Balance transfer credit card offers

The balance transfer interest rate is the introductory interest rate charged on your existing balance when you transfer it to a new credit card. This introductory rate typically lasts between 6-24 months but can last longer in some cases.

So a credit card with a 12-month 0% balance transfer offer means you would pay 0% interest on the existing credit card debts you transferred to the new card for 12 months.

There are a number of fees and costs that may be involved with a balance transfer credit card. These include:

• The credit card transfer fee: balance transfer fees are one potential trap you need to look out for, as these fees can be up to 3% of the amount being transferred.
• The credit card interest rate: the revert rate is the interest rate that the card switches to after the introductory promotional period. If the card has a high revert rate, you may want to consider carefully whether you’re able to pay off your debt by the time the low-rate period ends.
• The credit card annual fee: If you’re looking at a 0% balance transfer deal for up to two years or more, you may think you’ve struck a great deal. But beware, these credit cards with a long interest-free timeframe may charge a higher annual fee. So depending on how much you transferred, any saving you make on interest may be wiped out by the card fees.

A 0% balance transfer shouldn’t be the only thing you consider when you’re looking to transfer your credit card debts. These introductory balance transfer offers may not necessarily provide better value than a credit card which charges interest immediately.

For example, a card that comes with an interest-free period but a high annual fee could actually end up being more expensive over the long-term than a card with no interest-free period but no annual fee.

When taking out a balance transfer, it’s typically also a good idea to focus primarily on paying off as much of your debt as possible before making any new purchases with your card.

If you have other existing credit cards, you may want to consider paying off and cancelling your previous cards, if possible, to reduce your temptation to spend and help you repay your other existing debts quicker.

Failing to repay your debts in time on a balance transfer deal could keep you in a cycle of debt, so make sure you compare your options thoroughly before deciding. You may want to seek advice from a qualified adviser.

Ideally, if possible, it could be worth considering a card which combines a 0% balance transfer rate, no upfront or annual fees, and a competitive revert rate.

But if you’re having trouble making credit card repayments due to coronavirus, you may also want to contact your credit card provider and speak to them about applying for financial hardship.

Canstar compares balance transfers using a unique, sophisticated methodology that considers price and features. We compare products from across the industry, assigning our 5-Star Rating to products offering outstanding value.

You may also want to consider some of the features Canstar compares:

• Does the card offer an interest free or low interest deal?
• Does the card charge an annual fee? Credit cards with a longer interest-free timeframe may charge a higher annual fee, so be wary of overall costs when choosing a balance transfer.
• How long is the transfer period?
• What is the balance transfer revert interest rate? This is the interest rate that the card switches to after the introductory low-rate period.
• What is the balance transfer fee?

You can compare balance transfer cards yourself, based on your own financial and personal requirements, using the comparison selector tool at the top of the page.

If you apply for a credit card with a balance transfer offer, this is noted on your credit report. If you apply for multiple credit cards in a short space of time, this can negatively impact your credit score.

Some ways a balance transfer could affect your credit score include:

• If you make a number of applications within a short period, Equifax notes this will fag you as a greater risk than if you make infrequent applications with only a few credit providers. Credit enquiries stay on your report for five years
• If you are approved for a balance transfer credit card but are unable to meet the regular minimum repayments, this could also have a negative impact on your credit score. Your repayment history stays on your report for two years, while defaults stay for five years.
• If you do not close your old account, you’ll also need to be careful that you make your repayments on time for both cards. If you don’t, this could also negatively impact your credit score. It’s wise to close your old account if you can so you won’t be charged two sets of fees and don’t accumulate more debt.
• If you are unable to repay your credit card balance at the end of the promotional period and have to move the remaining amount to another credit card, this would also be noted as an enquiry on your credit report.

If you’re not sure what your credit score is, you can find out using Canstar’s free credit score checker.

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