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How to use a balance transfer credit card

If used wisely, a balance transfer credit card can be a good way to manage your debt, giving you time to pay it off without being charged interest.

If you have existing credit or store card debt and you’re being charged interest, a balance transfer credit card could save you money. They enable you to move debt onto another card that offers an interest-free (or low interest) period on the money transferred. 

This can help you pay off your debt quicker and cheaper.

How much could a 0% balance transfer credit card save you?

Here’s an example of how long it would take, and how much it would cost you to pay off £2,000 of credit card debt, with an interest rate of 21.9% versus 0%. 

It assumes you’ll repay £100 a month.

Credit card repayment comparison

  Credit card 1
Credit card 2
Starting balance £2,000 £2,000
Monthly repayments £100 £100
Interest rate 21.9% 0%
Time taken to repay balance 25 months 20 months
Total amount paid £2,452 £2,000
Interest paid £452 £0

Credit card repayment comparison

  Starting balance Starting balance
Credit card 1
£2,000 £2,000
Credit card 2
£2,000 £2,000
  Monthly repayments Monthly repayments
Credit card 1
£100 £100
Credit card 2
£100 £100
  Interest rate Interest rate
Credit card 1
21.9% 21.9%
Credit card 2
0% 0%
  Time taken to repay balance Time taken to repay balance
Credit card 1
25 months 25 months
Credit card 2
20 months 20 months
  Total amount paid Total amount paid
Credit card 1
£2,452 £2,452
Credit card 2
£2,000 £2,000
  Interest paid Interest paid
Credit card 1
£452 £452
Credit card 2
£0 £0

5 tips on using your balance transfer credit card

1. Check the terms on your balance transfer credit card

This may sound like a throwaway tip, but it’s vital to check the terms before applying for a balance transfer card. Make sure you’re aware of the following:

  • How long is the 0% interest period on balance transfers?

  • Is there a fee to transfer a balance from another card?

  • If there is a fee, is the cost benefit of switching to a card with an interest-free period greater than the fee?

  • What is the interest rate on the card once the 0% interest period ends?

2. Always make the minimum repayment

Like other types of credit cards, you need to make a minimum monthly repayment on balance transfer cards. It’s important to keep up with this, otherwise you’ll have to pay a fee. Missed or late payments can also negatively impact your credit score

While you only need to make the minimum repayment, the more you’re able to repay each month the quicker you’ll be able to clear your debt. 

The easiest way to make sure you keep up with repayments is to set up a Direct Debit

You can also make multiple repayments throughout the month. This means that if you have a bit of extra cash available, you can use it to pay off the debt before you’re tempted to spend the money elsewhere. You may find chipping away at the debt throughout the month helps you pay it off faster.

Explore: How to avoid credit card charges

3. Don't use the card more than you need to

One of the benefits of a balance transfer card is that it enables you to repay your debt in a cost-effective way.

Some balance transfer credit cards also offer a 0% interest period on purchases, which may be useful if you’re planning to use it to spend. 

The interest-free period for purchases is typically much shorter than the interest-free period for balance transfers. Once the interest-free period for purchases ends, you may have to pay interest on the balance if you don’t repay it in full each month. 

You may also be charged if you use the card to withdraw cash. This is known as a cash advance fee.

4. Keep the end date for the 0% interest period in mind

When the 0% interest period on a balance transfer credit card ends, a new interest rate will kick in. Make a note of the date and aim to pay off your balance before then.

For example, if you have £2,000 of credit card debt and a 20-month interest-free period, you could set up a Direct Debit to repay £100 a month. Assuming you didn’t use your credit card during that period, you’d clear your debt without paying any interest.

If you have an outstanding balance when the interest-free period ends, you’ll be charged interest.

5. Switch your outstanding balance at the end of the 0% interest period

If you still have money left to repay at the end of the interest-free period, review your options and consider moving your debt.

You may want to look at other balance transfer credit cards at that time, which could offer you a further 0% interest period.

Explore: What to do at the end of a balance transfer