Balance transfer credit cards can be used to simplify your credit card repayments and reduce the overall cost of borrowing.
By avoiding higher interest rates for a limited time, balance transfers with 0% interest offers give you breathing space to pay what you actually owe rather than the monthly interest. Other balance transfer cards might still have interest, but at a lower rate than what you’re currently paying. By moving your balance, not only could you save money, you could also get that debt-free feeling sooner.
Paying credit card bills with high interest rates is tough, because most of the monthly repayments go towards paying off the interest while the debt itself takes longer to repay. But with balance transfer credit cards, your account has 0% interest for a promotional period, so you can focus repayments on reducing the outstanding balance.
The 0% interest applies to all balance transfers you make to the account whilst you’re within the offer timeframe. But remember, interest rates may be charged on any purchases you make unless you have a balance transfer and purchase card with the same offer period, just check your offer for more details.
Clear the debt before the 0% interest period ends.
Always make at least the minimum repayments.
To fully benefit from a balance transfer, try and clear what you owe before the interest-free period ends, because after this time the card’s higher annual percentage rate (APR) will be applied to any remaining debt left on the account. You should always make at least the minimum repayments on time, otherwise you’ll incur a fee and/or lose the 0% interest offer on the balance transfer.
Try our Repayment Calculator to see how much you could save in time and interest by paying more than the minimum each month. This is especially useful if you don’t manage to clear the full balance before the 0% interest promotional period ends.
Don't get carried away. Avoid further borrowing until your current debts are under control.
Pay more than the minimum repayments.
If you have a large outstanding balance, even low interest rates can be costly. Move all the debt you can to a balance transfer credit card, but ensure the total is no more than 90% of its credit limit, and suddenly the same payments you were making will more effectively pay off a large credit card bill. By reducing, if not eliminating, your balance during the promotional period, you’ll be able to lower it with repayments that are affordable to you.
If you can afford it, pay off more than the minimum amount each month and you’ll bring your balance down more quickly. To find out more about potential causes of bad credit, you can read our article ‘What are the causes of bad credit?’
Check the limit on the card to see how much you can move.
Watch out for the handling fee - it's usually a percentage of the debt amount.
It can be tricky to manage repayments across multiple credit or store card accounts. If you choose to move the balance, watch out for any balance transfer fees. A one-off fee may apply for each balance transfer you make, so don’t forget to combine the cost of consolidating all your debts when finding the best balance transfer credit card. Our article How do I find the best balance transfer card? explains more.
Keep an eye on 0% period expiration dates.
Be aware of how your payments are used.
Balance transfers help manage existing debt, but you might still pay interest on future purchases. That is unless you get a balance transfer credit card that includes 0% interest on purchases. Keep an eye on when the interest-free periods end, as the 0% interest on purchases may not last as long as the 0% interest period on your balance transfer.
If you don’t have a 0% interest purchase offer included in your balance transfers deal, think about whether it’s worth avoiding using the card for cash withdrawals and purchases. Your repayments could be used to pay these off first, delaying your balance transfer repayment. The key here is to make sure other purchases don’t prevent you from paying off the balance you transferred before your interest-free period ends.
To help explain the benefits of balance transfer credit cards, consider the following example. If someone owes £1,500 (£1,000 on a low-rate card at 6.9% APR, plus £500 on a credit card at 34.9% APR) and they can afford to pay off £50 each month, how much time and money can they save by consolidating their bills?
Without taking steps to better manage their money, it would take three years and 10 months to become debt-free and the total cost of interest payments would be £340. By taking advantage of a 0% balance transfer offer for 30 months, they could pay off what they owe one year and four months earlier and avoiding paying any interest at all.
These example calculations don’t include the initial balance transfer fee. But at just 3.5% of the balance, the fee would amount to only £52.50. In some deals there is no balance transfer fee whatsoever.