In a nutshell: a balance transfer is where all (or some) of your credit card debt is moved across to a card with a better (lower) interest rate.
Why choose a balance transfer?
Balance transfers are a way to slow down the build up of debt by reducing the amount of interest being paid on it. For instance, if you’ve spent money using your credit or store card, and you’re paying high interest on the balance, you may be able to transfer that balance to a card with 0% interest for a set period of time.
How to do a balance transfer?
Simply contact the credit card provider by phone or online to arrange a balance transfer. Remember to have all the details of the debt (or debts) you want to transfer to hand. Once your debts have been transferred, you are well on the way to successfully using your balance transfer card.
Balance transfer costs
Unfortunately, balance transfers often come with a fee to actually make the transfer, typically a percentage of the transfer balance. So, be sure to check for any potential costs before you go ahead.
Things to know
- Your credit score. The best balance transfer deals are usually for people with a good credit score.
- Make minimum payments. As with any credit card, you have to make the minimum payments each month on your balance transfer card or face penalty charges.
- Don’t forget the transfer fee. Although interest can be set at 0% for a set time, there will be a fee, so check you’re comfortable with it.
- Don’t buy stuff on your balance transfer card. Remember your balance transfer was done to reduce your debt.
- Make the switch as soon as possible. Once you’ve been approved, be sure to do the balance transfer as soon as you can to take advantage of the 0% interest.
- But don’t keep switching. Doing balance transfer after balance transfer could lower your credit score.
- Set up a Direct Debit to pay off the debt. Once you’ve transferred your balance to a 0% interest credit card, set up a Direct Debit so you never miss a payment.
- Don’t forget to pay back a little every month. It’s possible to settle your debt just before the end of your 0% interest period – but don’t forget to pay your monthly minimum payments from the beginning of your balance transfer.
- Use price comparison websites. To find the best balance transfer deal for your needs, be sure to do your research – shop around and compare results.
Still want to learn more about balance transfers? Check out how balance transfers work on our blog today.