Five top tips for a successful balance transfer

If you've got a stack of debt on your credit card, now's the time to do something about it!

However hard you try, it can be difficult to keep your spending under control sometimes. So if you've spent a lot on your credit card and you know you can't afford to pay off the balance in full, you might be worried about how much interest you're going to be hit with.

The best solution to this problem is to transfer your debt onto a 0% balance transfer credit card - and that way you won't have to pay any interest on the debt for a year or more.

Sounds pretty good, right?

So to give you some help when it comes to applying for your card, here are five top tips for a successful balance transfer:

1) Be brand aware

When applying for a balance transfer, you'll find that you can't transfer debts between cards issued by the same company.

For example, if you already have a credit card with Norwich & Peterborough, you won't be able to transfer your debts to the Virgin Credit Card because both cards are issued by MBNA.

So this can be a tad inconvenient - particularly because it's not always clear which companies issue which cards. Luckily, however, you can find a comprehensive list of which cards belong to which providers in The secret truth about your credit card.

So before you apply for a particular credit card, make sure you check to see whether you actually can.

2) Consider all the benefits

Most 0% balance transfer cards only allow you to transfer debt from one credit card to another. However, a select few allow you to transfer part of your credit limit straight into your current account - as a cash or money transfer.

The Virgin Credit Card is one such card - so you can pay off an expensive loan or overdraft and still enjoy the same promotional 0% interest rate that you would on standard balance transfers.

Just be warned, however, that balance transfers do come with a fee - usually around 3% for a standard balance transfer, and around 4% for a money transfer.

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3) Avoid spending on your balance transfer card

Until the start of this year, the majority of credit card operators used a nasty trick called negative order of payment.

In a nutshell, it meant that any payments you made on your credit card would go towards your cheapest debt first, while the most expensive debt would be paid off last.

However, since January 2011, credit card lenders have had to move over to positive payment hierarchy. But while this appears to be good news, unfortunately this hasn't stopped some lenders from bending the rules slightly. As a result, I still think you're better off avoiding spending on your balance transfer credit card. If you need to spend on a credit card, apply for a 0% on new purchases credit card instead, such as the Tesco Clubcard Credit Card which offers 13 months interest-free spending.  

Alternatively, you could opt for a credit card which offers an equal 0% period for balance transfers and purchases. For example, the Sainsbury's Finance MasterCard with Nectar Card offers an interest-free period on both balance transfers and purchases for 12 months, as does the Barclaycard Platinum with Purchase Visa.

4) Getting accepted

When you're applying for a 0% balance transfer credit card, the last thing you want is for your application to be rejected.

So it can be a good idea to check your credit rating before applying for a credit card to ensure there are no marks against your name. You can get a free credit report from Experian if you sign up for a 30-day trial. If you find you have a low credit score, there are various steps you can take to improve it. Read 10 steps to a perfect credit record for some tips.

However, while this might seem straight-forward, sometimes getting rejected for credit can be completely out of your hands. As Jane Baker explains in The secret reason banks reject you for credit, every year between mid-August and November, the annual canvass takes place where new registration forms are delivered to every home in Britain so the electoral roll can be updated en masse. 

So this means the electoral roll won't be updated during that time, and instead, any changes sent to local registration offices will be stockpiled until 1 December. This means that if you move house during this period and apply for credit, it's very likely you'll be rejected. That's because the new address you give on your application won't match with your old address which is still on the electoral roll.  

Of course, this won't affect you right now, but it's certainly worth bearing in mind for the future. If you know you are likely to move home during that period, make sure you apply for credit in advance - before you leave your old address.

5) Make your payments on time

Once you've successfully got your hands on a 0% balance transfer credit card, you need to ensure you remember to make your monthly payment.

If you completely forget, or you're late, your card provider usually has the right to cancel your 0% deal there and then - meaning that instead, you'll be hit with an interest rate of around 16%. Ouch. Missing payments could also have a negative impact on your credit record.

So make sure you always remember to make your payment on time - a good way to do this is to set up a direct debit to automatically make the minimum payment each month - or preferably more than the minimum if you can afford it.

This is a classic article that has been updated for 2011.

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