If you’re currently paying interest on one of your credit cards, you’ll probably find you can save money by transferring the balance. This can a be a great way to give yourself a little breathing space if you’re worried about increasing debt, or just a savvy way to save a bit of cash. But before you start checking your credit card options, we’ve got a few top tips to help you make the most of your balance transfer. So, without further ado, here’s how to successfully use a balance transfer card.
What is a balance transfer credit card?
A balance transfer credit card lets you move the balance of one of your credit cards onto a new balance transfer card, usually for a small fee.
Balance transfer credit cards normally come with an initial 0% interest period – for instance, paying 0% interest for the first four months of you owning the card. This means that if you transfer your balance immediately, you won’t have to pay interest on it for those first four months. However, once those four months are up, you’ll be charged interest on the entire remaining balance.
How do I transfer a balance to new card?
This will vary depending on your credit card provider. If you’re not sure where to start, check your new credit card provider’s balance transfer FAQs on their website. It will usually involve giving your new card provider a call to arrange the transfer, or arranging it yourself online or via an app.
Balance transfer card top tips
As we said before, balance transfer credit cards can be a great way to save yourself a bit of cash. But before you get started, there are a few things to keep in mind.
You’ll still need to make minimum repayments
Just like any other credit card, you will still need to make the minimum monthly repayments. So, once you’ve transferred the balance, set up your monthly direct debt to make sure you never miss a payment.
Check the card’s terms
To transfer your card’s balance, you’ll usually have to pay a small fee. It’s a good idea to make sure the amount you save by transferring your balance is more than the transfer fee before you go ahead.
You can make overpayments to reduce your debt
As well as the minimum repayments, you can make additional repayments to try to reduce your outstanding balance while you’re not paying interest on it. This can be a great time to try to tackle paying off what you owe as the amount won’t increase until the 0% interest offer ends.
Make a note of when the 0% interest period ends
If you haven’t cleared your credit card balance before the end of the 0% interest period, you’ll be charged interest on the entire remaining amount. Make a note of this date and try to work out a strategy for paying off what you owe before then. If you don’t think you’ll be able to, you may want to think about switching to another balance transfer card or consolidating your debts before the new interest rate comes into effect.
If you are thinking of consolidating existing borrowing you should be aware that you may be extending the term of the debt and increasing the total amount you repay.
Try not to spend using your balance transfer card
Finally, try not to make purchases using your balance transfer card. Although it can be tempting, this will only increase the amount of debt you need to clear. Try to stick to your repayment plan and keep working towards your goal.
If you’re on top of your finances, balance transfer cards can be a great way to avoid paying high interest rates. If you’re not sure whether a balance transfer card or a debt consolidation loan is right for you, take a look at our guide to consolidating your debts.