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How to use a balance transfer credit card

Balance transfer credit cards can be a good way to manage your debt, giving you time to pay it off interest free. That’s as long as you use them in a smart way.

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 period on the money transferred. 

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

Credit card repayment comparison

As an example, the table below compares how long it would take and how much it would cost to pay off £2,000 of credit card debt with an interest rate of 21.9% versus 0%. It assumes you’ll repay £100 per month.
  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
As an example, the table below compares how long it would take and how much it would cost to pay off £2,000 of credit card debt with an interest rate of 21.9% versus 0%. It assumes you’ll repay £100 per month.
  Starting balance
Credit card 1 £2,000
Credit card 2 £2,000
  Monthly repayments
Credit card 1 £100
Credit card 2 £100
  Interest rate
Credit card 1 21.9%
Credit card 2 0%
  Time taken to repay balance
Credit card 1 25 months
Credit card 2 20 months
  Total amount paid
Credit card 1 £2,452
Credit card 2 £2,000
  Interest paid
Credit card 1 £452
Credit card 2 £0

Balance transfer credit card tips

1. Check the terms

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

As with other credit cards, balance transfer cards require you to make a minimum monthly repayment. Make sure you keep up with this, otherwise you’ll have to pay a fee. While you’re only required 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 that chipping away at the debt throughout the month helps you to pay it off faster.

Explore more: How to avoid credit card charges

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

The benefit of a balance transfer card is that it enables you to repay your debt in a cost-effective way. The less money you owe, the easier that is. 

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.

Explore more: What is a 0% interest credit card?

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 when this will happen 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 per month. Assuming you didn’t spend any more on 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 start being charged interest.

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

If you do 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 more: What to do at the end of a balance transfer

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