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If you’re fed up of seeing half your monthly card repayment going towards interest, a balance transfer credit card offers low or 0% interest for a specified period when you transfer existing debt from a different bank. This promotional rate runs for a fixed number of months (usually between 12 and 24 but in some cases even longer) and then reverts to a higher standard variable rate. In most cases you’ll incur a one-off “balance transfer fee”, although some cards waive this. Even with a transfer fee, a 0% interest rate usually means that you can clear your debt faster and more cheaply.
Balance transfer credit cards comparison
What's in this guide?
- Balance transfer credit cards comparison
- An intro to balance transfers
- How does it work?
- What is a balance transfer fee?
- Expert video: Choosing the right balance transfer card
- How do I find the best balance transfer credit card?
- How can I find the best card that I'm eligible for?
- How much money can I save with a balance transfer?
- Balance transfer illustration
- The dos and don'ts of balance transfers
- How to do a balance transfer in five steps
- Why might my application be refused?
- Can't get a balance transfer?
- Your questions about balance transfers answered
An intro to balance transfers
A balance transfer refers to the process of transferring your existing credit card debt to a new card issued by a different bank, in return for a lower interest rate for an introductory period. Generally, this promotional interest rate is 0% for a specific number of months – varying from as little as three all the way up to today’s market-leading maximum of 30 months.
For the card issuers, it’s a way to get new customers on board. But they usually won’t make any money out of you unless you still have outstanding debt when the 0% period expires or use the card to make new purchases.
How does it work?
Let’s assume that you already have existing card debt and you want to save on interest by moving it to another card issuer.
Once you’ve picked a balance transfer deal (more on this below) you’ll usually be prompted to check your eligibility. Provided it’s good news, you can then go ahead and apply for the new card.
During the application process you’ll be asked if you want to transfer a balance and prompted to provide details of how much it is, which bank it’s currently held with and the account number.
When you’ve received your shiny new card (which can take up to two weeks, depending on how efficient the card issuer is) and activated it, the card issuer will then request the transfer of all outstanding funds from your old bank. From this point, the transfer will typically take around 1-3 working days. If there’s a transfer fee involved then this is can be added onto your balance.
From then on it’s over to you. You can pay as much or as little as you like each month, subject to the new card’s minimum repayment requirement (which is typically 1% or 2% of your outstanding balance). Ideally you should pay enough each month to ensure you’re debt-free before the introductory low-rate period expires.
What is a balance transfer fee?
Most – but not all – balance transfer cards (particularly those with the longest promotional periods) charge a balance transfer fee. This is a one-time fee that’s calculated as a percentage of the debt you wish transfer to the new card. Typically the balance transfer fee is between 1.5% and 3.5%. A minimum is usually also specified, so a card issuer might describe its balance transfer fee as “3% (minimum £5). So if you had a £2,000 debt to transfer, the transfer fee would cost you £60. If you had just a £150 debt to transfer, the fee would cost you £5.
The fee is usually added to the balance and so also benefits from the 0% promotional period.
Expert video: Choosing the right balance transfer card
How do I find the best balance transfer credit card?
There are lots of balance transfer card deals available, so to help you pick the right one, we recommend asking yourself these important questions:
- How much can you afford to repay each month?
Take a look at your income and outgoings and try to get a rough idea of how much you could comfortably repay each month.
- How long do you need in order to clear your debt?
Next, divide your outstanding balance by the amount you can afford to repay each month to establish how many months at 0% you need. It’s a good idea to add a couple of months to act as a buffer.
- Could you get a deal with no transfer fee?
Balance transfer fees typically come in at about 3% of the total sum being transferred, so they’re worth avoiding, if possible. No-fee deals don’t tend to have the very longest 0% periods around, so sometimes the fee is worth shouldering.
- Do you need the new card to offer anything else?
If you’ve found cards offering the length of 0% period you need, and you can avoid a transfer fee, maybe a new card could offer you some perks. Just watch out for cards that encourage you to use them for further spending. If you only need the balance transfer deal for a brief period, then factors like the card’s standard rate and any perks on offer might have a greater importance to you.
Once you’ve answered these questions you should be well prepared to start comparing deals. If you need 26 months or less to pay off your balance, then you should head straight to the no-transfer-fee deals. If you need longer, you should probably swallow the transfer fee and head for the very longest 0% deals available.
Identifying the best balance transfer card for your unique individual circumstance really boils down to three factors: how much card debt you have, what you can afford to repay each month and which deals you can get approved for.
How can I find the best card that I’m eligible for?
OK, so now you know how to spot a good balance transfer deal. But realistically, the longest 0% deals a reserved for those with excellent credit. Additionally, card issuers often tailor offers to the individual applicant, so if your credit history is limited or damaged, you may find you’re accepted for a card, but offered a shorter 0% deal or a higher revert rate.
Almost every card issuer now lets you use an eligibility checker to find out the likelihood that you’d get approved and the specific deal you might be offered. These facilities use a soft credit search of your credit file (in other words a “light” check, which won’t affect your credit score and isn’t visible to other banks). Card issuers don’t always call this the same thing – look out for “Quick check” or “Check your eligibility” on card issuers’ sites.
If you already know that you have excellent credit, then you might choose to head straight to the card issuer offering the deal that you’ve homed-in on, but if you have fair/bad credit or if you have no idea about your credit rating, you might prefer to narrow down your options to just those that you know you’re in with a good chance of getting approved for. To do this, you can use an eligibility checker which takes a few basic details that you provide, then looks at cards from a whole range of issuers and shows you your likelihood of getting approved for each.
How much money can I save with a balance transfer?
Exactly how much you’ll save will depend on the size of your debt, the length of the 0% balance transfer offer and your repayments, but you could save hundreds or thousands of pounds in interest while you clear your debt. Here’s an example:
Balance transfer illustration
Let’s say you have £3,000 debt on a card that’s currently charging 20% interest annually, but you’ve been offered a new card with 0% on balance transfers for 18 months, a 3% transfer fee and no annual fee.
Clearing your debt over 18 months would be around £407 cheaper using the new 0% card than it would on the old card. What’s more, you’d be debt-free three months sooner than if you’d made the same monthly repayments to your old card. All in all, a worthwhile exercise!
Remember that this isn’t based on simply paying the minimum monthly repayments, but on overpaying as much as is necessary in order to completely clear the debt before the revert rate kicks in. In this example you’d want to pay around £172 each month to clear the debt in time. To get that figure we divided £3,090 (the balance being transferred with the transfer fee on top) by 18 (the number of months in the introductory rate period).
The dos and don’ts of balance transfers
Used intelligently, a 0% balance transfer card will reduce your interest payments and get you out of credit card debt faster. Used the wrong way, your debts can actually become larger and last, well, indefinitely. Ensure you don’t get trapped in problem balance transfer debt with our dos and don’ts.
How to do balance transfers right
- DO: Compare the best deals and use eligibility checkers.
Your goals should be to get debt-free as cheaply as possible and in as little time as possible. To do this, you’ll want to pin down the best deal available to you.
- DO: Look at deals with no balance transfer fee first.
Many people don’t take the time to understand balance transfers and the potential costs involved, and end up paying a balance transfer fee that they hadn’t been banking on. If you’re reading this, you’re already ahead of the curve.
- Do: Consider all applicable fees
While you won’t be charged interest with a 0% balance transfer, you may have to pay annual fees and a balance transfer fee. Make sure you consider these when choosing a balance transfer deal, but bear in mind it can be a mistake to dismiss cards purely on the basis of fees.
- DO: Request the transfer at the earliest possible opportunity.
Most balance transfer deals only apply to balances transferred within the first x days of account opening, so it’s better not to hang around.
- DO: Keep making payments on your old card until you’re sure the transfer has gone through.
Balance transfers are still far from instant, frustratingly. In fact they can take a couple of weeks. Don’t risk damaging your credit record by missing a repayment on your old card.
- DO: Set up a direct debit for repayments.
Ensure you’ll never miss a repayment and protect your credit score by setting up a direct debit for repayments. You can do this during application, when you accept the offer that the card issuer has made. You can set up a direct debit to pay the minimum monthly repayment, a fixed amount or a fixed percentage of the outstanding balance. Choosing a fixed amount direct debit is likely to be your best bet – simply divide your balance (plus the transfer fee, if applicable) by the number of months in the 0% deal to see what you need to pay each month to be debt free at the end of the promotional period.
Mistakes to avoid with balance transfers
- DON’T: Forget you still have to make payments.
Despite the promotional period with interest at 0%, you still have a debt, and you still have to make at least the minimum payment each month. You can’t simply transfer a balance and then stop making payments. The minimum repayment is usually stated in terms like “2.5% of your outstanding balance or £5 (whichever is greater)”.
- DON’T: Forget to checking the standard purchases rate.
Once your balance transfer promotion finishes, you’ll be paying the standard rate on any remaining balance. Choose a card with a standard rate that’s lower than your current credit card rate if possible or make sure you repay the entire debt before the standard rate applies.
- DON’T: Use your card for further spending.
Adding new debt will slow down your ability to repay your card. Don’t buy anything new on your credit card that you can’t immediately pay off in full. Also, banks are required to allocate repayments to whichever debt is accruing the highest interest on your account. So, if your balance accrues 0% interest and your purchase collect the standard interest rate, your repayments will go to the purchases rather than your balance transfer. It’s usually best to focus on clearing the debt you have, rather than adding to it. However, there are cards which offer 0% deals on both existing debt and additional purchases. Watch out for rewards programmes that incentivise additional spending – you could end up paying much more in interest than you earn in points.
- DON’T: Only pay the minimum repayment each month.
If you’re only paying the minimum repayment each month, you won’t be able to repay the entire balance by the time the 0% balance transfer offer ends. Then your debt will start to collect interest and it will grow again. Instead, you should calculate exactly how much you need to pay each month to repay the entire balance by the time the interest-free period ends. You can do this by dividing the size of your debt by the number of months in the balance transfer offer. This will give you a goal repayment to meet every statement period to clear the debt before the 0% promotion ends.
- DON’T: Keep your old card open
It’s tempting to hang on to your old card “for use in emergencies”. Realistically, if you’ve run up debt on it before, you’re likely to do so again. Cancel the card and concentrate on paying off your balance. Remember to transfer any regular payments, and ask your old bank for your final balance so you don’t have any leftover debt. Even after you’ve made a balance transfer you may still be liable for accrued interest from your final statement, or for missed payment charges. Make sure these are cleared – if you don’t take action they’ll continue to build up interest and penalties.
So how much should you aim to repay each month? The table below shows what percentage you should pay off each month to fully clear your debt during the interest-free balance transfer period. We’ve also shown how much this would be for a £10,000 debt. For this example, we’re assuming no new purchases are being made with the card.
|Length of deal||% of total to repay each month to clear debt||What that would equal per month on a £10,000 debt|
The key lesson? Budget as much as you can towards paying off your credit card debt while the promotional rate applies. If you haven’t paid everything off, it’s possible to apply for another balance transfer.
How to do a balance transfer in five steps
Follow these five steps to successfully apply for a balance transfer credit card and improve your chances of approval:
- Find a balance transfer offer that meets your needs. Use our comparison tables to easily compare a range of cards and see how much you could save.
- Check how much you’re eligible to transfer. The amount you can transfer to your new account will vary, but is usually capped at between 90% and 95% of your approved credit limit. So, if you can only transfer 90% of your £1,000 credit limit, you’ll only be able to transfer up to £900. Remember, you won’t know for sure what your credit limit will be until you’ve made your application, and this will depend on a number of factors, such as your overall credit rating, address and employment status. You can contact the bank in question to get an estimate before you apply. You’ll also need to make sure that you’ve selected a new card that accepts transfers from your current bank and card.
- Submit your application. If you’ve found a balance transfer credit card that is right for you, you can click on the ‘Go to site’ button to be directed to a secure online application. Check out our guidelines for successfully applying to maximise your chances of approval.
- Wait for your application to be approved. Some banks can process your request and offer approval within 60 seconds of applying, but others can take between 5-7 days. If you haven’t heard from the bank after this time, you may wish to contact them to find out if there’s an issue.
- Confirm transfer and close your old account. Once your new card is set up, contact your old bank and make sure the previous account is closed to avoid any further fees or interest payments. Now it’s time to start repaying your debt. Use our tips for paying off your credit card debts faster to clear your debt and maximise your interest savings.
Do I have to contact my old bank and new bank to make the switch?
Your new card issuer manages this process after both your card and the balance transfer are approved. You just need to provide details of your existing card when you apply. But if you want to close your old card, you’ll need to do that yourself by contacting your bank. If you don’t close your old account, you could be stuck with annual fees and any other maintenance costs that come with your existing account.
Why might my application be refused?
Financial institutions assess balance transfer applications carefully. To increase your chances of approval, consider some of the factors that could cause a bank to decline your application before you apply:
- Poor credit history. You’ll need a good credit history to obtain a balance transfer deal. However, if you have a poor credit history due to missed payments, defaults on your account or significant levels of debt, you might need to repay more of your debt and demonstrate your ability to make regular repayments before you apply.
- Submitting multiple applications too rapidly. Each application you make for a balance transfer deal is recorded in your credit history. If your application is refused, don’t just apply to a different credit card issuer straight away. Instead, take some time to repay your debt and carefully compare other card options and ensure that you tick off the eligibility criteria before you apply.
- Transferring to the wrong bank. If you try to get a balance transfer deal from a bank with the same owner as your current card, you’ll be immediately refused. You can’t transfer your debt from a Royal Bank of Scotland account to a NatWest card, for instance, as they’re both owned by the same group.
- Cards in a different name. Your new balance transfer card must be in the same name as your current card. If you apply with a different name, such as your partner’s name, you’ll be turned down.
Can’t get a balance transfer?
If you don’t qualify for an interest-free balance transfer on a credit card, look at debt consolidation loans to see if they can help you pay off your debt.
Your questions about balance transfers answered
Applying for balance transfers
Using balance transfers
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