Balance Transfer Credit Cards

A balance transfer credit card allows you to move the balance of your existing credit card onto a new card with a different credit provider.

Balance transfer credit cards may allow you to transfer money interest free or at a low rate of interest for an introductory promotional period. This can be handy if you are looking to clear an existing balance within a certain timeframe without incurring any additional or high interest. It’s good to be aware that some cards may charge an initial fee when transferring the balance.

Advantages of a balance transfer credit card

• If you have more than one credit card with an outstanding balance, a balance transfer credit card could enable you to move the balance of an existing card onto another. This could make it easier to manage and keep track of your credit.
• Transferring a balance onto a balance transfer credit card with low or zero percent interest could help you pay off your balance sooner.

Things to consider before applying for a balance transfer credit card

• When thinking about how to transfer a balance, it’s important to remember that some credit cards may offer an interest-free promotional period for a set period of time (for example, 12 months). However, not everyone who applies will be eligible for the promotional rate. If your application is successful, the interest rate you will be offered will depend on your individual circumstances, such as your credit history and affordability.
• If you don’t manage to clear the outstanding balance before the promotional period ends, you will be charged interest at the standard rate. If the standard rate on your account is higher than the rate you are already paying with your current credit card provider, this could mean you end up paying more in interest in the long run.
• An initial fee may be charged when you transfer the balance. You may wish to look into whether or not the fee outweighs the interest you will save by transferring.
• There may be limits on how much of your existing balance you can transfer to the new card.

How do balance transfer credit cards compare to other credit cards?

Is a balance transfer credit card the right option for you?

With so many different options on the market, it can be tricky to know which credit card is the best match for you.

While we’re going to be mostly focusing on the benefits of a 0% interest balance transfer credit card, we have also put together brief explanations of some of the most common types of credit card, which we hope will help you make the best decision for you and your personal situation.

For further information on how credit cards work, please visit our blog.

• Credit builder credit card. This card may be ideal for those wanting to build up their credit score. Using a credit builder credit card carefully and making more than the minimum repayment on time every month will demonstrate that you are able to manage credit responsibly and reliably, and could also increase your chance of being approved for financial products in the future.
• 0% purchase credit card. A 0% purchase card allows you to make purchases interest-free for a promotional period.. This could help if you are looking to spread the cost of a large, one-off purchase and feel confident that you will be able to make the monthly repayments. Once the promotional period has ended, any remaining balance on your credit card, as well as any further purchases you make, will be charged interest at your standard rate.

Will using a balance transfer credit card affect my credit score?

Using any credit product – including a balance transfer credit card - will affect your credit score. Whether your score is affected negatively or positively is down to how you manage all of your credit commitments.

If you fail to make at least the minimum monthly repayments on time every month, it’s likely that your credit score will decline.

Keeping on top of your borrowing may result in an increase in your credit score.

Remember, making multiple credit applications over a short period of time could also have a negative effect on your credit rating.

Can a credit card affect my mortgage?

There are a number of ways that credit cards might affect a mortgage application.

Your credit score plays a big part in your mortgage application, and your score may be dictated by how you manage your credit commitments, including cards.

Those with low credit scores may find that their mortgage options are somewhat limited.

It’s possible that a low credit score does not necessarily mean bad credit history – it may just simply mean that you have no credit history available for a finance providers to assess you as a potential customer. This is quite common among young people who have never paid bills, or those who have never borrowed credit. In this instance, a credit builder credit card may help to build up and establish a credit rating, which in turn may help when you come to apply for a mortgage.

Before you make a commitment to any financial product, including a balance transfer credit card, there some things you should think about.

Be sure that you will be able to comfortably manage your monthly repayments without affecting your priority bills, such as food, housing and utilities. or your credit rating will suffer. This could hinder your chances of being accepted for a mortgage, or mean that you are offered less desirable interest rates.

FAQs

How much balance can I transfer?

The balance you can transfer will depend on the limit set by your card issuer. Your credit limit is based on factors such as your credit score. In some cases the credit card provider will allow you to use a percentage of your credit limit to transfer a balance from an existing card.

Can I transfer a balance from more than one credit card?

You may be able to transfer balances from more than one existing credit card, depending on your credit limit. You can transfer up to 90% of the remaining credit limit on your balance transfer credit card. You may be charged a fee for each transaction; make sure to read the terms and conditions of your credit card account carefully before deciding if a balance transfer is right for you.

What happens to my existing credit card once the balance has been transferred onto my new card?

This is entirely up to you. Once the balance has been moved from your existing credit card, you may wish to cancel your card to avoid spending and gaining further interest.

On the other hand – if you’re sure you won’t be tempted to spend on it - keeping your card active could help to improve your credit rating. Showing lenders that you have responsibly borrowed in the past may increase your chances of being approved for other financial products.

For further information on closing your credit accounts, check out our blog.

Can I get a balance transfer credit card with poor credit history?

Poor credit history and a low credit rating may make being approved for credit more of a challenge. If you are approved for a balance transfer credit card with a less-than-perfect credit score, you may be offered a lower credit limit or a higher interest rate.

Having a good credit score could increase your chances of being approved for financial products.

How can I improve my credit score?

There are a number of ways that you can improve your credit score. Signing up to the electoral roll may increase your rating, as this makes it easier for lenders to check your identity. You should also make sure all of your bills and any current credit commitments are paid on time every month, and amend any errors (such as a misspelled address or an incorrect postcode) on your credit report as soon as possible.

You can check your credit score at Experian, TransUnion and Equifax.

Experian offer a totally free service, whereas Equifax and TransUnion charge after the initial 30-day free trail period (£14.95 a month for Equifax, and £14.99 a month for TransUnion)