Balance Transfer Credit Cards

What is a balance transfer credit card?

Balance transfer credit cards are a specialist type of card that can be invaluable for anyone paying interest on their credit card debts.

They allow you to transfer a balance from your existing credit card to a new card that charges little to no interest for a specified period, which could save you money and help you clear your debts faster. If you owe money on multiple cards, you can also consolidate the different debts onto one credit card.

Balance transfer cards are specifically designed for this purpose and are not recommended for spending as this is likely to incur high interest charges (unless the card is a combined balance transfer and purchase card).

The best balance transfer credit cards offer a limited interest-free period, which means you won’t be charged any interest for that length of time. The 0% periods could range from as little as a few months to as long as 30 months.

Provided that you pay off the card balance before the end of the 0% period, you won’t be charged any interest. After the interest-free period ends, the provider will charge interest on any balance left outstanding on the card, which will be shown as an annual percentage rate (APR).

Note that you often need to pay a balance transfer fee, which is usually 2% to 4% of the sum transferred and is added to your total credit card balance.

How do balance transfers work?

If you want to transfer debt from one credit card to another, you first need to apply for a balance transfer credit card. This will involve the usual credit and affordability checks as a standard credit card.

Once you’ve been approved, you then need to give the provider details of your existing credit card(s). You can transfer the full balance from your card or a proportion of your debt; you simply need to tell the provider how much you want to transfer.

You may need to request a balance transfer within a certain number of days after opening, such as 60 days, and providers may set a minimum amount you need to transfer.

You can’t use up the whole credit limit on the card by transferring balances as providers will allow for fees and other potential costs. The maximum you can transfer onto the card will often be between 90% and 95% of the total credit limit.

Bear in mind you won’t normally be able to transfer a balance between two cards from the same banking group.

You often have to pay a balance transfer fee to the credit card provider you are moving the balance to. This is usually in the region of 2% to 4% of the amount you transfer, although some providers may charge no fee at all.

Providers may process and complete a balance transfer within one working day, although some may take longer.

Once a balance transfer is complete, it’s important to stick to the terms of the card, including making the minimum monthly repayments and staying within the credit limit, otherwise charges may apply and any 0% offer may be withdrawn.

Make sure to clear your balance before the end of the 0% period to avoid paying any interest, either by paying it off or by transferring it to another card. If not, you will be charged interest on any balance left on the card.

Is it hard to get a balance transfer card?

It’s not necessarily harder to get a balance transfer credit card than another credit card, but those with a better credit history are likely to have a better chance of approval.

Factors such as the amount of debt you’re currently paying off and your record of making repayments will also affect a provider’s decision.

While having a less-than-perfect credit score won’t necessarily stop you from getting a balance transfer card, you may find it more difficult and, if approved, the 0% period you qualify for may be shorter than for someone with a better credit history.

Bear in mind that you’re not guaranteed to get the advertised interest-free period; the actual offer you receive could be shorter than this (unless the provider says it’s a guaranteed offer for all successful applicants).

Is transferring credit card balances a good idea?

Many people with existing credit card debt could potentially benefit by moving it to a balance transfer card with a 0% interest period.

Standard credit cards charge interest on their balances, whereas 0% balance transfer cards won’t charge any interest for the specified period.

This means that, even factoring in the balance transfer fee, it’s often worth moving your debt to a balance transfer card as this could save you a significant amount in interest.

However, it’s crucial to check that the cost of the balance transfer fee doesn’t outweigh the savings you could make on interest. Bear in mind that the fee will apply for each individual transfer, so you will be charged two fees if you transfer two balances, for example.

It’s also important to consider whether you can afford the payments after moving your debt to a balance transfer card. You need to make at least the minimum required monthly payments (ideally more) and clear your balance in full before the end of the 0% period to avoid any charges.

When should I not do a balance transfer?

While balance transfers can be useful, they’re unlikely to be a good idea if the cost of the balance transfer fee outweighs the sum you could save on interest.

Furthermore, you should only transfer a balance if you can afford to pay at least the minimum payments each month. If you’re struggling financially and you’re worried about your ability to make payments, you should contact your card provider and seek professional help from a debt charity as soon as possible.

What banks offer the best balance transfer credit cards?

The banks offering the best balance transfer credit cards will usually be those offering the longest interest-free periods and the smallest fee.

At the time of writing, the cards with the longest 0% balance transfer periods are offered by some of the major high street banks, including Barclays and HSBC.

However, the cards with the longest 0% period may charge higher fees and may not necessarily be the best for you. For example, if you don’t need a particularly long interest-free period to clear your debt, a card with a shorter period and a smaller fee may be more suitable.

Alternatively, if you want to benefit from interest-free spending, a combined 0% balance transfer and purchase card may be worth considering instead of taking out two individual cards.

It’s a good idea to compare balance transfer cards and check your eligibility before applying to help you find the best card for your situation.

Other types of credit cards

If you’re looking for a credit card to use for spending instead of balance transfers, there are several options available.

• 0% purchase credit cards allow you to make purchases without paying any interest, as long as you pay off the card in full before the 0% period ends.
• Cashback credit cards pay a percentage cashback on your spending, so you can earn money on your spending. However, you should aim to pay off your balance in full each month to maximise the benefits.
• Reward credit cards work in a similar way to cashback cards except, instead of being paid for your spending, you can earn rewards such as supermarket points, air miles and vouchers, for example.
• Travel credit cards are designed for spending abroad. Unlike standard credit cards which may charge foreign transaction fees, travel credit cards don’t apply any additional charges for spending outside the UK.
• Credit builder cards can help those with a poor or limited credit history who may not be eligible for a standard credit card.