What is a balance transfer and purchase credit card?
Balance transfer and purchase credit cards let you transfer your balance from another credit card, and make new purchases using a single credit card.
This is often useful if you want to track your debt and manage your spending.
How does the balance transfer period work?
A 0% interest period for balance transfers is a set amount of time. Typical 0% interest free balance transfer periods are 18 months, 21 months and 24 months. The best 0% interest free balance transfer period deals are longer and can go up to 29 months.
During that time you will not be charged interest on the debt you transferred from your old card to your new credit card, though you may be charged a fee up to 5% to complete the transfer.
You will need to pay the minimum repayments on the 0% balance transfer card. But you should aim to make repayments that are enough to pay off the balance in full before the 0% offer ends. You will be charged interest on any remaining balance, which is often much higher than on standard credit cards.
How does the purchase period work?
A 0% interest period for purchases is a set period of time where you won’t be charged any interest on new purchases made with your credit card.
Aim to pay off your credit card during the 0% purchase period. Or you will be charged interest on any outstanding balance when the 0% purchase period ends.
A 0% purchase period is different to a 0% balance transfer period. The 0% purchase period only lets you buy things with your credit card at no interest. A combo credit card may give you different time periods for 0% balance transfers and 0% purchases. Keep an eye on when each one ends.
Aim to have paid off what you owe on your low interest rate credit card before each of the 0% interest rate periods ends. Find out more about how to calculate your interest here.
How to get the cheapest balance transfer credit cards and purchase credit cards
In order to find the best offers the simplest place to start is by comparing as many deals as possible. At the same time it’s important to keep in mind there is no one best deal. The best deal for you is one that offers the longest interest free period on both balance transfers and purchases, but also covers your individual needs.
Shopping around and comparing credit cards is the best way to find the best deals.. Look for 0% interest rate credit cards with long interest free periods and the lowest balance transfer fees. The best deals offer 0% interest rates on balance transfers and 0% purchase deals for up to around 28 months.
However be aware that often a single credit card can offer differing interest free periods on balance transfers and purchases.
For example, a credit card may offer 12 months 0% on interest on old balances transferred to the card, but 24 months on new purchases.
Understanding balance transfer and purchase card fees and charges
The cost to you of a credit card is the APR, or annual percentage rate. This is the number you should look out for when using credit card comparison websites.
Costs included in the APR are the interest rate you will pay the lender for balance transfers and purchases on your credit card, and any extra fees. You pay all these charges as part of your monthly repayments. During 0% interest free balance transfer periods and 0% purchase periods you don’t pay any interest. You can read more about how APR works here.
Use the APR number when you compare balance transfer and purchase credit cards. Get the cheapest balance transfer credit card deal and the best purchase credit card offers by choosing a low APR credit card or 0% interest rate credit card.
Does 'representative' APR mean I won’t get the best combo credit card deals?
When you compare balance transfer credit cards and purchase credit cards, you will see a ‘representative’ APR.
This is the APR (or lower) that at least 51% of a lender’s customers will pay when taking out the credit card advertised. You may not get the APR on offer.
How much a credit card company will charge you for a combo credit card will depend on your personal circumstances. Your credit history will affect how long a credit card company will give you a 0% interest free period on balance transfers and purchases.
Shop around using credit card comparison sites to get the best credit card deals.
Before you apply for a combo credit card, use a credit card comparison site with a ‘soft credit check’. This lets you see how likely it is you will be accepted. This ‘soft credit check’ can cut the number of marks on your credit file, making it more likely you will be offered credit cards in future.
Mistakes to avoid with 0% interest balance transfer and purchase cards
To get the most out of a 0% interest period? Here are some things to watch out for:
Forgetting about the revert rate: At the end of the introductory promotional period, the 0% interest rate will revert to the standard purchase rate, which is usually between 10 and 35%, but can be higher. Consider the standard interest rate before applying for the card so you understand how your debt will grow if you fail to repay your balance before the interest free period ends.
Only making the minimum repayment: Most credit card providers expect you to make a minimum monthly repayment towards your balance. This is usually around 3% of your balance.
However, if you only make the minimum amount each month, you’ll be unable to repay your entire balance before the 0% offer finishes. This means you’ll end up being charged the revert rate on your remaining balance, which will make it much harder to pay it off.
Not taking advantage of the entire offer period: The 0% offer is available as soon as your card is approved, not from when you make your first purchase. So if your card offers a 0% offer for six months but you don’t make a purchase or any repayments for the first month, you’ll only have five more months to make repayments without incurring interest. If you have a big purchase in mind, make it as soon as possible and start making repayments immediately to get maximum value out of the offer length.