Best balance transfer credit cards to payoff your debts with 0% interest
IF you've got a large amount of credit card debt, it may pay you to switch to one of the best 0% balance transfer cards on the market.
These types of money transfer credit cards allow you to move over debts you already owe onto a new card, and you won't pay interest on this amount for a set period.
By putting a stop on paying pricey interest, you can clear your debt much more quickly and cheaply.
In fact, you can potentially save thousands of pounds by using a 0% balance transfer card properly.
It's worth noting that only people with the best credit ratings will be accepted for the best deals though.
And even if you do get accepted, you may also be offered a smaller 0% period and be charged a bigger transfer fee.
After your 0% period is up, lenders will typically charge you between 15% and 20% interest, so try to move the debt onto another 0% deal if you've not repaid it fully by then.
What is a balance transfer credit card?
A balance transfer card lets you clear debts on your credit cards by paying them off with a new one.
Your balance is moved to a new credit card and the repayments you make are interest-free for a set period, often for more than two years.
This can be an effective way to combine balances on lots of credit or store cards into a single product and clear your debts faster, as more of your money is going towards repayments rather than paying interest.
It can be used to take control of your credit card debts by combining balances in one place and reducing interest.
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How do credit card balance transfers work?
A balance transfer card can temporarily reduce the interest payments you make on your credit card debt.
That's helpful, especially when a credit card provider could be charging 19.9% interest, known as the annual percentage rate (APR) or more, on repayments.
For example, if you had credit card debt of £4,000 and were struggling to keep up with the repayments, you could clear it with a balance transfer card.
Your balance is cleared and the credit card paid off, which should give you some peace of mind.
That's not the end of the debt though, it has just reduced the interest payments.
The money is then moved onto a new card that instead lets you focus on repayments for an interest-free period.
This should help you clear the balance faster.
You still need to repay at least the minimum amount each month. However its best to try and clear the outstanding balance before the 0% period ends to avoid paying interest.
There may also be a fee for the transfer.
How to do a credit card balance transfer
You can search for the best balance transfer credit cards on comparison websites or directly with providers online.
There are a few factors to consider when choosing a balance transfer credit card.
The main one is the interest-free period.
This tells you how many months you can repay the debt for without any interest being charged.
There may also be a balance transfer fee and a maximum number of days to actually move your money before the introductory offer expires.
These will vary across providers.
Check your existing cards first to work out how much you owe, as there may be a maximum amount that some balance transfer credit cards will let you move.
In most cases, providers won’t confirm the balance transfer limit until they have processed your application. However, a small number of providers have started offering guaranteed balance transfer limits as part of the eligibility check.
You can usually apply for a balance transfer credit card online or on the phone, and banks may be able to help in-branch.
To make an application, you will need to provide your name, address and an email as well as details of your income so a provider can assess your eligibility.
You will also need to provide details of how much money you want to transfer to the new card, but you can often do this after you have been accepted.
Applicants need to be over 18.
If your application is approved, you will need to transfer the balances within a set period, usually around 60 or 90 days.
Your old balance will then be cleared and you can start making interest-free repayments on your new card.
How long is the 0% balance transfer introductory period?
The interest-free period, also known as the 0% balance transfer introductory period, varies across providers.
This is the main figure that providers will use to lure customers.
The longest 0% balance transfer period as of the start of April 2021 was 29 months.
That is more than two years of paying zero interest on your credit card debts.
Interest-free periods have in the past been for as long as 40 months but it depends on competition in the market and how much business providers are trying to attract.
Not everyone will get the interest-free period that is on offer when they apply.
Providers only have to give the interest rate or APR advertised to 51% of successful applicants.
There may be a higher APR if you have had credit problems in the past.
The interest-free period will only last as long as you make the monthly repayments.
Your balance will be moved onto a pricey APR if you miss payments and it could affect your credit score.
What is a balance transfer fee?
There is often a cost for moving your money using a balance transfer card.
This is known as a balance transfer fee.
The costs vary among providers and it is based on a percentage of your balance.
For example, if you found a balance transfer card with a 3% fee, it would cost £30 too move £1,000 of debt.
What happens when the 0% offer ends?
The interest-free period on a balance transfer card won't last forever.
It is important to be prepared for when it ends as your card will then move onto a higher APR more in line with standard credit cards.
This is where banks make their money, as they rely on borrowers falling onto the high rates of interest at the end of deal period.
Make sure you can clear as much of the debt as possible within the interest-free period, otherwise interest will be added to your repayments once the deal term ends.
At this point it may be worth doing another balance transfer if you still have debts left.
When should I transfer my balance?
A balance transfer card can help you take control of your debts.
It can be hard to keep track of balances across different credit and store cards.
Instead, a balance transfer card combines your credit card debt into one place and removes the interest for a set period.
How to cut the cost of your debt
IF you're in large amounts of debt it can be really worrying. Here are some tips from Citizens Advice on how you can take action.
Check your bank balance on a regular basis - knowing your spending patterns is the first step to managing your money
Work out your budget - by writing down your income and taking away your essential bills such as food and transport
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs
Pay off more than the minimum - If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker
Pay your most expensive credit card sooner - If you have more than one credit card and can’t pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)
Prioritise your debts - If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don't pay
Get advice - If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further
Groups like Citizens Advice and National Debtline can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans
Savvy spenders could also use one credit credit card to make a large purchase and then take out a balance transfer to clear the debt and make the repayments interest-free.
It is important in both cases that you can still afford to make the repayments.
When you open a balance transfer there is usually a set period that you have to move your balance within.
This ranges from 60 to 90 days and if you miss this you may lose the interest-free offer.
Do balance transfers affect your credit score?
As with any type of credit applying for a balance transfer card can affect your credit score, so avoid making too many applications at once.
Some comparison websites and providers will let you do a soft search first, which doesn't show up on your credit report, to give you an idea of your chances of being accepted.
This is a better strategy as lots of applications and rejections could lower your credit score and deter financial providers, making it harder to get loans and credit cards in the future.
Is it worth doing a credit card balance transfer?
The main benefits of a balance transfer is that you can consolidate your debts in one place and have a break from paying interest.
This should help reduce your debts faster as more of your money is going towards repayments.
You need to understand how long the interest-free period is for and how much of the debt you can afford to clear during that time.
There will also be a fee to pay and there may be limits on the value of transfers, so check how much of your debt you can actually clear.
There are risks though as too many applications and rejections could harm your credit score.
Remember, you may not get the interest-free period that is on offer so you may end up with a shorter time to make repayments.
Plus, you could end up with more debt if you have combined lots of old balances and then fail to keep up with repayments as you will be charged a pricey APR.
Additionally, interest is charged at the end of the deal period so you need to make sure you can afford to clear as much of the balance as you can before then.
Can I transfer a balance from a different provider?
One of the main rules with balance transfers is that you can only move money to and from a different provider.
For example, you can't use a Barclaycard balance transfer to clear a Barclaycard credit card balance.
This can be annoying if your current credit provider offers the longest interest-free balance transfer rate on the market.
The same restriction may also apply on transfers between the same banking family, so you cannot do a balance transfer between HSBC and First Direct as they fall under the same group.
What should I do with my old credit card?
Your old credit card will still be active but the balance will be cleared.
You could still use the card but that may not be the best idea if you are already clearing debt elsewhere.
Alternatively, you can contact your old provider to close your card.
Can I get a balance transfer credit card with bad credit?
You will need a good or excellent credit rating to get the best balance transfer credit cards.
A history of arrears or defaults, county court judgements or bankruptcy can make it harder to access the best deals.
You may be restricted to shorter interest-free periods if you have a lower credit score.
There are some credit cards that help rebuild your rating and offer short interest-free balance transfer periods.
Avoid making too many applications though as this can reduce your credit score, especially if you are rejected.
Check what you are most likely to be accepted for first so you don't waste your time and credit rating.
How long does it take for a balance transfer to take place?
Providers will work to different timescales when completing a balance transfer.
Some may be able to complete the transfer by the next working day.
You should still pay your credit card bill until the transfer completes.
Can I transfer money to my bank account?
Some balance transfer cards will also let you do money transfers into your bank account without any interest charges.
This lets you pay money from your balance transfer card into your current account and could be used to clear an overdraft.
Remember this will still add to your debt though.
Check with your provider before doing this as there may be high rates of interest for money transfers.
There may also be a separate transfer fee, usually of around 4%, to do the transfer which will add to the cost.
How do I find the best balance transfer credit cards?
Balance transfer credit cards are offered by a range of banks, building societies and dedicated providers.
It can be time consuming to search each individual website for the best balance transfer credit card.
You could save time by using a comparison website that will let you compare deals by interest-free period, transfer fee and the maximum balance that can be moved.
A comparison website may also be able to do a soft credit check so you can see a range of balance transfer cards that you are most likely to get accepted for.
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