What are balance transfer credit cards?

Understanding balance transfer credit cards

Balance transfer cards are designed to help you move debt from one or more existing credit cards onto a new card, ideally with a low or 0% introductory interest rate. This gives you a break on interest for a set time, usually between 6 to 30 months, so you can focus on reducing the balance.

Just a heads up: once the low-interest promotional period ends, any remaining balance will start being charged at the APR set when you first opened a credit card account.

The representative APR is the Annual Percentage Rate of charge. You can use it to compare the overall cost of credit between different lenders.

Key features of balance transfer credit cards

If you’re thinking about getting a balance transfer card, here are some important features to consider:

• Interest rates: Most balance transfer cards offer a promotional or introductory low or 0% interest rate for a limited time (typically between 6 and 30 months). After this period, the card will change to a set APR that applies to any remaining balance.
• Transfer fees: Depending on your credit card provider and the new balance transfer card you’re applying for, a balance transfer fee is usually charged when you move your balance from your old card. It is typically 3-5% of the amount you want to transfer.
• Credit limit: The balance transfer card will have a credit limit that determines how much debt you can transfer onto your new card.
• Eligibility: As with any credit card or loan product, approval for a balance transfer card will depend on your credit score and financial history. This can also impact your credit limit and the APR after the promotional period ends.

Benefits of balance transfer credit cards

Balance transfer cards can be great for consolidating debt and staying on top of finances. Here’s why:

• Reduced interest: Transferring existing debt to a low or 0% interest balance transfer card means you can avoid building high interest on your balance while you work to pay it off.
• Debt consolidation: Some balance transfer credit cards allow you to transfer multiple sources of credit card debt into one central place, which makes it easier to manage your outstanding balance as you pay it off.
• Faster debt settlement: With low or 0% interest on your balance, more of each repayment will go towards reducing your overall debt, which means you can pay off your credit card more quickly.

Things to think about before applying

Before applying, take a moment to think about how a balance transfer card will fit into your financial plan. If you’re unsure, our eligibility checker can help you figure out what balance transfer options might work best for you.

How to use balance transfer credit cards effectively

To get the most out of a balance transfer card, start with a clear plan:

• Set a repayment goal:  Based on your total balance and the length of your promotional period, come up with a plan for how much you will repay each month so you can try to clear your balance before the low interest rate ends.
• Avoid new debt: While you pay back your balance transfer card, try to avoid accumulating new debt on additional sources of credit. Spending on your balance transfer card will often be subject to additional fees, so it’s best to focus on making repayments and keeping other credit spend to a minimum.
• Track your progress: Regularly check your balance to stay on track. Adjust your plan as needed to hit your goal before the introductory period ends. If your circumstances change, be sure to adjust the plan accordingly, with the aim of clearing your balance before the promotional interest period ends. Remember to set up a Direct Debit so you don’t miss a payment.

Balance transfer cards can be a helpful tool when trying to manage, consolidate, and reduce credit card debt. Before determining which is the best option for you, it’s important to fully understand the different components of a balance transfer card and work out how the promotional interest period aligns with your affordability and repayment strategy. And if you’re not sure what’s right for you, you can speak to a Money Confidence Expert who can give you an information on the options available.

18+ and UK resident only. Lending is subject to approval. Credit limits, promotional periods and interest rates will vary based on your individual circumstances.

To remain eligible for promotional rates you must stay within your credit limit and make your payments on time each month.

Representative example Purchase rate 24.95% p.a. (variable) Representative 24.9% APR (variable) Based on borrowing £1,200 over 12 months. Credit limits, promotional periods and interest rates will vary based on your individual circumstances.

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