Pay down your debt without the extra interest
Save money by avoiding balance transfer fees
Consolidate and simplify your repayments
A balance transfer credit card is designed to help you manage existing credit card debt more effectively. It allows you to transfer your high-interest credit card balances to a new card that offers a 0% interest rate during an introductory period, which can last up to 12‑month or more. For instance, if you are currently carrying £800 in debt on a card with a 15% interest rate and another £200 on a card charging 18%, transferring the total £1000 to a 0% balance transfer card could save you from accruing further interest during the introductory period.
This strategic move provides a window to pay down the debt without the burden of accumulating interest, making it easier to reduce your balance more quickly.
When you're approved for a balance transfer credit card, the next step is to initiate the transfer of balances from your existing credit cards to the new one. Here's a step-by-step guide on how the process works:
Contact your new card provider to move your existing balances. This can usually be done online or over the phone. Balance Transfer Fee: Most balance transfers involve a fee, typically around 1-3% of the total amount transferred. This fee is added to the balance on your new card.
The amount you can transfer is usually capped at a percentage of your available credit limit on the new card, often up to around 95%, so you may not be able to move your entire existing balance across. For example, with a £2,000 credit limit, you might only be able to transfer up to £1,900.
Once the balance is transferred, you'll need to make at least the minimum monthly payments by the due date. To take full advantage of the interest-free period, aim to pay more than the minimum. Keep in mind that when the 0% period starts, and any deadline for completing the transfer to qualify for it, will depend on the card's terms, so check these details with your provider before applying. Once you know your timeframe, calculate your monthly payments by dividing the total transferred balance by the number of months in the introductory period. For instance, if you transfer £1,500 and the introductory period is 15 months, you should aim to pay about £100 per month to clear the balance before interest kicks in.
Setting up a standing order for the calculated monthly payment can help ensure you never miss a payment and stay on track to clear your balance within the interest-free period. End of the Introductory Period: Be aware that once the 0% interest period ends, any remaining balance will start accruing interest at the card's standard rate. To avoid this, consider paying off the full balance before the promotional period expires.
If you still have a balance at the end of the interest-free period and you cannot pay it off in full, you might consider applying for another balance transfer card to extend the 0% interest benefit. However, aim to clear the debt as quickly as possible to avoid falling into a cycle of debt.
Balance transfer cards vary a great deal in how long their 0% period lasts, whether they charge a transfer fee, and what interest rate they revert to afterwards. Comparing your options properly, rather than taking the first offer you're eligible for, can be the difference between clearing a debt interest-free and paying more than you needed to.
Although initially there will be no interest payments on your debt, balance transfer credit cards will often have a small fee that you will have to pay in order to transfer the balance of your other credit cards over. This fee will be in the region of two to three percent of the amount which you transfer over.
For example, if you were to transfer over £1000 of credit you would likely pay roughly £20 to £30 as a fee for making the transfer. This, however, should not dissuade you from using a balance transfer credit card, as you will more than likely make this amount back and more by not having to pay interest on your debt for the first 12 months or so.
Eligibility for balance transfer credit cards typically depends on having a good to excellent credit score, as these cards are designed for individuals who can manage credit responsibly. Applicants must also meet other criteria set by the issuer, such as minimum income levels and current employment status. Additionally, the amount of debt you wish to transfer and your current financial obligations will be considered to ensure you can realistically manage the repayments.
A few factors are worth weighing up before you apply:
How long the 0% period lasts - the longer it runs, the more time you have to clear the balance interest-free.
Whether there's a transfer fee, and how it's calculated.
What the card's standard interest rate is once the 0% period ends, in case you don't clear the balance in time.
Any other costs, such as late payment charges.
The level of credit rating the card typically requires, so you can focus on cards you're realistically likely to be accepted for.
A balance transfer credit card offers several advantages that can help you take control of your financial health more effectively:
With a 0% interest rate during the introductory period, a balance transfer credit card allows you to pay down your principal faster. This is because payments are not being eaten up by high interest charges, enabling you to reduce your overall debt more quickly.
Transferring your high-interest debt to a card that offers a 0% introductory rate can lead to considerable savings on interest. While there is typically a fee involved in transferring the balances, this cost is often minor compared to the potential interest savings over time, especially if you can pay off the balance before the promotional period ends.
Consolidating multiple debts onto one card with a lower interest rate can simplify your payments, but the effect on your credit score is more nuanced than a straightforward improvement. Opening a new card, the new credit limit, any change to your overall credit utilisation, your existing account history and how you manage repayments going forward can all affect your credit profile, in different directions, and not always straight away. Managed well over time, reducing your overall debt and keeping up with payments can work in your favour with future lenders.
There are some downsides to balance transfer credit cards. Some charge a transfer fee, and the 0% interest period is temporary, its length varies by card. To make a worthwhile saving, it's best to clear your transferred balance before the 0% period ends and interest starts being charged. If you're not likely to pay off the debt within that timeframe, a balance transfer card may offer less benefit.
You should also watch out for penalty charges which you may have to pay in the event that you miss a payment or go over your credit limit. This can make using a balance transfer card risky if you don't feel that you can be reliable with your payments and your spending habits.
Maximising the benefits of a balance transfer credit card can significantly help in managing and reducing your debt. Here are some strategies to ensure you make the most out of your balance transfer card:
The 0% interest period on your balance transfer card typically begins as soon as the card is issued. To make full use of the interest-free months, transfer your existing balances from other cards as soon as possible after receiving your new card. Delaying the transfer means less time to enjoy the zero interest benefit.
Ensure you make at least the minimum monthly payments on time. Missing a payment or paying late can result in penalty fees and might cause you to lose the 0% introductory rate, reverting to the card's standard interest rate. If possible, aim to pay more than the minimum to reduce your debt quicker.
Using your balance transfer card for new purchases or cash withdrawals is not advisable, as these transactions often incur high interest rates and additional fees, counteracting the benefit of the balance transfer. If you need to make purchases, consider a card that also offers a 0% period on new purchases, or use another card with lower charges for purchases.
Work out a plan to fully repay the transferred balance before the end of the 0% period. Calculate how much you need to pay each month by dividing the total debt by the number of months in the interest-free period. Setting up a direct debit for this amount can help you stay on track without having to remember to make the payments manually.
Mark the date when the introductory offer is set to expire in your calendar. This reminder will give you enough time to either pay off the balance or explore options like transferring any remaining debt to another balance transfer card. Staying ahead of this deadline ensures you won't be caught off-guard by sudden jumps in interest rates.
Compare cards and use an eligibility checker where available before applying, so a hard credit check doesn't leave a mark for a card you're unlikely to get.
Have your balance and existing card details ready so you can transfer as soon as you're approved.
Set up a plan (and reminders) to clear the balance before the 0% period ends.
Money Expert has been helping people compare and save since 2003. We show you credit cards from a range of UK providers, so you can compare features and apply for the card that suits you.
Yes, you can usually transfer up to a certain percentage of your new card’s credit limit, often up to 95%. This means if your credit limit is £2,000, you could potentially transfer up to £1,900.
Applying for a balance transfer card involves a credit check, which might slightly lower your credit score temporarily. However, if you manage the card well by reducing your overall debt and making timely payments, it can positively affect your credit score over time.
While you can use the card to make purchases, it's usually advisable not to. Purchases often don't benefit from the 0% interest rate offered on the transferred balance and can accrue interest at the standard rate from the day of the transaction.
Your credit limit is determined by the card issuer based on your creditworthiness, financial history, and other factors. You will be informed of your credit limit when you receive your card.
Yes, it's encouraged to pay more than the minimum to reduce your balance quicker. This not only shortens the repayment period but also reduces the total interest paid, especially after the introductory 0% interest period ends.
Balance transfer fees typically range from 1% to 3% of the amount transferred. This fee is added to your balance, so it’s important to factor this into your repayment plan to make sure the transfer is cost-effective.
