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The 8 golden rules of a balance transfer card

8 golden rules of balance transfer credit cards image
Robert Bester, Consumer Finance Expert

10th May 2021

4 minute read

Have you been thinking about getting a balance transfer card? It can be incredibly helpful to take one out for the purposes of organising your finances and generally ensuring monthly repayments are made on time by consolidating your payments onto one card.

Like all credit cards though, if your balance transfer card isn’t properly managed, it can lead to further financial problems that can make your money management a lot more stressful. Without proper guidance, you can end up in exactly the same spot, or even make your issues worse.

But fear not! The Guru has put together 8 golden rules of owning a balance transfer card to keep you on the path to financial enlightenment. If anything, it’s like having a financial sat nav pointing you in the right direction, so you don’t end up in a field somewhere.

The 8 golden rules of owning a balance transfer credit card:

1. Always read the summary box document

Before using any balance transfer card, or any credit card for that matter, always check the summary box document that comes with it. It’s like having a clear set of terms and conditions to refer to, that outlines the balance transfer deal you have.

Important details include the following:

  • 0% interest free period – one of the most important details is the length of your 0% so you can calculate if this is enough time for you to pay off your overall debt
  • Transfer fees – this can be applicable when making individual transfers, so should be factored into any transfers you need to make. This can often be coupled with a period of 0% interest which results in a fee-free transfer
  • Credit limit – this needs to cover the entirety of your outstanding debt so you can pay it all off at the same time
  • Minimum repayment amount – this is the amount you definitely need to pay back every month, though it’s advisable to pay over this
  • Annual fees – your balance transfer card might also be subject to annual fees which will need to be paid on top of any outstanding debt
  • Representative APR – this is the rate of interest you can expect to pay when your 0% interest free period has expired, but ideally you won’t be paying it if you’ve reduced the balance to £0

2. Make sure the credit limit is enough to cover all of your debt

It might sound obvious, but having a large enough credit limit to accommodate all your outstanding debt is crucial. Getting a balance transfer is all about organising your finances and dealing with your debt all at once, and that means having a limit that is slightly more than your current debt.

It’s also important not to open any other credit cards or store cards during this period of consolidation. Be strict with yourself and tidy up your finances so you aren’t stung by late fees or charges in the future.

3. Try to repay more than the minimum amount every month

To make sure that opening the balance transfer card is worthwhile, you need to make sure that you meet the minimum repayments on your new card. But you also need to think about paying off the overall debt within the interest free period. That means paying more than the minimum each month and overpaying as much as possible when you’re comfortable to do so.

4. Clear the overall debt before the end of the 0% period

The best way to manage your balance transfer card, and your debt, is to make sure you can clear the overall debt before your interest free period runs out. Once that happens the interest rate will jump up and the remaining amount will incur a charge every month.

Ideally, before you even take out the balance transfer card, calculate how much you can afford to repay every month and how much it would therefore take you to pay off in total. For example, if you can afford to repay £100 per month and have a total debt of £2,000, you should aim for a balance transfer card lasting 20 months.

If you want to give yourself extra breathing room, try to calculate your repayments with an extra month or two planned in. This will give yourself room to drop down to the minimum payment if you’re having an expensive month.

5. Never miss a monthly repayment

The whole idea of getting a balance transfer card is to manage your money better and reduce your debt in the process. If you end up missing a payment you jeopardise the positive effort you’ve made to improve your finances, and could end up being penalised further.

Missing a payment can negatively impact your credit score, and lengthen the amount of time you need to pay off the entire debt. If you calculate your repayments properly and ensure you don’t overspend, there’s no reason that you can’t stick to this regime and pay off your debts.

6. Never withdraw cash

As much as it could be tempting in some situations, withdrawing cash on your balance transfer card, or any credit card for that matter, should always be a no-no. Not only will you make it more difficult to pay off your debt in time, you’ll also incur further charges for withdrawing cash in the first place.

7. Don’t spend unless it also includes 0% on purchases

Of course, you might be able to spend on your card if it includes a 0% purchase period. Some of the best balance transfer cards will include a 0% balance transfer period and a 0% purchase period, which means you won’t be charged for spending on the card for a set period of time.

Whilst this could be an option for you, it doesn’t mean you should take it. If you are purposefully taking out a balance transfer card to pay off your debts, making purchases will not help. Try and stick to your guns and keep the card hidden in a drawer at home, rather than available to use when you’re going on a shopping trip.

8. If in doubt, switch to another balance transfer card

This isn’t always the most ideal way to go about things, but if for some reason you have been delayed in repaying the balance on your new card, you might be able to take out a new balance transfer card. Ideally, you would do this before your original period of 0% interest finishes.

Like before, you would be transferring your debts and entering a new period of 0% interest. Bear in mind it will have to be a different card provider and your credit score will have to be good enough for you to be accepted.

Are you ready to get a balance transfer card?

Start comparing balance transfer credit cards and find one that is right for you. If in doubt, try our moneymatcher online comparison tool to get tailored results. Not only is it free, it also won’t affect your credit score.

For more information on balance transfer cards and to browse our tables, head over to our Balance Transfer page for everything you need to know before you apply.