nigel woollsey

Nigel Woollsey

Online Writer
Published: 11/02/2019

At a glance

  • The great thing about a 0% balance transfer credit card is that (providing you don't make any purchases or withdraw any cash using your card) 100% of your payment goes towards reducing your debt.
  • You will have to pay a balance transfer fee which is normally between 2% - 3%.
  • Make sure that you pay at the very least the minimum payment each month – Ideally you should aim to repay more than this to ensure you clear your debt before the introductory interest free period ends.
  • To make the most efficient use of your 0% balance transfer card avoid making any new purchases or withdrawing any cash on your credit card.

A 0% balance transfer credit card can save you a quite a bit in interest if you currently have balances on expensive credit cards and store cards.

How 0% balance transfer credit cards work

Although you can transfer a balance to most credit cards, those that offer an introductory 0% interest period can save you the most money. These cards do still tend to charge a balance transfer fee when you move debt across, but they don't charge interest on the transferred balance for a set introductory period.

Most credit cards will let you transfer a balance, although this will be subject to the following conditions:

  • Your credit limit.
  • The size of the balance you want to transfer.
  • Who the balance is with (if your balance is on a card that is part of the same group, you may not be allowed to transfer it). 

If you want to transfer a balance, you will normally have to pay a fee to the credit card provider you are transferring the balance to. This is usually in the region of 2% to 3% of the amount you transfer, although some fees can be higher while other providers charge absolutely no fee at all.

At the end of the introductory period, your transferred balance will go onto your lender's standard balance transfer rate, which will most likely be around 19% per year.

 

Do...

Don't...

  • Make sure you pay at least the minimum payment each month on your credit card, otherwise the provider may decide to withdraw the introductory 0% offer and put you on a more expensive interest rate.
  • Try to pay more than the minimum balance – It’s unlikely you’ll clear your debt before the interest-free period ends if you only pay the bare minimum.
  • Make a monthly repayment plan and try to pay more than the minimum payment. Some providers will let you set up a Direct Debit for a set amount or fixed percentage every month or you can set up a standing order, so take advantage of this and get your debt repaid!

 

  • Make purchases or withdraw cash using the credit card, as this will mean that you're paying interest and not using the card in the cheapest and most efficient way.
  • If you like to spend on your credit card, keep a separate card for purchases. However, even if this has a generous interest-free period of its own, try not to spend too much as you could end up paying off one debt only to find you have run up another!
  • If you have a big purchase in mind, and want to do a balance transfer at the same time, you could go for a combined 0% card for balance transfers and purchases. These tend not to have the longest 0% period for either transfers or spending, but on the plus side you have just the one card to manage.

You must still make the minimum payment!

Unlike some interest-free loans you may get from furniture or electrical retailers, a 0% interest credit card does not mean that you don't make payments for an initial period.

You must pay at least the minimum payment every month: you can set up a Direct Debit to avoid missing it.

Be careful not to get into further debt

When you take out a new credit card to transfer a balance, the danger is that you put a balance back on your old card and end up with twice the problem.

If you don't want that to happen, you could:

  • Cut up your old card to prevent you from spending on it and close the account with the card provider.
  • Ask your credit card provider to reduce your credit limit.

Moneyfacts tip

Moneyfacts tip nigel woollsey

Balance transfer credit cards have become increasingly competitive with their introductory periods, so shop around to get the best deal.

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

pile of credit cards

At a glance

  • The great thing about a 0% balance transfer credit card is that (providing you don't make any purchases or withdraw any cash using your card) 100% of your payment goes towards reducing your debt.
  • You will have to pay a balance transfer fee which is normally between 2% - 3%.
  • Make sure that you pay at the very least the minimum payment each month – Ideally you should aim to repay more than this to ensure you clear your debt before the introductory interest free period ends.
  • To make the most efficient use of your 0% balance transfer card avoid making any new purchases or withdrawing any cash on your credit card.

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