Choosing a Balance Transfer Card

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If you have existing credit card debts which you can not afford to pay off in full, then you have come to the right place. You could save 1000s of pounds by reading our guide to Balance Transfer cards, so read on!

What is a Balance Transfer?

A Balance Transfer (BT) is the process of moving debt from an existing credit card to a new one. So why would you do that? Very simply, you would do that to reduce the cost of your debts, saving you 100s if not 1000s of pounds in the process. The credit card industry is very competitive, so card issuers are keen to steal business from their competitors. To do this, they offer deals to attract customers away from other lenders. One of the biggest enticements that they offer is the Balance Transfer card where they let you move an existing debt to their card and charge you a much lower interest rate than you are currently paying.

How much could I save?

This depends on your existing debts and what credit card offers are available at the time, but here is an example. If you have £10,000 of debt on a credit card with an interest rate of 18.9% APR and you move it to a new card that is offering 0% interest on balance transfers for 12 months, then you would save nearly £1400 in interest in one year!
(these calculations assume that there is a 3% BT fee payable on the new card and that you pay £200 off your bill each month). To work out exactly how much you would save, check for yourself using our Balance Transfer Calculator.

But What is the Catch?

There is no 'catch' as such. The lenders just hope that you will become profitable for them over time, but your job is to ensure that you use the deal to your advantage by reducing the cost of your debts. Although there is no catch, there are a couple of important points you need to know.

  • Most credit cards charge a fee for doing the BT - typically 2 to 3% of the balance you move. When working out how much you will save, don't forget to take this into account. One or two cards have no fee, a handful more have capped fees, but most now have uncapped fees.
  • Never make purchases on a BT card! This is very important. If you do make purchases on a BT card they will be charged at the normal purchase rate and you will get charged interest each and every month. Any payments you make go towards paying off the 0% BT debt and not the purchases, so you can not pay it off without paying off your BT debt too!
  • As with any credit card, you must continue to make your minimum monthly payments on time. Ideally you should use your 0% interest period as an opportunity to pay off your debts as quickly as possible, so pay as much as you can each month.
  • Making many credit card applications can have a negative impact on your credit score. For more details, please read our guide to Credit Scoring.
  • Make sure you know when the 0% offer period ends so that you can pay off your debt before the lender charges you interest.

How do I choose the right Balance Transfer Card?

To choose the right card, select which of the following best describes you and your situation.

I can pay off my credit card debt within 9 months

If you can pay off your debts in less than 9 months then you will have a great choice of cards. Try to choose one that has no Balance Transfer fee or choose one that has a capped fee. Check out the top two sections here

I can pay off my credit card in 9 to 14 months

If it will take you 9 to 14 months to pay off your debts, then you will probably have to pay an uncapped BT fee. Despite this, you will still make great savings by transferring your balance to another card. Check out our 0% balance transfer tables to find a 0% deal that is at least as long as your debts will take to pay off.

My debts will take longer than 14 months to pay off but I am happy to move money around to the best deals

How do you fancy becoming a tart? Someone who regularly moves debts around from one 0% credit card deal to another is known as a rate tart or card tart. It can be a great way of reducing the cost of your debts over a longer period of time, but does require some effort and care. Choose the cards from our table which have low BT fees and/or long 0% offer periods.

My debts will take longer than 14 months to pay off but I don't want to move my money regularly

In that case, choose a card that offers a low balance transfer rate until you pay off the balance. This is known as a Life of Balance (LOB) card. They typically offer BT rates in the region of 3.9% to 6.9% either for life, or for a period of 3 to 4 years. This is a good way to benefit from lower interest rates while minimising the amount of effort. However, it is more costly than using 0% cards. Choose an appropriate card from our Life of Balance card table.