Money matters can be tricky to understand, a lot of the time we’re bamboozled by words and phrases that don’t really mean a lot in normal speak – like ‘APR’ or ‘balance transfer’ . So, we thought we’d clarify a few things – here’s what you need to know about a balance transfer card.

What’s a balance transfer credit card?

If you’ve got an existing credit card debt that is charging you interest, then you may be able to move that amount onto a balance transfer card. These types of cards usually have low, or zero interest rates meaning that you can save money on your repayments – although there is usually a charge to transfer your balance to the card.

How do balance transfer cards work?

All you need to do is apply for a card that’s offering a balance transfer facility. If your application is successful, then you’ll have to move your existing balance over within a certain period of time – such as within 60 or 90 days of opening the account. Transfer times differ so make sure to check or you risk missing your chance to move the balance.

Once you’ve made the transfer, you will still need to pay off your debt each month as you would have done on your old card. The only difference, is that on your balance transfer card you’ll pay a lower rate of interest or none at all for an agreed time so you could pay off your debt quicker.

What should I look out for with a balance transfer card?

Most balance transfer cards will charge you a ‘transfer fee’ – this is usually a percentage of the amount you want to move over. Transfer fees can vary from zero to just over 3%, but the savings you can make with an interest free card could outweigh the charges.

Remember, if you carry out a balance transfer you must make the monthly repayments on time or you could lose the interest free period. Make sure you clear the debt within the interest free period too, because after that, it’ll convert back to a standard rate and you could be left paying the higher rate of interest again. Alternatively you could look for another balance transfer card.

How does a balance transfer affect your credit score?

Your credit score is produced from a number of different factors and transferring your credit card balance from one card to another is just one of them. When you apply for and obtain a new card to facilitate the balance transfer, you might see your credit rating take a temporary dip as you’ve taken on a new credit account. The good news is that this could be short lived and as long as you continue to pay this off, it could even improve your credit rating as your debt reduces.

Could a new card application be rejected?

Nobody likes rejection, but the short (and honest) answer, is yes.

As with any other credit or loan application, your credit score will be checked. Many credit card companies have strict criteria when assessing applicants for balance transfers and this is particularly the case where 0% interest for long periods is offered.

If your credit score isn’t great you might find that you’re turned down or not offered the best deals, so be wary of multiple rejections as they could leave a ‘footprint’ on your credit score. If you’re struggling to get credit, then use our guide to how to build your credit score.

How do I compare balance transfer cards?

There are lots of 0% balance transfer deals out there and we want you to find the right one for your needs, which why at comparethemarket.com, we make it really easy to find and compare credit cards. Just let us know what you’re after and we’ll do the rest; so, make your bank account happy and start comparing today.

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