What is a balance transfer credit card?

A balance transfer credit card lets you move the balance of one credit card to another one, often at a lower interest rate. It’s not always straightforward though, so we’re here to help if you’re looking for more detail on how a balance transfer credit card works!

We’ll explore the basics of balance transfers, what to consider before you get one, how long it takes for a balance transfer to go through, and offer you some top tips for managing your payments.

In this guide:

• What is a balance transfer credit card?
• What is a 0% balance transfer credit card
• How does a balance transfer credit card work?
• Benefits of a balance transfer credit card
• What to consider before you apply
• How to transfer a credit card balance
• Top tips for managing your repayments
• Explore more insights and tools

What is a balance transfer credit card?

A balance transfer credit card lets you move outstanding debt from one or more credit cards to another card with a different provider. Balance transfer credit cards often offer low, promotional interest rates, making paying back your credit balance more affordable.

When you use a balance transfer credit card, you may be charged a balance transfer fee. This is often a percentage of the money you’re moving across, which will add to your total balance on the new card.

What is a 0% balance transfer credit card?

Some providers may offer what’s called a 0% balance transfer credit card. This means that there’s a limited 0% interest period, offering you the chance to avoid paying interest and repay your debt faster.

However, promotional offers such as 0% interest are often dependent on your credit history and creditworthiness. If you have a weaker credit score, you may be offered a shorter promotional window. The amount you can transfer can also vary depending on your eligibility.

Various providers offer 0% balance transfer credit cards, and it’s important to find one that suits your priorities and financial situation. Here are a couple of options you might come across:

• Long 0% balance transfers: These credit cards can offer 0% interest for longer periods (up to 36 months in some cases) but they often come with higher transfer fees.
• Short 0% balance transfers: This is an option if you’re hoping to clear your debt quickly with high monthly payments. Transfer fees are often less, but you’ll have a shorter period to pay off your balance without interest.

For more insights on interest rates and how they work, explore our guide on interest rates explained.

How does a balance transfer credit card work?

Balance transfer credit cards work by transferring or consolidating existing credit card balances to a card with a new provider. You’ll then pay off the balance on your new balance transfer card instead of your original credit card provider(s).

1. Transfer your credit card balances: Move one or more credit card balances to your new balance transfer card, paying it back with a single monthly repayment.
2. Unlock a limited promotional rate: As you repay the balance on your balance transfer card, you’ll often benefit from a limited 0% offer period – pausing interest and saving you money for six, 12, 24 or up to 36 months.
3. Promotional rate expires: Once the promotional interest rate ends, you’ll be charged interest on the remaining balance. This interest rate may be higher than standard credit card interest fees, so it’s often a good idea to pay off your debt during the low-interest period if you can.

Balance transfer card example

Here’s an example of how this might look:

• You have £3,000 on a credit card and apply for a 0% balance transfer credit card, which offers 20 months at 0% interest and a transfer fee of 2%.
• Your original balance is transferred to the balance transfer credit card, including the 2% fee, which makes your total balance £3,060.
• Your original credit card is closed, and you’ll have up to 20 months to pay off the £3,060 balance interest-free.
• To clear the debt and avoid paying the standard interest rate (once the promotional offer ends), you’ll need to pay £153 per month for 20 months.

Benefits of a balance transfer credit card

There are lots of options out there for managing debt, and a balance transfer card is just one option. Follow on as we highlight some of the potential benefits and why transferring your balance could be right for you.

Take control of your debts

If you have existing credit cards with high interest rates, a balance transfer can help you take better control of your debt. As mentioned, 0% interest rates mean you’ll be able to make a dent in what you owe without interest becoming unmanageable.

Learn more about alternative methods of paying off debt with our guide to the debt snowball method.

Manageable payments

A balance transfer credit card can combine multiple credit card repayments with different interest rates to one single monthly payment at a lower interest rate. Depending on your balance, paying this way could help make repayments smaller or more affordable. You’ll also be able to pay back what you owe much faster without interest.

Some people also find that consolidating several balances onto a single credit card can help simplify and manage all their outstanding balances in one place.

It can help improve your credit

Another potential benefit of a balance transfer is that in the long run, it might help to improve your credit score. If you establish a healthy record of regular, consistent repayments, you may be able to boost your score and show future lenders that you’re a reliable borrower.

What to consider before you apply

While it may seem like a great option for managing your credit card balance, there are various other factors to consider before applying for a balance transfer card. Let’s go through them below:

Check your eligibility first

Your credit history and affordability can influence how likely you are to be accepted for a balance transfer credit card, and at what rate and terms. There are various free eligibility checkers online you can use to complete a ‘soft’ credit check, which you can use to assess your chances of being approved.

That way, when it comes to completing a ‘hard’ credit check when you apply, you can help reduce the risk of rejection. Hard credit inquiries can also temporarily reduce your credit score, so it’s important to be prepared and only apply if you’re eligible. For more information about how this works, check out our guide on how credit checks work.

You can also check your credit score by requesting a free check from one of the three main credit reference agencies:

• Experian
• Equifax
• TransUnion

Read the terms and conditions

Before applying for a credit transfer, make sure you understand the fine print, including how long the offer stands for. For instance, are you able to repay what you owe within the 0% interest period? Interest will usually jump up to a much higher rate after the offer period ends.

While balance transfer cards may offer 0% interest rates, they often have a higher standard purchasing rate than other credit cards too. This means you may be charged interest if you use it for everyday spending. So, it’s important to understand the associated fees before you consider using it.

There may be other 0% interest credit cards available that offer better purchasing rates for regular spending than a balance transfer credit card. For more on this, head to our 0% interest credit card guide.

Check for balance transfer fees

You’ll often be required to pay a one-off transfer fee on the amount of money you’re moving. These are often around 3% of the amount you’re transferring, or they could be a set fee, depending on your provider.

If you’re planning to combine multiple credit cards onto one balance transfer card, you may be charged for each credit card balance. So, consider whether it would be cheaper to pay back your credit balance this way or leave your credit card balances as they are.

Make sure you can pay the minimum monthly repayment

It’s essential that you commit to repaying at least the minimum repayment amount. Missing one or going over your credit limit could mean losing the promotion rate. This means you may have to start paying a higher rate of interest.

Missing credit card payments can also damage your credit report. For more information on how long missed payments stay on your credit file, explore our guide.

Consider the minimum and maximum balance

While terms can vary, the minimum balance you can transfer is often around £100. The maximum balance depends on your eligibility, though you can often transfer up to 93% of your credit limit.

How to transfer a credit card balance

So, if you’re wondering how to balance transfer onto a credit card, let’s dive into it:

1. Compare credit card offers: Take some time to consider which provider offers the best deal for you. A tip is to look for cards with a 0% transfer period which is long enough for you to pay off your debt.
2. Request the transfer: Once you’ve settled on a provider, the next step is to apply and request the transfer. You can either do this during your application, or after you’ve been accepted.
3. Transfer your credit card balance: Once you’ve been accepted and sent your terms, you’ll usually send the money in the form of a bank transfer to your new credit card. You can then set up a Direct Debit to automatically repay the minimum repayment on your new balance transfer card.

How long do balance transfers take?

It will vary based on your provider, and how long it takes to confirm your details. In all, the transfer can take anywhere between one to two working days, to up to a week or more.

You might need to wait for your card to arrive in the post, or for your new account details to be sent to you, then transfer the outstanding balance onto the card.

Top tips for managing your repayments

Once the balance transfer is complete, it’s important to keep on top of payments and make the most of your lower interest rate. Here are a couple of handy tips for making prompt, timely payments:

• Set up reminders: Setting up a Direct Debit or using the reminders app on your phone can you to make payments on time.
• Prioritise effective monthly budgeting: If you budget properly, you’ll be able to ensure you have the necessary funds to meet your repayment deadlines comfortably.

If you’re looking to reduce interest to pay off your debts, or combine various debts into one for manageability, a balance transfer card might work well for you. Just remember to make sure you’re aware of the terms and conditions before applying, and commit to making prompt payments if you are accepted.

Explore more insights and tools

Now you know what a credit card balance transfer is and how they work, why not head over to the Moneyboat blog for more insights? Find more relevant tips on building a good credit score, how to create long-term financial goals, and how to check your credit score for free.

If you’re ever worried about your finances, or how you’ll meet credit repayments or priority bills, know that you’re never on your own.

There are a wide range of third-party organisations and charities that offer free, confidential advice on debt and financial stress. Reach out to StepChange, Citizens Advice, and MoneyHelper for help and support today.

If you’re a Moneyboat customer and you’re concerned about meeting your short-term loan repayments, get in touch with our team as soon as possible. We’re always available to help discuss your options.