What is a balance transfer credit card?

A balance transfer credit card lets you move the balance of one credit card to another one, often at a lower interest rate. It’s not always straightforward, so if you’re looking for more detail on how a balance transfer credit card works, we’re here to help you.

We’ve created a handy guide to answer your balance transfer related queries, as well as offering you some top tips for managing your payments.

What is a balance transfer credit card?

First things first: what exactly is a credit card balance transfer? And what is a 0% balance transfer credit card?

Well, a balance transfer involves moving outstanding debt from one credit card to another card from a different provider (usually one which charges less interest).

What is a 0% balance transfer credit card?

Some providers offer what’s called a 0% balance transfer credit card. This means that there’s a limited 0% interest period, offering people an opportunity to avoid interest building up, and subsequently pay off their debts faster.

However, bear in mind that if you have a weaker credit score, the 0% interest offer may be for a more limited duration.

The amount you can transfer from card to card differs. And, if you don’t clear your debt within the limited 0% offer period, you’ll be charged interest on your remaining balance – and this interest is often quite a bit higher than standard credit card interest fees.

Another thing to highlight is that you’ll often be required to pay a one-off transfer fee on the amount of money you’re moving (which will be added to your overall balance). This might be a proportion of the money you’re moving, or a set fee, depending on your provider.

There are various providers, and it’s important to select one which suits your priorities and financial situation. Here are a couple of options you might come across:

• Long 0% balance transfers: these offer 0% interest for a longer period (up to 36 months in some cases) but they often come with higher transfer fees.

• Short 0% balance transfers: this is an option if you’re hoping to clear your debt fast with high monthly payments. Transfer fees are less, but you’ll have a shorter period to pay off your balance.

Why use a balance transfer credit card?

There are lots of options out there for managing debt, and a balance transfer card is just one option. Here are some of the reasons why transferring your balance might be right for you.

Take control of your debts

If you have existing credit cards with high interest rates, a balance transfer can help you take better control of your debt. As mentioned, 0% interest rates mean you’ll be able to make a dent in what you owe without interest becoming unmanageable.

Manageable payments

Your payments will be smaller, and you’ll be able to pay back what you owe much faster without interest constantly being added. Some people choose to consolidate several balances onto a single card, to help manage all of their outstanding balances in one place – but bear in mind, this might involve multiple transfer fees depending on your card’s terms.

It can help your credit

Another benefit of a balance transfer is that in the long run, it might help to better your credit score. If you establish a track record of regular, consistent payments, you may eventually benefit from a boosted score.

What to consider before you apply

While it may seem like a great option for managing your credit card balance, there are multiple things to consider before making an application for a balance transfer card, and we’re here to talk you through them.

First, bear in mind that if you have a poor credit history, you might not be accepted at all. There are various eligibility checkers online, which do a ‘soft’ credit check, which you can use to check the likelihood of you being approved.

Doing this before you apply for a new card is important, as it can help you avoid damaging your score further. For more information about how this works, check out our guide to how credit checks work.

You can also check the health of your credit score by requesting a free check from one of the three main credit reference agencies:

• Experian

• Equifax

• TransUnion

Also, before applying for a credit transfer, make sure you’re aware of the fine print (such as exactly how long the offer stands for). For instance, are you able to repay what you owe in the 0% interest timeframe? And bear in mind that after the offer period ends, the interest will usually jump up to a much higher rate.

Equally, ensure you’re aware of any transfer fees. These usually stand at around 3% of the amount you’re transferring. So, consider whether it would be cheaper to pay this or leave your balance as it is.

It’s also essential you’re committed to making prompt, well-timed payments. Missing one or going over your credit limit could mean you may have to start paying interest.

How to transfer a credit card balance

So, if you’re wondering how to balance transfer onto a credit card, let’s dive into it.

First, as mentioned, take some time to consider which provider offers the best deal for you. A tip is to look for cards with a 0% transfer period which is long enough for you to pay off your debt.

Once you’ve settled on a provider, the next step is to apply and request the transfer. You can either do this during your application, or after you’ve been accepted. Once you’ve been accepted and sent your terms, you’ll usually send the money in the form of a bank transfer to your new credit card.

How long does a credit card balance transfer take?

It will vary based on your provider, and how long it takes to have your details confirmed. You might need to wait for your card to arrive in the post, or for your new account details to be sent to you, then transfer the outstanding balance onto the card. In all, the transfer is usually completed over 5-7 days, although with some providers it can take weeks rather than days.

Top tips for managing your payments

Once the transfer is complete, it’s important to keep on top of payments and make the most of lower interest rates. Here are a couple of handy tips for making prompt, timely payments:

• Set up reminders: setting up reminders (perhaps on your phone), or ensuring you have a direct debit set up is key to making your payments on time.

• Effective monthly budgeting is also key. If you budget properly, you’ll be able to ensure you have the necessary funds to meet your re-payment deadlines comfortably.

If you’re looking to reduce interest to pay off your debts, or combine various debts into one for manageability, a balance transfer card might work well for you. Just remember to make sure you’re aware of the terms and conditions before applying, and commit to making prompt payments if you are accepted.

For more insights, why not head over to the Moneyboat blog? There you’ll find guides on various topics such as simple ways to save money as well as different payment methods in the UK!

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