Credit Card Guides

Balance transfer FAQs

Updated: Tuesday 29 November, 2011

By Martin Fagan

Although credit card companies have got wise to the so-called 'rate tarts' and now impose fees for balance transfersthere are still significant savings to be made through strategically manoeuvring your debts between cards, or between cards and loans.

You asked us the balance transfer questions, and we've answered them here.

• What is a balance transfer?
• How do I make a balance transfer?
• What special deals can I get?
• Why do lenders offer reduced rates for balance transfers?
• Are there any dangers to watch out for?
• Will I have to pay any fees?
• How do I find the right balance transfer credit card?

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.

Back to the top

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 (if you’re a good risk, they’ll want your business). 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.

Back to the top

What special deals can I get?

Some credit cards will offer an introductory low interest rate or even 0% balance transfer annual percentage rate (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.

Some cards also offer 0% deals for purchases alongside 0% balance transfer. These allow card users who have surfed debt to the 0% card enjoy 0% interest on further purchases for a set period.

Back to the top

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.

Back to the top

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.

Back to the top

Will I have to pay any fees?

Since credit card issuers realised certain types of consumers were forever shuffling their accumulating debts from one 0% card to another, they now levy fees for the privilege. There might be a transfer fee; this will 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.

Credit card companies usually charge around 3% of the balance you’re transferring and add this amount onto the debt. However, set against the prospect of paying interest of around 20% on your debt if you stay put, this could be a price worth paying.

Back to the top

How do I find the right balance transfer credit card?

The Creditchoices.co.uk 0% balance transfer best buy tables will tell you all you need to know about the credit available to you, and the best balance transfer deals currently on the market. For more information read the Creditchoices.co.uk 0% balance transfer guide.

Back to the top