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Balance Transfers

For those of you that have an existing credit card balance you will find yourself in one of two camps. Either your current introductory rate may soon be expiring or it already has and you are paying a much higher than is necessary rate of interest. If this is the case then you should be considering a balance transfer.

More from Understanding Credit Cards
6 November 2008

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Balance Transfers

Transferring a balance sounds complicated, but is actually a very simple process.

How do I make a balance transfer?

Transferring a balance sounds complicated, but is actually a very simple process. To transfer a balance to a new card, just tell your new card provider where you want to move the debt from, and it will pay it off for you. You then owe your new card provider the money instead. It really is that simple!

Most cards will normally allow you to transfer within a set period of getting the card (usually 30 – 90 days), should you not choose to carry out the transfer immediately.

Watch the transfer fee

Most card providers will also charge a balance transfer fee. These are normally between 2-3% of the total amount that is to be transferred so can add up to over £100 in some instances. Depending on the card provider, the transfer fee may also attract interest.

Zero percent or life of balance deals?

For those of you who don’t want to repeatedly switch credit cards and find the whole affair a chore, you should use ‘life of balance’ deals. This is where the amount of money that you transfer remains on a fixed interest rate that will last until the entire balance has been paid off. This is normally at a better rate of interest than you could secure by using a personal loan.

If you are confident however that you can clear the entire amount to be transferred within a certain time frame, say 9-12 months, then consider a zero percent deal.

Remember every month you will have to pay back at least the minimum amount shown on the statement. Always try to pay a little more if you can. By doing this your debt will be cleared quicker.

But beware. Should you be late or fail to make your payment one month, then it is common for the card provider to switch you from the introductory offer, directly onto their standard variable rate irrespective of how long is left too run on the offer period.

What if my new card’s got a cheap deal for spending too?

Usually if a card has a 0% deal for purchases and balance transfers and they’re not identical e.g. 0% for purchases for 3 months and 0% on balance transfers for 9 months, don’t spend on it.

This is because the interest is calculated on clearing the cheap debt first. In other words and using the timescale above, if after three months you have spent on the card and have not cleared that amount, the debt will usually revert to a high rate of interest and will be paid off last.

If you think you might be tempted like this, the answer is to leave your new card in a drawer where you will not be likely to use it!

How many times can I transfer a balance?

When your existing deal comes to an end you can keep on transferring the balance. The only limiting factor is whether your credit score is high enough to be accepted for new cards.

In recent years a new term describing regular card switchers has been coined. They are known as ‘rate tarts.’ A rate tart will keep on switching their cards in relation to low interest rate deals that are being offered at the time. It was mainly for this reason that balance transfer fees were introduced.

Spread your card applications out

It can count against you if you already have several loans and/ or credit cards, or if you’ve made lots of different applications recently. The most important measure is to spread your card applications out.

Do this and most people with a reasonable income and who pay all their regular bills on time should be able to transfer without worry.

Best Buy Credit Cards

Credit Cards Balance Transfers Purchases APR Representative (Variable)
Tesco ClubCard Purchases Credit Card Logo Tesco Bank Logo Tesco ClubCard Purchases Credit Card Apply
 0%
9 months
2.9% fee
 0%
18 months
 
16.9%
Representative Example: The annual purchase rate is 16.9% p.a (variable) so if you spend £1200 your representative apr will be 16.9% p.a (variable)
Barclaycard Platinum With BT (27 Mths) Logo Barclaycard Logo Barclaycard Platinum With BT (27 Mths) Apply
 0%
28 months
3.5% fee
 0%
6 months
 
18.9%
Representative Example: The annual purchase rate is 18.9% p.a (variable) so if you spend £1200 your representative apr will be 18.9% p.a (variable)
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