Credit card balance transfers explained

A balance transfer card is designed to let you consolidate several different debts (such as store cards, other credit cards, and sometimes overdrafts) by transferring them onto just one card. This can make it easier and potentially cheaper to clear your debts.

7 min read
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How to transfer your credit card balance

Once you’ve received your new card, transferring these debts onto a balance transfer card is really simple.

How to transfer your debt:

  1. gather the necessary information about the cards you’re moving the debt from and the amount you’d like to transfer. Remember, the maximum amount you can transfer depends on the credit limit you have available on your new card
  2. contact your new card provider (the one where your debt is moving to) to tell them you’d like the transfer the balance(s) with the information you gathered
  3. done! The new card provider will contact your old card provider(s) and move the balance for you. This can sometimes take a week or two
  4. once this has been processed, be sure to focus on paying off as much as you can within the interest-free period (if there is one). Simply pay off the balance in monthly instalments, just like you would with a regular credit card

    Because you only have this one bill to pay, rather than several, this can make managing your finances easier. You should always consider your existing interest rates when deciding to do this, as there’s a chance you could end up paying more in the long run.

    Some balance transfer cards allow you to spend as well as transfer your balances, so this might be an option if you’re keen on both features. Just take care that your spending doesn’t make your monthly bill unmanageable.

    Should I get a balance transfer card?

    Juggling multiple store cards, credit cards and an overdraft can leave you easily confused, making you at risk of missing a payment. It’s often easier to consolidate these debts into one single account, with one single monthly payment, by getting a balance transfer card. This involves you opening a new account and transferring all or most of your current credit accounts over to it. 

    It’s worth remembering that applying follows the same principles as any normal credit card application, so it pays to research into what accounts you may be eligible for before applying.

    Unlike debt management plans, this is a good option for people whose debts have yet to cause them to miss payments or default. If you’ve already been impacted by missed payments, a debt management plan might be a more suitable option.

    What does it cost me? 

    Balance transfer cards can potentially help you save money, as they can sometimes offer you low interest rates (or even 0%) as an introductory offer for a set period of time. To figure out if it will save you money, it’s best to work out how much interest you are currently paying on all your cards and compare that to the total figure a balance transfer card would charge you. 

    Introductory offers only last for a set period of time too, usually between 3 and 29 months. After this point, the interest rate will increase, so it makes sense to pay off as much as you can afford to whilst the rate is low. Some providers will also issue a transfer fee, so it’s important you include that fee in all the calculations you are making about total costs. 

    What to look out for

    The same rules apply with any form of borrowing; make sure you stay on top of all your repayments and pay at least the minimum every month, or your credit score could be damaged. With balance transfer cards this can have extra consequences, as lenders may end the introductory offer on account of missed payments, costing you more in interest.

    Whilst your total payments should be lower than before, it’s likely that this single payment will be higher than any of the other payments you are used to. So make sure that you have enough money in your account for this (easy to forget for someone who is paid weekly).

    Another thing to be wary of is spending on the card. Any extra spending could be subject to a higher interest rate than balance transfers, and increasing your debts is never consistent with a strategy to get rid of them.

    It could be a good idea to close down the cards you’ve transferred the balance from to avoid temptation.

    If you’re trying to clear the debt in full, work out the exact cost of doing so within the timeframe of the offer (plus the interest you would be charged), and then divide by the amount of months the offer is on for:

    A balance transfer of £1000 with a 3% transfer fee (and 0% interest rate for 12 months) will cost £1030 to settle within a year, which could be done by 12 monthly payments of £85.83.

    Setting up a direct debit for that amount would then clear the total debt, rather than simply paying the minimum amount each month which could take years to clear.

    If you don’t pay off the debt in full by the end of the introductory offer, you can look to transfer to another provider with a similar offer on. You may get a better deal for longer if your credit score has improved, but there is no guarantee (and you may not be accepted).

    Also be wary of applying for lots of cards in a short space of time, as this can impact negatively on your score. Shop around for the best one for you beforehand, and that will most likely accept your application, so that you can cut down on the number of deals you apply for. 

    How to manage your balance transfer card responsibly

    • stay on top of your repayments - as with any form of borrowing, it’s important to stay on top of your repayments and pay at least the agreed minimum, or your credit rating could be affected. This could make it difficult for you to borrow in the future, and may even result in you incurring penalties and charges from your lender. Your lender may also decide to end the low-interest rate offer you’ve been enjoying early
    • set up a direct debit - A good way to keep on top of your repayments is to work out how much you need to pay each month to clear the balance by the end of the low-interest period and then set up a Direct Debit for this amount – or as close to this as you can afford. This way you don’t even have to think about it
    • be wary of spending on your card - another thing to be cautious of when taking out a balance transfer card is spending. Once you have shifted the balances from your other cards on to this one, it may be all too tempting to start spending on them again. However, this will mean you’re adding to your debt and you could end up in the same situation you were trying to get out of, with too many lines of active credit that you find difficult to manage

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