualifications

Typically, credit cards with desirable balance-transfer APRs are available only to those with good to excellent credit.

Balance Transfer Fees

Some credit card issuers charge a balance-transfer fee, typically a percentage of the amount to be transferred. Although some companies that charge a balance-transfer fee also provide a cap for amount it costs to transfer a balance, some companies do not, which can result in fees as high as several hundred dollars to transfer large balances onto another credit card.

Warnings

Before applying, check out the terms and conditions of the credit card thoroughly. Look for any additional fees such as annual fees. Also, if you plan to use the card to make purchases, consider the purchase APR as well as the balance-transfer APR. If transferring a large balance is the first amount to be applied to a new credit card, be aware that all credit card payments will be applied to that balance first. Any purchases, which are typically subject to a much higher interest rate, will generate finance charges if a transfer balance remains.

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