Balance transfer cards: pay off your debt with no interest and low fees

For those in debt, balance transfer cards can provide vital breathing room. Here you can work out whether you need one, find the best card and avoid fees.

What is a balance transfer card?

A balance transfer is moving your debt in order to pay it off.

Unlike a normal credit card, balance transfer cards won’t charge interest on your debt for a set term. This could last for up to three years, giving you an opportunity to pay off your debts.

Best of all, if you are able to pay off your debt quickly, you can avoid any costs whatsoever.

Just don’t use your balance transfer card for spending – interest rates are applied to new purchases and are typically high.

How does a balance transfer card work?

Applying for a balance transfer card is like any other credit card; providers will take into account your credit rating.

A limited selection of cards is available for those with a poor or limited credit history.

If you are approved, you’ll often need to pay a fee, usually a percentage of the balance you’re transferring, typically between 1-3%. However, fee-free cards are also on offer.

Once you have moved your balance across you’ll need to keep up with your minimum monthly repayment and should aim to pay off your entire balance within the interest-free period.

Finding the best balance transfer card

The best balance transfer card for you depends on the answer to two questions: how much debt do you have and how quickly can you pay it off?

No fee or low-fee cards are available if you can pay off your debt quickly. Work out how quickly using a free online calculator.

If you’ll need longer, it’s vital you consider the fee.  As fees are percentage based, a large amount of debt could incur a large fee, which could wipe out your savings from avoiding interest payments.

Confused? Our comparison site can do the calculations for you, showing the saving you could make compared to your current credit card.

Advantages of a balance transfer card

Moving your debt onto a balance transfer card can save you hundreds of pounds in costly interest: the average credit card in the UK charges an eye-watering 19.9% APR, so any debt you have will be racking up interest at an alarming rate.

For example, assume you had £5,000 outstanding on your existing credit card, with an interest rate of 20%. If you switched to a 0% balance transfer card, paying back £250 a month, you could pay off your debt in 20 months and save over £1,100.

At 0% interest, for small debts balance transfer cards beat personal loans from banks and help you avoid payday loan providers.

Balance transfer cards can play an important role as part of a wider strategy to pay off your debt. Read more here.

Disadvantages of a balance transfer card

Like any credit card, the low fees and long interest-free terms you see advertised for balance transfer cards may not be available to you.

This applies particularly if you have a poor credit rating.

If you can pay off your debt now, avoiding a balance transfer card could help your credit rating. Applying for a card and being in debt – even though you’re no longer paying interest - both affect your rating.

If you’ll need to make new purchases on your card, consider an ‘all round’ card which can offer interest-free terms on balance transfers and new debt.

Balance transfer card dos and don'ts

Don’t use a balance transfer card for purchasing anything.

Don’t apply for several cards at once, as it will show up on your credit record. Use our soft credit check to see your chances of approval without touching your record.

Don’t miss a payment, otherwise, you’ll lose your 0% rate.

Do talk to your current lender first to see if they’ll offer you a deal

Do pay off the maximum amount you can comfortably afford each month

Do check the terms of your balance transfer card, such as whether you need to transfer the balance within a certain number of days. Breaking these terms could result in high interest rates.

Do set yourself a calendar reminder for when your interest-free period is about to end, as the card provider won’t necessarily contact you.