balance transfer credit cards

How Do Balance Transfer Credit Cards Work?

Balance transfer credit cards are popular with consumers and there are a number of providers offering various transfer deals. We discuss how these cards work and what the advantages are.

What is a balance transfer?

Put simply, a balance transfer is when you move the outstanding debt from your existing credit card over to a new credit card. Usually, this can only be done between different credit card providers i.e. you normally cannot transfer to a different card that is provided by the same company or group, it has to be a completely new card provider.

Why would you want to do a balance transfer?

Many companies often run introductory offers where you will pay 0% interest on the outstanding debt that you have transferred over. The advantage of course is that where you may have been paying hefty interest charges on this debt with your old card, you are now paying no interest.

However, these interest free balance transfer offers only last for a specified period e.g. 12 months, 18 months etc. After this introductory period ends, any outstanding amount will automatically be subject to normal interest rate charges.

Another thing to bear in mind is that usually these offers apply when you make the balance transfer within 90 days (3 months) of your card account opening.

How much can you transfer over?

Generally speaking, credit card companies usually allow you to transfer over around 90% - 95% of the available credit limit on your new card. So for example, on a card with a £3,500 limit, you could transfer over around £3,150 or so. You should always check the terms and conditions with the card provider on how much you can transfer over.

Do you get charged for making a balance transfer?

It depends on the individual card offer. Many credit cards will charge you a fee based on a percentage of the amount being transferred e.g. 2% or 3%. However, some balance transfer credit cards may offer a 0% transfer fee depending on the promotion they are running.

How do you make a balance transfer?

The process of transferring the amount is very straightforward and can often be done either by telephone, using the online website or even using an app if available. You would need to log into your account and provide the details of the card from where you are transferring the balance.

You may also be able to complete the transfer details during the card application process. The whole process is usually done within 24 hours of account opening.

Monthly repayments

You should always ensure that you make the minimum repayment each month. Failing to do so make result in your 0% balance transfer offer becoming invalid and losing the interest fee promotion. Your debt would then be subject to the normal interest rates.

In addition, you should avoid going over your credit limit as this may also affect your 0% offer and you may incur further charges.

How to compare balance transfer cards

  • Use our credit card comparison table and select to compare 0% balance transfer credit cards menu tab option.
  • Compare the 0% period offers between cards
  • Check the normal APR rate
  • Compare other features and benefits offered
  • Consider checking your current credit score before applying
  • Use the apply button next to the card on the comparison table
  • On the card provider’s website, check the additional terms such as the transfer fee charges

Balance transfer credit cards can be a great way to avoid paying costly interest charges on an outstanding debt.  Transferring the balance to a new card can give you some breathing space and help you manage your finance better.

However, you should ensure you maintain your regular repayments and pay off the whole amount before the introductory period ends and interest kicks in.