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Balance Transfer FAQs
Although credit card companies have got hip to the so-called 'card tarts' and begun to impose fees for balance transfers, there are still significant savings to be made through strategic manoeuvring between cards, or cards and loans. You asked us the balance transfer questions, and we've answered them here.
What is a balance transfer?
The term refers to the process of moving a debt from one lender to another. You can make a balance transfer with a new credit card or loan, using it to pay off a loan with a higher interest rate.
How do I make a balance transfer?
Arrange the transfer with your new lender when you apply for your new credit card or loan. They will make it very easy for you. You can normally only take advantage of special low interest rates on balance transfers if you arrange them as soon as your application is accepted, but there are ‘anniversary’ deals available. These allow you to make another cheap balance transfer a year later.
What special deals can I get?
Some credit cards will offer an introductory low interest rate or even 0% APR on the amount you transfer for a specified amount of time. This is normally three, six, nine or twelve months, and can make your current debts much easier and quicker to pay off.
Why do lenders offer reduced rates for balance transfers?
An introductory balance transfer deal is usually used to tempt customers away from other lenders, where they might be paying a higher interest rate.
Are there any dangers to watch out for?
If you’re looking for a good deal on balance transfers, watch out for the interest rate you’ll pay on purchases, and look at the small print. When you make your monthly repayments, you might be paying off your balance transfer before your purchases. This means that the value of your purchases will build up lots of interest – for months or years – before you can start dealing with it.
If you’re thinking “that’s okay – I can use the card as a cheap way of paying off my current debt and just make sure I don’t use it for day-to-day purchases”, that’s a great idea. However, some lenders impose a ‘minimum spend’ limit as a condition of owning their cards. Check the small print carefully, or ask your lender whether this applies to your card.
Might I have to pay any fees?
There might be a transfer fee: this can depend on your lender, the amount you’re transferring, your interest-free period, and various other factors. Again, check the small print and make sure you’re getting the best card for your needs.
How do I find the right balance transfer credit card?
