Balance transfer credit cards let you pay off existing debt by moving the balance to a new card with a lower interest rate. This means you could clear your debt faster as you won't be paying as much interest.
5 best balance transfer credit cards
- Barclays Platinum, 21.9% APR, 18 months, £0 fees
- Sainsbury's Bank, 19.9% APR, 29 months, £90 fees
- Halifax, 19.9% APR, 29 months, £90 fees
- Virgin Money, 21.9% APR, 29 months, £90 fees
- mbna, 20.9% APR, 26 months, £89.70
When to use balance transfer credit cards
Balance transfer credit cards should be used when your existing rate is too high, which can make it more difficult to pay off the balance on your existing card.
With a balance transfer to a new card, you could pay off your debt at a monthly cost you can afford.
If you are looking to cut interest on your balance and find the best card to make purchases at the same time, you may be able to find a balance transfer credit card to help you do both.
How to find the best balance transfer credit cards
When you're looking for the best balance transfer credit card, there are a few things to consider:
Decide how long you need to repay the balance you want to transfer. Divide this by what you can repay each month to decide how long you need. For example, if you repaid £100 a month for 15 months, you would pay off £1,500.
Use the comparison above to find the best deals. Look for cards with a 0% period long enough for you to repay the interest free balance.
Check the fee of each balance transfer credit card. This is charged as a percentage of the amount you transfer (although some cards come with no fee).
How long is the 0% balance transfer introductory period?
With a 0% balance transfer credit card, you can repay the balance without paying interest during an introductory period that can range from one month to more than two years.
This means you will not pay any interest on your balance during that period, but it will go up when it ends. The longer the balance transfer period, the more time you will have to pay it back.
Most providers will state that you must complete the balance transfer within a set period for you to get the 0% deal. For example, you may have to complete the balance transfer within 60 days of opening your balance transfer credit card. This is to stop the rate rising and any fees being applied.
Check the small print in the comparison table to find out the terms for each provider.
How long do you need?
Paying off your balance in the interest-free period helps you save money.
If you have a balance of £2,000 on your current credit card and you can afford to pay back £80 a month, you will need a balance transfer credit card offering a 0% introductory period of at least 25 months: £2,000 ÷ £80 = 25
This calculation is assuming you are offered a 0% balance transfer card with no fees.
Using the example above, if you are offered a balance transfer credit card with a 0% introductory period of less than 25 months, you will need to switch again at the end of that period. Start early and give yourself six weeks to find a new card.
What is the balance transfer fee?
Some credit cards will charge a small percentage on the amount you want to transfer and this is called the balance transfer fee.
If you make a balance transfer of £2,000 to a credit card with a 2% balance transfer fee, it would cost £40, making your total transferred balance £2,040.
The calculation for this is 2% ÷ 100% x 2,000 = £40
The balance transfer fee will typically range between 1% and 5%. Some providers will also charge a set price if you have a small balance to transfer.
You may be offered a balance transfer credit card with a fee of 2.9% or a £5 minimum. If you want to transfer £150 to this card, 2.9% of your transfer amount is only £4.35, so you would have to pay the £5 minimum.The calculation for this is 2.9% ÷ 100% = £4.35
How do you choose the APR?
The Annual Percentage Rate (APR) represents the yearly cost of your credit card debt. It includes the interest rate set by the credit card provider and any additional fees and charges.
You will pay a lower rate on top of your balance if you choose a card with a low APR.
If you don't think you will be able to pay off your balance in the 0% interest period, it is good to consider what the interest rate will be, once the introductory period is over.
For example, you might want to transfer a balance of £2,000 and have a balance transfer card offering a 0% rate for 20 months.
If you pay £50 a month, after 20 months you will have paid £1,000 and owe £1,000.
The calculation for this is £50 x 20 months = £1,000. £2,000 - £1,000 = £1,000
If you have a balance transfer credit card with 19.9% APR after the introductory period, you will have to pay £199 on top of your balance.
The calculation for this is 19.19% ÷ 100% x £1,000 = £199
If you continue to use the card once the introductory period is over, you will owe £1,000 + £199 = £1,199.
With a balance transfer credit card with 21.9% APR after the introductory period, you will have to pay £219 on top of your balance.
The calculation for this is 21.9% ÷ 100% x £1,000 = £219
If you continue to use the card once the introductory period is over, you will owe £1,000 + £219 = £1,219.
These examples assume there are no balance transfer fees attached.
What does the 0% rate cover?
It is important to check what the 0% rate covers on the balance transfer credit cards available to you.
Sometimes the 0% introductory offer applies to balance transfers and not purchases. This means you'll usually have to pay higher interest rates on any purchases with the balance transfer credit card.
How to do a balance transfer
1. Review your credit card debt
Evaluate how much debt you have. This is not only about calculating your total debt but figuring out which cards are charging you the highest interest rates and setting a target date that you want to pay off your debt. This information will help you choose the best balance transfer card for you.
2. Compare your optionsThere are several balance transfer credit cards out there. In order to get the best deal that covers your needs, you should compare as many balance transfer cards as you can. Some of the features you should keep in mind include:
Promotional interest rate: Most balance transfer cards come with 0% interest introductory rate, though same may charge a slightly higher
Length of the introductory period: Most balance transfer cards come with introductory rate ranges from six to 29 months. The longer the period the more you save.
Interest rate: This is the interest rate you'll be charged once the introductory rate ends. This interest rate tends to be much higher than the rate for purchases, so make sure you factory that in if you cant pay off your debt during the interest free period.
Balance transfer limit: Most cards have a limit on how much you can transfer on to your card.
Balance transfer fee: You may be charged a one-time fee for the balance transfer, typically up to 5% of the transferred amount. You may want a card with no balance transfer fee if you’re transferring several balances — otherwise, this fee could offset your interest savings.
Your credit history.: Your creditworthiness will play a huge part in which balance transfer credit cards you’ll qualify for.
3. Apply for a balance transfer credit card
Once you've chosen the credit card that's right for you, the easiest way to apply for it is to fill out the online application form. This is where you enter your name and contact details. This also where you may be able to make any balance transfer requests.
You'll only know the transfer limit once the lender gives you approval, which will depend on your financial history and credit rating. It may take between five days and two weeks to get approval. In the mean time, make sure you are continuing to make repayments on your old card.
4. Start paying off your debt
After your balance transfer is complete, make sure you know how long the introductory period lasts. Paying off your debt within this period is how you can save they most money. You'll be charged interest on any balance that's left over.
What should I do with my old credit card?
Once you've transferred the balance from an old card you have two options. You can either close the card or keep it. Closing the card can impact your credit rating as it will affect your credit utilisation, which is the amount of debt you have compared to the amount of credit available to you.
If you feel that having that credit available might tempt you into overspending, it's better to close the card. But if you keep the card and use it responsibly it can help your credit rating.
Unable to get a long enough 0% balance transfer deal?
If you cannot find a balance transfer that gives you long enough to pay back the full balance before the interest free period ends you could:
Use another balance transfer deal once the 0% period ends
Get a lifetime balance transfer card that charges a low interest rate for as long as you need to pay it off
There are lots of reasons to have a credit card and a balance transfer credit card may not be the best credit card for your needs. Here are a few others to choose from: