If you've got credit card debt you're trying to pay off, a balance transfer might be what you're looking for. But there are a few things you should know before you get started.
The timeframe for a balance transfer can vary. Once your application is approved, it could take between one and five working days to complete the transfer. However, in some cases, it might take several weeks.
In the meantime, keep making any payments to your old card until the new one is up and running.
What is a balance transfer?
A balance transfer is the transfer of credit card debt from one card provider to another.
Balance transfers are great if you want to consolidate multiple cards resulting in a single manageable payment and save interest.
Some providers offer balance transfer cards with a 0% interest-free period. So, if you transfer debt from a high-interest card, then you could save some money. The aim should be to pay off any debt before the 0% interest period ends. If you don't, you’ll start to incur interest charges. These interest charges might be higher than the card they originally came from.
There's usually a fee to transfer balances, which can be up to 4% of the balance transferred in some cases. So, if you transfer £2,000, you'd pay a fee of up to £80. While you’re likely to save more money on interest, you should bear this in mind, especially if you haven't got much debt to transfer.
If you use the balance transfer card for spending, the 0% interest won't apply to your purchases. Make sure you check the terms and conditions carefully before going ahead with an application. There are no limits to the number of balances you can transfer, but each time you apply for a new card, it could affect your credit score.
How can I get a balance transfer?
If you’re thinking of applying, make sure you use an eligibility checker first. Eligibility checkers perform a basic soft search of your credit file. Soft searches won't leave a mark so they won't affect your credit score. Balance transfer cards with terms such as long periods of 0% interest generally require you to have a good credit score.
If you make several applications in a short space of time, it could affect your credit score. There are some balance transfer cards aimed at those with bad credit, but the 0% interest period may be shorter. Once it ends, the interest rate is likely to be high. You should only consider these if you know you can pay the debt off within the interest-free period.
Generally, you won’t be able to transfer cards within the same banking group. For example, transferring between cards in the Natwest group, such as Royal Bank of Scotland and Ulster bank, aren't allowed.
Read on about how to improve your credit score.
Should I get a balance transfer?
For any credit card debt, a balance transfer may save you paying interest. It may also make payments easier to manage if you have multiple. It's essential to be sure that you'll be able to pay the transferred debt off before a higher rate of interest kicks in.
Use this balance transfer calculator to see how much you could save by transferring a balance to a 0% interest card. The calculator takes the transfer fee into account and assumes that you’ll pay off the entire debt within the interest-free period. This should only be used as a guide. If you don’t make your repayments on time or pay off your debt in the interest-free period, you’ll be charged extra fees.
Also, transferring a balance from one credit card to another won't close the original account. It will remain open, so you should contact the provider to close the account if you want to avoid spending on it again.
Read about how to take control of your debts.
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