Balance transfer credit cards

What are 0% balance transfer credit cards?

If you have existing credit card debts on which you are paying a high rate of interest, it may be cheaper to transfer all your borrowing to a card where you do not pay any interest for a set period of time. This gives you a chance to pay off your debt, saving you a significant sum of money. These types of credit cards are called balance transfer credit cards.

How do 0% balance transfer credit cards work?

When you move to the new 0% balance transfer card your credit card debt will be interest free for a set period of time - often up to two years. After that, it the interest rate (known as the APR) will revert to a higher rate.

During the 0% interest period you can pay off your credit card debt in regular instalments. By transferring over your old credit card or store card balance to a new card you will have some financial breathing space. There is a charge for this - you will pay a fee based on a percentage of the value of the debt you have transferred across.

Is it worth having a 0% balance transfer card?

Zero interest balance transfer cards can be a useful way of reducing your monthly outgoings and can enable you to manage all your credit card borrowing in one place. A 0% balance transfer credit card allows you to transfer debt from existing credit cards to one with a 0% introductory deal. This means you can pay off your debt over a longer period without worrying about paying extra in interest repayments.

This can be a good way to save money on the cost of paying back your credit card debt as you can pay down the balance without paying interest charges.

It can also be a good way to make your debts more manageable. You can consolidate your debts from multiple credit cards and keep them all in one place.

You do need to have a plan to repay the transferred balance so that you don't end up paying a high rate of interest when the 0% period ends.

How do you compare balance transfer credit cards?

There are a few things to look for when comparing balance transfer credit cards. Look at the details of the different cards available. How long is the 0% balance transfer period? What is the fee you will have to pay to transfer the balance across?

How long is a 0% balance transfer credit card offer?

Most cards come with a 0% interest offer. This allows you to pay off your credit card debt within a specified time period without being charged interest. This period can last for more than 18 months depending on the offer, which can be very attractive to help pay down the debt, without interest charges.

To make the most from the introductory offer, calculate how much you’ll need to pay back each month to complete your repayments within the 0% interest period.

For example

You transfer £1,000 to a card with a 24 month 0% introductory offer.

The transfer fee is 3% costing you £30

In total, you owe £1,030

The total debt divided by 24 months is £42.92

To pay off the credit card in full during the 0% introductory period, each month you'd need to pay: £42.92

You might get a shorter introductory period than advertised

Be careful. Where you’ve had credit problems in the past you might be given a shorter introductory period than you see advertised which may not make the offer as attractive. If your credit rating is lower, you may be offered a less attractive deal. For this reason, it is a good idea to get your credit rating into the best shape possible.

Find out more about What Affects your Credit Rating

Check when the 0% offer ends

0% balance transfer offers do not last forever. When the introductory offer ends, the interest will go back to a more expensive standard rate.

When you transfer your credit card balance to a new card, always make a note of when the introductory 0% interest rate ends. You may wish to consider moving any outstanding balance to a new balance transfer card to pay it off without costly interest payments.

What does a 0% balance transfer offer cover?

A credit card might offer a long 0% balance transfer rate that lasts years. But it might only offer a few months of interest free spending.

Generally it’s better to have your balance transfer credit card just for balance transfers. But it’s worth knowing what rates you’ll be paying for spending on it too, just in case you need to.

If you have a large debt to pay over the 0% interest period try to avoid spending on the card after transferring a balance to it.

Or if you're looking for a card that offers a good rate on both, you might want to consider a 0% balance transfer and purchase credit card.

What is the true cost of the balance transfer fee?

Most credit card providers charge a balance transfer fee of around 3% when you move your debt from one card to another. This varies between cards and providers.

As the fee is worked out as a percentage, the cost of the transfer fee will rise with the amount you transfer.

For example

You transfer £1,000. The transfer fee is 3%.

It'll cost you £30 to transfer your balance.

You transfer £2,000. The transfer fee is 3%.

It'll cost you £60 to transfer your balance.

But do not let the fee put you off. Even with the fee, you’re still likely to be paying less overall compared to your existing credit card.

Some credit cards will offer a discount on the initial balance transfer fee provided you meet their terms and conditions. This usually includes paying off your balance on time each month.

What is the APR?

APR is there to help you compare credit card deals more easily. APR stands for annual percentage rate.

It helps you work out what the credit card will cost you once your 0% introductory period ends. A higher APR means higher repayments.

It takes into account the interest rate and additional charges of a credit card offer.

You might get a higher APR than advertised

The rate you see advertised isn’t necessarily the rate you will get. Credit card providers only have to give the typical APR they advertise to around 50% of successful applicants. Where you’ve had credit problems in the past you might be given a higher APR.

Check that the rate you see advertised is the rate you will actually get to avoid a shock when your first statement arrives. Again, getting your credit rating into good shape will help your chances of getting the best deals.

Find out How to improve your credit rating and credit score

Are money transfers included?

Some balance transfer credit cards will also include 0% on money transfers.

Money transfers allow you to pay money from your balance transfer cards into your current account. So you can pay off overdraft debt, not just credit card debt.

These deals will also come with a fee, usually around 4%, but this will vary from provider to provider. Check what the fees involved may include as this could make your money transfer very expensive.

These balance and money transfer credit cards can be vital for consolidating debt from a variety of areas. It could be worth considering if you have debt elsewhere and not just from your credit card.

Finding the best balance transfer cards

The best balance transfer credit card for you will depend on your needs. But to help you find the best deal you should look for:

Also consider what other features you might need including:

Balance transfer credit cards for bad credit

Your options for balance transfer credit cards will be limited if you have bad credit.

Most credit cards transfer deals will only accept people with a good or excellent credit rating.

You might have a higher chance of being approved for a credit card for bad credit.

Find out more about balance transfer cards