What is a balance transfer credit card?

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Balance transfer credit cards allow you to move debt from one card to another. If you choose a card with a 0% interest rate, you’ll be able to clear your debt quicker and more cheaply.

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What is a balance transfer credit card?

A balance transfer credit card lets you move debt from one (or several) credit cards or store cards to another. Many balance transfer credit cards charge a low rate of interest or even no interest at all for a set time, making them a good option for those who are paying high interest rates on existing card debt. 

Consolidating your credit card debt into one place can also make it easier to keep track of repayments and manage what you owe.

To transfer your balance, you may have to pay a small fee. This is typically between 1% and 4% of the amount you’re transferring and it will usually be added to your outstanding balance. 

As an example, if you transferred £2,000 with a 3% balance transfer fee, it would cost you £60. Your total transferred balance would therefore be £1,060.

Balance transfer cards are not designed for spending. Interest rates on anything you buy with a 0% balance transfer card are often very high.

Compare balance transfer credit cards

How does a credit card balance transfer work?

When you apply for a balance transfer credit card, you’ll be asked if you want to move debts from other cards. If you do, you’ll need to provide details of the cards so that you can then move your balance from your old cards to your new one. This transfer process may take one to two working days. 

Once the transfer is complete, you’ll start making monthly repayments to your new provider. 

Note that the amount you can transfer is typically a percentage of your new card’s credit limit - usually around 90% to 95%. 

What about 0% balance transfer credit cards? 

Many balance transfer cards offer 0% interest for a number of months. This is typically anywhere between six months and three years.

 By shifting your debt to a 0% balance transfer card, your repayments will go towards clearing the debt itself, not the interest. This means you can clear your existing card debt more cheaply and pay it off faster as a result.

At the end of the 0% offer, you’ll start being charged interest on the remaining balance.  Interest rates can be high so you should aim to clear your debt by the time the introductory offer ends.

To do this, when you get accepted for your card, divide your balance by the number of months the 0% offer lasts and set up a monthly standing order for that amount.

For example, £1,500 on a 0% balance transfer card for 12 months would be £125 per month (1500 ÷ 12).

If you cannot completely pay off your debt before the 0% offer finishes, it might be worth getting another 0% balance transfer card. But remember you will probably have to pay another transfer fee. 

Also bear in mind that you’ll usually need to carry out your transfer within a set number of days (typically 60 or 90) to qualify for the 0% deal. 

Am I eligible for a balance transfer credit card?

If you have a poor credit score, you may find it harder to get accepted for a balance transfer card, particularly those that offer the longest 0% deals.If you apply for a card and you’re rejected, this could do further damage to your credit score and make it harder to get credit in the future. 

For this reason, it pays to check you're eligible for a card before you apply to avoid rejection. Using an eligibility checker will help you to see which cards you’re most likely to get accepted for and it won’t harm your credit score.

You can find out what cards might accept you, and see your chances of getting a card by using the eligibility checker with our partner Uswitch.

Case Study - Charles, Croydon

"Over the past winter the boiler in my house broke down. It was out of warranty, and I didn’t have insurance. It cost £1,000 and I charged it to my rewards credit card, which I generally use to collect air miles for holidays.

Being a rewards card, the interest rate is a lot higher than other cards, so I try to pay it off every month to avoid paying interest. With the unplanned charge of £1,000, I wouldn’t be able to pay off my balance in full and I was worried about having to pay interest on top of the £1,000. I’d been furloughed for much of last year, so dipping into my savings wasn’t an option.

So I looked into balance transfer credit cards, which often offer interest free deals to new customers. To be honest, I’d never completely understood how balance transfers work until I needed one myself. Having used Uswitch for energy, I thought it might be a worth trying again to find a good deal on a balance transfer credit card.

I used the eligibility tool to narrow down my options and picked the deal I liked. The rest of it was fairly straightforward. Although I didn’t get as long of an interest-free period as I wanted, at 9 months it still buys me enough breathing room to spread the repayments —  the best part is that I’m not paying interest on top of it, which may have saved me around £100.

One thing I’ve learned is the need to be more financially literate. It seems there are many ways that we can save money that many of us don’t know about simply because we haven’t looked or assumed that it’s too complicated."

Can you get a no fee 0% balance transfer card?

Yes, some credit cards won’t charge you a fee to transfer your balance.You may find the 0% deal offered is shorter compared to a fee-charging card, but if you can clear your balance within that time, this shouldn’t be a problem. 

It’s best to do some calculations to see which option works out to be more cost-effective for your individual circumstances - a longer 0% deal that charges a fee or a shorter 0% deal with no fee.

How much interest do balance transfer cards charge?

This will  depend on whether or not you're transferring your balance to a 0% credit card.

If you manage to get a 0% balance transfer card, you won’t pay interest on your transferred balance until the 0% deal ends. That's why it's preferable to try to clear the balance before this.

If you don’t, you could be charged interest of anywhere between 18.9% and 25.9% APR. 

Some balance transfer credit cards don’t offer a 0% deal but will charge a low rate of interest instead - usually around 5.9% to 9.9% APR.

How can I choose the best balance transfer card?  

To help you choose, work out how much you can afford to repay each month and look for a term that gives you enough time to repay your debt.

For example, if you can afford to repay £50 a month, and your balance is £1,000, it will take you 20 months to clear your debt. To avoid paying any interest, you'd need a balance transfer card with a 0% deal that lasts for at least 20 months.

Keep in mind you won’t usually be able to transfer a balance between cards from the same provider. This can also apply for the same banking group. You wouldn’t be able to transfer a balance from an HSBC card to First Direct for example.

Once you’ve qualified for a card, remember to make your monthly repayments on time and avoid spending on your balance transfer card.

Find the best credit card for you, whether you're looking for 0% card for balance transfers or purchases or day to day spending and rewards

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