0% balance transfer credit cards

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What is a 0% balance transfer card?

Balance transfer cards typically offer a 0% interest rate for a set period, which may last up to 40 months. You may be able to reduce the amount you’re currently spending on interest by moving debts from your existing credit card(s) to a 0% balance transfer card.

How can a 0% balance transfer card help me?

A 0% balance transfer credit card can potentially help you save money. In turn, this may help you pay off your debts faster.

For example, imagine you have £1,000 of debt on a credit card with an APR (Annual Percentage Rate) of 19%. This means you’d pay £190 every year in interest fees. Now imagine you move this debt to a balance transfer card, which offers a 0% rate for the first 24 months. This means you wouldn’t pay interest on the debt for the next two years, saving you a total of £380 in fees. You might use this money to pay off your debt quicker, before the 0% promotional period ends. However, you might be charged a transfer fee, which will take away from your savings – we’ve explained this below.

Consolidating your debt (moving debt from multiple cards to just one) can also help you see how much you owe. This can make it easier to manage your repayments.

How will a balance transfer affect my credit score?

You credit score reflects your ability to borrow money from lenders – the higher it is, the greater your chances. Transferring a balance from one credit card to another can affect your score – but whether the effect is positive or negative depends on several factors.

Here’s how a balance transfer might lead to your score being lowered:

  • Applying for any credit, including a balance transfer card, will temporarily reduce your score. However, your score should bounce back quickly – just try not to apply too often in a short space of time
  • You may decide to cancel your other cards after transferring your balance, as having too much available credit can look bad to lenders. But this may reduce your score in the short-term, since lenders typically like to see old, well-managed accounts in your credit history. However, your score will bounce back over time, especially as your new credit card ages. Learn more about using credit cards here.

Here’s how a balance transfer might lead to a better credit score:

  • Paying your debts off can boost your score. A 0% balance transfer card can help you save money on interest, and you can use these savings to pay off what you owe quicker. This will reduce the amount you’re using of your available credit, helping improve your score.
  • Increasing your available credit, so that you use a smaller proportion of it, can improve your score. For example, if your old card had a credit limit of £2,000 per month, and you used up £1,000 per month, you would’ve been using 50% of your available credit. But if you transfer your £1,000 debt to a new card with a £4,000 limit, you’ll only be using 25% of your available credit. Using less of your available credit can boost your score.

Before deciding to get a balance transfer card, weigh up the pros and cons. How much money will you save overall? Are you prepared to accept the risk of damage to your score? If you’re planning to applying for a loan or mortgage soon, a lower score could reduce your chances of approval – however, you may decide the risk is worth the money you save.

Are balance transfers a good idea?

Balance transfer cards can offer attractive benefits and could help you pay off your debt faster, but you should carefully consider the conditions of the deal, and the impact on your finances. As well as potential damage to your score, there are several key things to look out for:

Balance transfer fees

When you first get a balance transfer card, you’ll normally have to pay a fee to the provider. This tends to be 2-3% of the balance you’ve transferred, but it can be higher, especially if the promotional period is quite long. Make sure you compare deals and read the terms carefully before picking a card.

Losing the promotional rate

If you get a balance transfer card, try to pay back at least the minimum amount required each month. Otherwise, you may lose the promotional rate, which could end up making things more expensive.

After the 0% promotional period finishes, you'll start being charged interest at the card's standard rate. Check the terms and conditions to see how much this is. It’s usually a good idea to pay off your debt before the rate goes up.

Paying interest on new purchases

Be wary of spending money with your balance transfer card. Before using it to buy something, check the terms and conditions to see if you’ll be charged interest on purchases. It’s often the case that the 0% rate is only applied to balance transfers, and not to new debt created on the balance transfer card. If you want to use your card for both balance transfer and purchases, you could consider getting a dual credit card.

What should I do before applying for a 0% balance transfer card?

Think a balance transfer card could be the right option for you? Here are some useful steps to take before applying:

  • Research your options. With Experian, you can compare credit cards from across the UK market. But remember, we’re a credit broker, not a lender† we can help you find deals, but only the lender can offer you credit
  • When you’ve found a deal you like the look of, read about the features and terms carefully, and make sure you can afford the repayments
  • When applying for a card, keep in mind that lenders reserve the right to offer you an interest rate that’s different to the one advertised. Many banks now offer 0% balance transfer cards, but those with the longest promotional periods may not be available to everyone
  • Check your eligibility rating when you compare cards with Experian. This helps you understand your chances of approval before applying, which is useful since credit applications can damage your score
  • If you’re not eligible for the card you want, review your Experian Credit Score. This can help you get an idea of where you stand with lenders. If your score is low, you may want to check your Experian Credit Report to find out what’s affecting your score, so you can fix the issue

How do you do a balance transfer?

Balance transfers are usually simple to do – you can often make the transfer online, via the lender’s website or app, or though their customer helpline. The lender will typically arrange to move your debts for you, so you shouldn’t need to contact your existing credit card providers yourself.

However, once your debts have been moved, you’ll need to decide what to do with your old cards, as these won’t be cancelled automatically. You might choose to keep them open while your new card matures, because losing old, well-managed accounts can temporarily hurt your score. However, keep a close eye on old cards to protect them from fraud, and be careful not to spend on them as you’ll be charged your old interest rates.

Managing your credit card: 5 things to remember

It’s important to manage your credit card well, as this can help protect your credit score and keep your finances in order. Here are our top five tips:

  1. Make the minimum repayments required every month. Otherwise, you may be charged fees and even lose the promotional interest rate. Missed and late payments are also recorded on your credit report for at least six years, which can have a negative effect on your score
  2. Check the terms before you purchase anything on your card
  3. Consider setting up direct debits to help you pay on time
  4. Make budgeting easier by scheduling your direct debits on your pay day
  5. If you can’t avoid a missed payment, contact the lender as soon as possible to discuss your options – you may be able to minimise the damage to your credit history
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