What Is a Balance Transfer Credit Card and Should You Use One

A balance transfer is the process of moving the outstanding balance from one or more credit cards to a new card, typically one that offers a zero per cent or low interest rate on transferred balances for a promotional period. During that promotional period, you pay no interest on the transferred debt, which means every pound you pay goes directly toward reducing the balance rather than servicing interest charges. For people carrying credit card debt at typical rates of 20 to 30 per cent APR, this can save a significant amount over the transfer period.

How the transfer works in practice

When you apply for a balance transfer card, you specify which existing card or cards you want to transfer from and the amounts involved. The new provider pays off those balances and moves the debt to your new account. You then make monthly payments to the new card instead. Most providers charge a balance transfer fee — typically two to three per cent of the amount transferred — which is added to the new balance. This fee is usually still much less than the interest you would have paid on the original card, but it is worth factoring into the calculation.

The promotional period and what happens after it

Zero per cent balance transfer offers typically last between twelve and thirty months depending on the card and your credit profile. After the promotional period ends, the standard interest rate — often 20 per cent or more — applies to any remaining balance. The purpose of the transfer is therefore to clear as much of the debt as possible during the zero-interest window. Dividing the transferred balance by the number of months in the promotional period tells you the monthly payment needed to clear it completely before the rate changes.

Common mistakes that undermine the benefit

The most frequent error with balance transfer cards is using the new card for additional spending. New purchases on a balance transfer card are often charged at the standard rate, not the promotional rate, and minimum payments are usually applied to the cheapest debt first — meaning your new purchases accumulate interest while the transferred balance sits at zero per cent. Keep the balance transfer card for the transferred debt only and use a separate card or debit card for new spending. Also do not miss payments — a missed payment can trigger the end of the promotional rate immediately on some cards.

Eligibility and credit score considerations

Balance transfer cards with the longest zero per cent periods are generally reserved for people with strong credit scores. If your credit score has been affected by debt difficulties, you may be offered a shorter period or a higher fee, or declined. Applying for multiple cards in quick succession can also affect your credit score through hard search footprints. Checking your eligibility with a soft search tool — which does not affect your credit file — before applying is worth doing. MoneySavingExpert and MoneySuperMarket both offer eligibility checkers.