Ceri Roberts
Transferring credit card balances can be a handy way to save money and potentially clear your debt faster, particularly if you’re currently paying a high interest rate, as long as you qualify for a low or 0% interest rate.
Once your new account is open, you can transfer your balance in a few simple steps. Read on to understand how to transfer credit card balances.
Why transfer credit card balances?
There are two main benefits to transferring credit card balances.
Firstly, you could save money on interest because a balance transfer card typically offers an introductory period with a low or 0% interest rate when you transfer an existing balance from another account.
This introductory period could last for a couple of months or, in some cases, over two years. You will need a good credit score to be approved for the best deals and, in most cases, you will pay a balance transfer fee of up to 5%. So, if you move a balance of £2000 you can expect to pay a fee of up to £100.
Even after taking these fees into account, you are likely to save money if you are paying higher interest rates on your existing balance.
Secondly, it can be a helpful way to consolidate your debts and streamline your payments. It’s possible to transfer more than one balance from different accounts – as long as you don’t exceed the credit limit on your new card. Bear in mind that you will need to leave a buffer to cover interest and charges. As a guide, most providers allow a balance transfer of up to 90-95% of your credit limit. In addition, there’s usually a minimum transfer amount, which is typically £100.
Importantly, a balance transfer should be a tool you can use to pay off debt more quickly and cheaply and not simply a way to minimise monthly repayments while you go back to using the card or cards that were paid off by the balance transfer.
Do balance transfer cards affect your credit score?
When you apply for any type of credit card it will show up on your credit report, and a balance transfer card is no different. If you apply for several of these cards, or if your application is refused, this can negatively affect your credit score. So it’s best to check your credit score and apply only if you’re confident you will be accepted. Some providers offer eligibility tools so that you can check the likelihood of approval without it showing up on your credit file.
However, if you transfer existing debt to a balance transfer card, manage it well and clear the balance as soon as you can, this should improve your credit rating over time. Not only will the amount of your debt decrease but this will show lenders that you are able to manage your credit responsibly.
Balance transfer cards for poor credit
It may be possible to get a balance transfer card if you have a poor credit score, but you are likely to be offered a lower credit limit and a shorter 0% interest period. You may also pay a higher interest rate (APR) once the interest-free period ends, so make sure you check the terms and conditions to avoid any unexpected charges.
Even if you’re not eligible for a 0% balance transfer card, you may still be able to save money by transferring your balance to a credit card with a lower APR than your existing card.
How to transfer a balance from a credit card
There are three simple steps to transferring your credit card balance.
- Apply for a balance transfer card: If you have decided that you would benefit from a balance transfer card, first consider whether you are likely to be accepted, then check the balance transfer fee and details of the introductory offer to make sure that the amount you will save on interest is more than any fees you will pay. Before you proceed with the transfer, check that you are getting the credit limit you need, as some lenders might offer a lower limit or shorter 0% interest period than advertised, depending on your circumstances and credit score.
- Request a balance transfer: When your new account is open, you will need to provide the account numbers of your existing card or cards, and confirm the amount you would like to transfer. In many cases you can do this online via your new provider’s website or app, but sometimes you may need to set up a balance transfer over the phone. Some providers require you to set up balance transfers within a set period of time after opening your new account to benefit from the 0% interest offer. Typically you will have 60-90 days to request the transfers.
- Close or maintain your previous accounts: If you have cleared the balance on your previous card in full, you can close your account. However, if your new credit limit isn’t high enough to pay off your previous balance, don’t forget that you will need to make payments on both your old and new accounts.
How long does a balance transfer take?
This depends on the provider. In some cases the transfer might be completed on the same day, but it can take several days to arrive in your account. Your card provider should be able to give you more information on timeframes when you set up the transfer.
Transfering credit card balances for debt consolidation
Transferring your credit card balances might seem like a good way to consolidate your debt and pay it off more quickly, but you could end up owing more money if you can’t resist spending money on your old card.
This is why, if you’re already struggling financially, applying for a balance transfer card could worsen your situation. If there’s a risk of this happening, consider closing your old account once you have cleared the balance.
Bear in mind that this may temporarily affect your credit score, especially if you have had the card for a long time. This is because it can reduce your overall credit limit and increase your credit utilisation ratio.
If your debt feels unmanageable, before applying for a balance transfer card consider seeking free debt help from charities such as:
A range of help is available, including the ‘Breathing Space’ scheme, which can give people who live in England and Wales a break from interest and charges while they get their finances back on track.
In Scotland there’s a similar scheme called the Debt Arrangement Scheme. There are plans to establish a Debt Respite Scheme in Northern Ireland following a public consultation, but it isn’t yet available.
» MORE: Compare credit cards
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