How balance transfer credit cards work

A balance transfer card can help you better manage your finances if you’re currently paying interest on existing credit card debts.

In this guide we explain balance transfer credit cards and how best to use one.

How do balance transfer credit cards work?

Balance transfer credit cards offer a low, or even 0%, interest rate for several months on an introductory offer. You can move debt, from your existing credit cards that are charging expensive interest, onto the new lower interest card.

You’ll usually need to pay a small fee to make the transfer, but sometimes you can find deals that are free.

You can reduce how much interest you’re paying

You should be able to pay off the balance on your card more quickly with a 0% balance transfer credit card.

The introductory rate of interest can last anywhere from six months to over two years. This gives you more time to pay back your debt without building up any interest.

Any repayments you make during the introductory period will go towards clearing the debt rather than paying interest.

Make sure you know when your balance transfer interest free period ends

After the introductory period ends, the interest will go back to its standard rate. If you still have debt to repay, you’ll probably have to pay a significantly higher charge.

The interest rate that the credit card goes back to is typically higher than on other credit cards on the market.

Balance transfer cards are not the same as money transfer cards

There are credit cards on the market that offer both money transfer and balance transfers. But they're not the same thing. The main difference between balance transfer and money transfer cards is where you can move your money.

Balance transfer credit card

A balance transfer credit card allows you to move debt from your existing credit card to a new credit card. You can use it to consolidate debt from multiple cards into one place. 

The introductory period can range from six months to just over two years. The fees are usually between 1-4% of the amount you’re transferring.

Money transfer credit card

A money transfer credit card allows you to borrow money from your credit card and transfer it into your bank account. You can use it to pay off an overdraft at 0% or to access money if you need to pay for something in cash.

The introductory period can range from six months to just over two years. The fees are usually higher than balance transfers. It can cost you between 3-4% of the amount you’re transferring.

How to do a balance transfer

Find out how to do a balance transfer with this step-by-step guide:

• Calculate your current costs See how much your current debt is costing you with our credit card calculator

• Check your eligibility Estimate the likelihood of being accepted for a balance transfer credit card using our credit card eligibility checker

• Compare balance transfer cards Enter the balance you want to transfer and compare the balance transfer cards most likely to accept you

• Calculate how long will it take to repay Calculate how much you would need to pay each month to repay the balance within the 0% interest period

• Apply Apply for your chosen balance transfer credit card

• Transfer your debts Your new credit card provider will ask details of the credit card you want to transfer the balance from. The transfer usually takes 1-2 business days.

• Make your repayments Start (and finish) repaying your balance within the 0% interest period

• Close your old credit card If you'll no longer be using the old credit card you transferred the balance from, you could close the account.

Closing your account will reduce the amount of credit you have available. This could help improve your chances of applying for other forms of credit, such as a mortgage or a loan in the future.

How long does a balance transfer take?

The transfer usually takes one to two business days. You typically have a limited time to complete the transfer. Otherwise, you could lose out on the benefits of the introductory offer.

Can I use my credit card the same day I transfer a balance?

You may be able to use your credit card on the same day you transfer the balance. This is known as a 'same day balance transfer'.

Some providers allow a same day balance transfer if they get the request before 5pm. But this depends on when your old provider processes the payment. Other providers will process your transfer by the next working day.

To avoid unnecessary charges or late fees, you need to keep up your repayments on your old card until the balance in transferred.

Can you use a balance transfer to pay off an overdraft?

A balance transfer credit card was designed to clear credit to credit card debt, as opposed to clearing bank account debt.

Instead, a money transfer credit card can be used to transfer money from your credit card to your bank account, therefore allowing you to use it to clear any overdraft debt.

A money transfer card is similar to a balance transfer card, with most offering 0% interest. Like a balance transfer credit card, you'll still have to clear your transfer amount. You might also be charged a fee for the card.

Things to remember when getting a balance transfer card

Do not miss repayments on your old card Your credit card provider can stop the introductory offer if you miss a payment. Avoid missing repayments and paying a high interest rate by setting up a direct debit

Check your eligibility for a new card Depending on your financial situation, lenders might not approve your credit card application. See if your application is likely to be successful without impacting your credit score using the Uswitch credit card eligibility checker

Do not buy anything on your balance transfer card You’ll pay interest on anything you buy on your new card, and the rates can be very high. Any repayments you make go towards paying off your spending first, not clearing your existing debt

Balance transfer fees Include the balance transfer fees when working out how much you need to repay and how much you'll save by transferring the balance. Even with the fee (usually between 1% and 4% of the balance), you’ll likely to still be paying less overall than your current credit card debt

You may have to switch credit card provider To transfer your existing credit card debts to a balance transfer card you might need to switch providers. Very few balance transfer credit cards allow you to transfer a balance with the same provider

Clear the balance within the 0% interest offer Make the most of the introductory period by transferring and clearing your balance before it ends. You could set up a Direct Debit to ensure you never miss a repayment.

You might need to pay a balance transfer fee

Most credit card providers charge a balance transfer fee of between 1% and 4% of the amount you’re transferring. In most cases, the provider adds the fees to your overall balance.

Any charges should be made clear when you're comparing balance transfer cards.

Credit cards with no balance transfer fee

There are some cards that don't charge a balance transfer fee provided you clear the balance during the introductory offer.

No-fee cards often have shorter introductory periods. This means you’ll have less time to pay back your balance before the interest rate increases. So, your monthly repayments will be bigger.

Always check the length of the 0% balance transfer offer

Consolidate credit card debt using a balance transfer credit card

Merging debt from multiple credit cards onto one card is known as 'credit card consolidation'. This could help you keep track of your finances and potentially help you pay off your debt sooner.

Reduce your interest repayments

If you have a lot of credit cards, you might be paying high interest rates on all of them.

You could avoid paying interest altogether if your application for a 0% balance transfer card is accepted. This means your repayments will go towards clearing the debt balance rather than on the interest.

But do not forget when your introductory deal finishes. Once it ends, you’ll start paying interest on your remaining balance.

Pay off the balance sooner by increasing your monthly repayments

Once you receive your balance transfer card, you could pay off your debt quicker by increasing the amount you pay each month.

If you only repay the 'minimum amount', it will take you longer to clear the debt. You may even end up having to pay a lump some at the end of the introductory offer.

Not paying the lump sum to clear the balance means you'll start paying interest on the remaining debt. This may mean you need a new 0% balance transfer card to take advantage of another introductory offer. This is a dangerous cycle to get into, and it could take you years to clear that one debt.

For more information on credit card debt consolidation and to find sources of debt help, explore our debt help guides.

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