0% Balance Transfer Credit Cards: How do they work
Written by Robert Bester, Consumer Finance Expert Robert has been a writer for six years, specialising in consumer finance and the UK lending market. Concentrating on consumer credit products, Robert writes informative articles that help customers manage their personal finances efficiently.
29th November 2021
3 minute read
While most credit cards will allow you to spend money and make repayments at your own pace, a 0% balance transfer credit card allows you to move an existing debt and could allow you to avoid paying interest for a limited time with a 0% interest introductory period.
This gives you a window where you can pay no interest at all, giving you the opportunity to reduce your debt and ultimately pay off your existing debt without accumulating more in the process.
To find out more about balance transfer credit cards along with how they work in the UK, keep reading our helpful article below.
What is a balance transfer credit card?
- A credit card for transferring existing debt and paying off at your own pace
- You have a balance you can use to accommodate debt or make purchases with
- 0% interest means you won’t accumulate any more interest within the introductory period
- Always check for additional transaction fees
A 0% balance transfer credit card is designed for transferring existing debt on old credit cards or store cards, allowing you to pay it off at your own pace without accumulating any further interest.
The introductory period of 0% interest will only last for a limited time, so it’s worth planning exactly how much you can pay off before the period comes to an end.
While you won’t earn interest within the introductory period, with some cards you might have to pay additional transaction fees to make the transfer, so always check this prior to going ahead so you can calculate whether you will still save money.
What debts can I transfer?
- Credit cards
- Store/Retail cards
You are able to transfer existing debts on credit cards and store cards over to your new balance transfer credit card, allowing you to pay it off and not accumulate further interest. This needs to be done within a limited window once you have been accepted for the balance transfer card so always check your terms and conditions. You may also get prompted when applying for your card if you intend to transfer a balance, so watch out for this during the application process.
The good news is that if you have multiple cards you wish to pay off, a balance transfer credit card is a good way to incorporate these into one monthly payment, which works in the same way as a debt consolidation loan.
How does a balance transfer credit card work?
- Transfer a balance from an existing credit card or store card
- Most cards have a limited period where you have to make the transfer (usually 60 days)
- You are given an introductory period of 0% interest to pay off the balance
- Standard APR after the introductory period ends
A balance transfer card works by transferring existing debt on a credit or store card and then paying it off at your own pace. The idea is to pay off the amount by the time the introductory period ends, so you don’t have to pay any further interest.
The best way to go about this is to add up how much debt you would like to pay off and have an idea of how long it would take you to pay off. When comparing balance transfer credit cards, it’s best to aim for the longest 0% period so you have as much time as possible to spread the cost.
The problem is that you will only find out your balance once you have been accepted. This means you should have a figure in your head that you can move onto your new card, which you can then divide by the introductory 0% period you have available. This calculation will give you your monthly repayment amount.
What are the benefits of a balance transfer card?
- Spread the cost of existing debt
- Actively reduce your interest payments
- Consolidate multiple debts at once
- Additional features – purchase or money transfer
The most beneficial aspect of a 0% balance transfer credit card is the ability to spread the cost of your existing debt and stop any further interest from accumulating. By taking out this type of credit card you can actively reduce your debt and put a plan in place to consolidate multiple debts if you have them.
You may also have additional features you can use such as a money transfer, which would allow you to deposit an amount in an existing account in your name. This can be useful to pay off other expenses but will normally include a transaction fee. Always ensure you read the terms and conditions so you can calculate how much this would be.
A 0% purchase feature will also allow you to spend without incurring any further interest. Check the terms and conditions to find out whether this option is applicable for the credit card you are planning to apply for.
Balance transfer credit card eligibility
- Check your credit score before you apply
- Always use an eligibility checker first
- Compare credit cards to find the right one for you
Are you eligible for a 0% balance transfer credit card? Try our FREE online eligibility tool MoneyMatcher to find out whether you can apply for a credit card. Use the link below to get started.