What is a 0% balance transfer credit card?
A 0% balance transfer credit card could help you pay off your outstanding credit card debt by moving the balance from one card (or multiple cards) where you might be paying interest, to a new one at a 0% interest rate for a set period of time. This could help you reduce the interest you have to pay, so you can pay off the outstanding balance quicker.
At the very least, you’ll need to pay the minimum repayment set each month by the lender. If you miss a payment, you’ll be required to pay a penalty fee and may lose your 0% rate and any other promotional deals offered with the card.
At a glance
✓ Manage credit card debt with interest-free payments
We understand that the outbreak of coronavirus (COVID-19) has caused financial difficulty for some of you. If you have a credit card and you’re worried about making repayments due to coronavirus, we’re here to help you understand the options available.Find out more
How long is the 0% transfer period?
That will depend on the deal you choose. Typically, 0% interest free periods can range from six months up to two years or more. For example, if you choose a 0% introductory deal for 20 months, you won’t pay any interest on your balance for the first 20 months. The longer the period, the more time you’ll have to pay off your balance without being charged interest.
The idea of a 0% balance transfer card is to pay off the full balance before the interest free period ends. So, before you start looking at cards, work out how long you’ll need to do that.
Let’s say you have £1,000 on your current credit card and you can afford to pay back £50 a month. You’ll need to look for a balance transfer card with a 0% introductory period of at least 20 months. You’ll also need to factor in the one-off transfer fee, if there is one. It’s usually worked out as a percentage of the balance you’re transferring, often up to 3%.
What happens when the 0% interest-free period ends?
Once your interest-free period ends, a higher rate of interest may be applied to any outstanding balance, so it’s important that you clear the balance before your interest-free period ends. If you’re struggling to do this, then at least make the minimum payment each month.
If you can’t pay off the full balance within the 0% period, you might want to switch again before it ends. Just make sure you give yourself plenty of time to find a new card before the higher interest rate kicks in.
How to find the best balance transfer credit cards
The best balance transfer credit card deal depends on your current personal circumstances, including your credit rating.
When you’re looking for a credit card with the option to balance transfer, it’s a good idea to consider the following:
- the length of the 0% period
- the transfer fee
- the typical APR after the 0% period has ended - some people can be offered a higher rate than advertised.
- if there’s a monthly or annual fee for having the card
Typically, balance transfer cards with longer 0% periods have higher transfer fees. If you think you can pay off your balance in a short period of time, you might benefit from choosing a card with a shorter 0% period because the transfer fee will likely be less.
To find out which cards you’re likely to be accepted for before you apply, why not try our credit card eligibility checker? It’s a way of seeing what deals you might be eligible for, without impacting your credit score.
How do you do a credit card balance transfer?
1. Look at your current credit card debt
Before you apply for a balance transfer credit card, check how much credit card debt you have and which cards you’re paying the highest interest on. Then think about how much time you need to pay off the debt. This will help you choose a 0% deal that’s right for you.
2. Compare your options
Now you can start comparing your options. There’s a lot of 0% balance transfer deals out there, each with different features, so spend time comparing.
Here are some things to look out for:
- The length of the 0% introductory period – this can be anywhere between six months to over 2 years. If you have a fair bit of credit card debt to transfer over, a longer period will give you more time to pay it off without being charged interest.
- The interest rate you’ll be charged once the 0% introductory period ends – this can be high, so you’ll need to factor it in if you don’t think you’ll be able to pay off the balance in full before the interest-free period ends.
- Balance transfer limit – check if there’s a limit on how much you can transfer over.
- Transfer fee – are you planning to do a one-off transfer or several transfers? Most cards charge a percentage of the amount you want to transfer – typically between 1% to 3%. A few cards don’t charge a transfer fee, so you might want to consider one of these if you’re planning several transfers during the 0% period.
- Credit score needed – to qualify for most deals, you’ll need to have a good credit score.
3. Apply for a 0% balance transfer card
When you’ve found a deal that suits your needs, you can apply for your new 0% balance transfer credit card. If you’re accepted, you’ll need to give the new credit card provider details of the card you want to transfer your balance from. They’ll do the transfer for you and let you know when it’s complete. Remember to keep making repayments on your existing card until you know the balance has been transferred.
4. Start paying off your debt
Once the balance transfer is complete, you can start paying off your debt. To make the most of the 0% introductory period, try to pay off the full balance before it ends.
When should I use a balance transfer credit card?
You may be thinking about transferring a balance for a number of reasons. Perhaps you want to lower your current rate of interest. Or maybe your current credit card charges a high fee for late or missed payments. Some people find it less of a hassle to have all their credit card debt in one place, so there’s just one monthly payment to remember.
There could also be circumstances where it doesn’t make sense to transfer your balance to another credit card. For example, if such a transfer wouldn’t make much difference to the overall time you’d spend paying off the debt or the total amount you’d pay.
What are the pros of a 0% balance transfer card?
You can transfer an outstanding balance from a credit card that’s charging a high rate of interest, allowing you to pay off the debt with 0% interest.
If you transfer your balance from several cards, you’ll only have one card to deal with, which should make setting up and keeping track of payments easier.
What are the cons of a 0% balance transfer card?
You may have to pay a fee for transferring your balance. However, some cards do offer 0% on fees. And some offer cashback, which might be bigger than the fee, so you won’t necessarily lose money when you transfer your debt.
If you transfer an outstanding balance to a 0% card, then you must make your monthly minimum repayments on time. If you don’t, you could lose the interest-free terms. Failing to make the minimum repayments could also have a negative impact on your credit score
If you don’t clear the total debt within the interest-free period, you’re likely to be charged a high rate of interest on the outstanding balance.
Also be aware that if you use the card to buy something, you will be charged interest.
Frequently asked questions
How much can you balance transfer on a credit card?
In theory, you could transfer anything from around £100 to £10,000, with the average amount in the region of £3,000 to £5,000. Most credit cards allow you to transfer around 90% of your total credit limit.
Remember that most credit card providers charge a balance transfer fee of around 1% to 3% – some as low as 0.5% and some as high as 5%. This should show up as a separate amount on your first credit card statement.
What is the balance transfer fee?
The balance transfer fee is the amount you’ll be charged for making a transfer. This is usually a percentage of the amount you’re transferring. For example, if you choose a card that charges a 3% balance transfer fee and you transfer over £1,000, your balance transfer fee would be £30. The cost of the fee is then added to your credit card balance. So, instead of owing £1,000, you’ll owe £1,030.
Balance transfer fees typically range between 1% and 3%, although there are a few cards with no transfer fee at all. Some providers also charge a set fee, instead of a percentage, if you’re transferring over a small balance.
What will my credit limit be?
When you apply for a new balance transfer credit card, it’s likely that the provider will tell you what your maximum credit limit will be before they do a hard credit check.
The amount of credit you’re offered depends on your financial situation. Deciding factors will include:
- your credit history
- your income
- how much debt you have in relation to your income
- your repayment history.
Once your card is active you can also find your credit limit by logging into your online account or app, phoning your provider or by looking at a statement.
If you pay off your balance on time, your provider might automatically raise your credit limit after a few months. But if you miss a repayment, go over the limit or don’t use your card much, they could also decide to lower your credit limit.
Just be aware that if you go over your credit limit, you’ll likely be charged a penalty fee and you might even lose the 0% introductory offer.
Why is it important to check the APR?
The APR, or Annual Percentage Rate, is one way to compare how much a credit card will cost in the long term, once the interest-free period ends. It takes into account the interest rate, plus any other standard charges, based on a credit limit of £1,200.
For example, if the APR on a card is 20% a year and you spend £1,000, the interest you’ll pay would be £200 (or slightly less as you’ll be making regular monthly payments). That means you’d end up paying back £1,200 in total.
Some 0% balance transfer credit cards may also offer you 0% on any purchases you make. Remember to check exactly how long the offer lasts and whether any terms and conditions apply.
What does the 0% rate cover?
It’s important to check what the 0% rate covers before applying for a balance transfer credit card. Many balance transfer deals only offer a 0% introductory period for balance transfers, not purchases. This means you could be charged a high interest rate for any purchases you make with the card.
If you also want to use your card for spending, there are credit cards that offer an interest free period for both [balance transfers and purchases. Just be aware that these combined cards typically charge a higher transfer fee and the 0% period for balance transfers and purchases isn’t always for the same length of time.
How long will a balance transfer take?
Thanks to faster electronic payment processes, an online balance transfer to a new card can usually be completed in a couple of days. However, some may take up to two weeks or more, depending on the banks involved.
Can I transfer a balance from a different provider?
Yes – in fact you wouldn’t be able to transfer a balance to a 0% card with the same provider, as banks don’t allow transfers from cards in the same group.
If you’re looking to consolidate your debt, you can usually transfer more than one balance at the same time on to one single card, provided you don’t go over your limit. When you apply for a new card, there should be an option to transfer debts from other cards.
Can I get a balance transfer credit card with bad credit?
It can be difficult to get a balance transfer card if you have a low or poor credit rating. The best 0% deals that last for more than 20 months are for those with the best credit scores.
However, don’t despair if you have bad credit as there are balance transfer deals that are aimed specifically at people with less than perfect credit scores. The main thing to watch out for with these is that once the introductory 0% period ends, you’ll start paying an extremely high rate of interest if you haven’t cleared your balance by then.
If you don’t think you can pay off your debt that quickly, a credit card for bad credit may be a more suitable option to help you rebuild your credit score.
If you’re struggling to make your credit card payments, speak to your credit card provider who may be able to help.
Do credit card balance transfers affect your credit score?
Your credit score is determined by lots of different factors. Even making an application to transfer credit can influence your score. Once your application for a balance transfer card is approved, your credit score might initially go down because you’re taking on more credit. But as long as you make your minimum repayments on time, it should improve.
What should I do with my old credit card?
Once you’ve moved the debt over to your new balance transfer credit card, you can decide whether to keep or cancel your old card.
If you decide to cancel your credit card, contact your credit card provider to let them know as they’ll need to close your account. Once that’s done, you should destroy the card.
Just be aware that cancelling a credit card might affect your credit rating. That’s because if you cancel a card but have outstanding balances on other cards, you’ll be using more of the overall credit available to you. The amount of available credit you have each month is called credit utilisation.
If you decide to keep your card but no longer use the credit available on it, this could improve your credit score. However, if you’re tempted to start using your old card and are worried about getting into debt again, it might be better to cancel it.
Where can I compare 0% balance transfer credit cards?
How much does a credit card balance transfer cost?
The fee for a balance transfer is a percentage of the amount you’re transferring, so the cost will depend on how much you want to transfer.
What do I need to get a quote?
When you compare 0% balance transfer cards with us, it’s a good idea to have some basic information to hand, including:
- the current balance you’d like to transfer
- your ideal monthly repayment
- the transfer fee you’d be happy with
- if you’d be happy to pay an annual fee on your new credit card.
From the Money team
What our expert says...
“A combined balance transfer and purchase credit card can be an effective way to reduce your debt and manage your spending on one single card. By using our credit card eligibility checker, you can find out which cards you’re likely to be accepted for before you make your application – and it won’t harm your credit score.”
Why use Compare the Market?
We compare credit cards from leading providers
Find out what credit cards you could be eligible for in under 1 minute**
93.8% of users would recommend Compare the Market to friends or family***
**On average it can take less than 1 minute to complete a credit card eligibility check through Compare the Market based on data in January 2021.
***For the period 1st September to 30th November 2020, 12,477 people responded to the recommend question. 11,706 responded with a score of 6 or above, therefore 93.8% are likely to recommend.