What is a balance transfer on a credit card?

Are you paying interest on your credit card? A balance transfer may help you save money and pay off what you owe faster. Learn how balance transfers work and what to look out for in our guide.

What is a balance transfer on a credit card?

A balance transfer is when you move debt from one credit card to another. You’ll still owe the same amount, just on a different card. The new card typically has a 0% interest rate for a certain number of months, meaning it can help you save money. Keep in mind there’s a fee for making a transfer.

What does 0% balance transfer mean?

A 0% balance transfer card comes with an interest-free period. This period might last a few months or even up to two years. Not everyone can get approved for the longest periods. When your 0% period ends, you’ll be put on the lender’s standard rate. This tends to be a lot higher, so try to pay off your balance before that happens.

How does a balance transfer work?

Once you have a balance transfer card you can move debt onto it from one or more existing cards. You can usually do this online or over the phone. You'll need to tell your new lender how much you want to transfer and give them the account numbers of your old cards.

What is a balance transfer fee?

You pay a fee for each balance transfer you make. These fees are added to the amount you owe on the card. A balance transfer fee tends to be around 2-4% of the amount you’re transferring. For example, moving a balance of £5,000 could cost around £100-£200.

Is it a good idea to transfer a balance?

Balance transfers have several benefits but they aren’t right for everyone. Consider your individual situation and weigh up the pros and cons below.

Advantages of balances transfers can include:

• Easier to manage. Grouping your balances in one place may make it simpler to keep track of your payments and the amount you owe.
• Saving money. You won’t pay interest until the 0% period ends. This may help you pay down your balance faster.
• Rewards. Some balance transfer cards come with rewards, such as cashback or shopping discounts (but the 0% rate may not apply to new purchases).

Disadvantages of balances transfers can include:

• Balance transfer fees. Most cards charge a balance transfer fee and this can eat into the amount you save on interest so make sure it’s worth it!
• 0% period ending. If you still owe money when your 0% rate ends, you’ll pay a high interest rate and your debt may grow again. Transferring to a new balance transfer card is a possibility, but don’t assume you’ll get approved for one.
• Interest on new purchases. Your 0% rate usually won’t apply to new purchases so you’ll be charged for any new spending on the card.
• Transfer limits. You can only transfer up to a certain amount, which depends on your card limit and existing balance.

Do balance transfers affect my credit score?

Your score always dips a bit when you apply for a card, so make as few applications as possible. Find cards you’re more likely to be approved for by searching with Experian.

Cancelling a card after transferring its balance may also lower your score, because old accounts have a positive impact on your score.

But a balance transfer should improve your score over time if it helps you pay down debt and make payments on time.

How much money can I save with a balance transfer?

It depends. Some people save thousands while others are better off with their existing deal. How much you save with a balance transfer depends on things like:

• Your existing rate. The more you’re currently paying in interest, the more you could save by moving to a 0% card.
• Balance transfer fees. These fees eat into the amount you save on interest, so remember to include them in your calculations.
• Transfer amount. The larger the amount you transfer and stop paying interest on, the more you’ll save.
• When you pay off your balance. You’ll save by paying off your balance before the 0% period ends.

What happens if I spend on a balance transfer card?

While it’s possible to spend money on a balance transfer card, it’s often not a good idea. The 0% rate probably won’t apply to new purchases, so spending on your card can get expensive and land you in more debt. Purchase cards and other 0% cards can be a better option for spending.

Does a balance transfer count as a monthly payment?

When you transfer a balance you’re essentially paying off one credit card with another. So it should count as a payment once the transfer is complete. Check your lender’s terms to be on the safe side.

How much of my balance can I transfer?

You can only transfer up to the credit limit on your balance transfer card. You also can’t transfer more than your existing card’s balance. The minimum you can transfer is often around £100.

How long does a balance transfer take?

It may take several days or even a few weeks for your balance to be transferred. Make sure you don’t miss minimum payments on your old card while you’re waiting.

When’s the best time to do a balance transfer?

It might be the right time to transfer a balance if you’re currently paying interest, you’re eligible for a 0% balance transfer card, and you have a plan to pay down your balance before the interest-free period ends.

You’ll probably want to transfer as soon as you get a balance transfer card so you can benefit from the 0% period. In any case, lenders usually require you to transfer within the first 1-3 months.

What happens to my old credit card after a balance transfer?

It’s up to you if you decide to cancel an old card after a balance transfer. Closing an old account can lower your score for a while. Also, you may have a remaining balance that needs to be dealt with.

Can I get a balance transfer card with poor credit?

You’re more likely to be accepted with a higher score, but it’s not impossible to get a balance transfer card with bad credit. Check your eligibility before applying to save time and protect your score.

How to compare balance transfer offers?

It’s a smart idea to shop around for the best offer. Search balance transfer cards from various lenders with Experian. It’s free, takes a few minutes and won’t hurt your score. Also, we’ll calculate your chances of approval so you can apply with confidence.