Compare The Best Balance Transfer Credit Cards

A balance transfer credit card allows you to move your existing credit card balance from one card over to another card, usually with a different bank, allowing you to take advantage of 0% interest rates on the balance transfer amount for a period of up to 12 months. To get the most out of a balance transfer card you should look for the lowest possible balance transfer rate combined with low annual fees, all of which means you can pay back your debt faster.

More Details About Credit Card Balance Transfers

Many credit cards feature the option of a balance transfer, which when used correctly can offer you a great opportunity to save money on credit card debt repayments and help sort out your finances. If you already have a credit card with a debt on the balance you can make a balance transfer, which is moving the debt to a new credit card from a different bank. The new card provider offers a special introductory promotion for a fixed period of time in which you can repay the debt at a competitively low interest rate.

Banks use attractive credit card balance transfer deals as a way of luring new customers away from competing banks, generating business with their own products. The provider benefits if the customer continues to use the card after the promotional period finishes, or by applying other fees and interest to their account. As a customer you can also benefit from credit card balance transfers, so long as you understand how they function and use them in the most beneficial way.

The length of the introductory promotion varies depending on the deal, but is usually between six months to a year. Some credit cards feature longer-term balance transfers of up to 15 months. During the promotional period your repayments attract a special low interest rate, meaning you can save money while clearing your debt.

The interest rate also varies greatly between different deals, but is typically low on short-term balance transfer periods, increasing slightly with longer promotions. Some credit cards offer a 0% balance transfer rate, usually only for the first three to nine months. If you think you can repay your debt within this period, this type of card can be a very good choice, offering the chance to repay your balance interest-free. If you need more time to repay the debt you should probably consider a deal with a slightly higher balance transfer rate but a longer period to repay the debt.

It is very important to note that the interest rate you pay on any outstanding balance changes when the promotional offer ends. Usually the rate reverts to the credit card’s standard purchase rate, or sometimes the cash advance rate. When comparing and choosing balance transfer credit cards you should consider the balance transfer rate, the length of the promotional period and how the deal changes at the end of this period. You should also take into consideration the card’s other features such as the annual fee, purchase and cash rates to make sure that extra charges don’t negate the money you save on the balance transfer.

Five Tips for Using a Balance Transfer Card

Make sure your credit rating is good: Of course you want to use a balance transfer to clear your debts, sort out your finances and improve your credit rating. Credit card providers, however, usually require that you have a good credit rating to get your application approved. Making sure your credit report is up-to-date and your rating is good will greatly help your chances of getting approved.

Find the balance transfer period and rate that suits your situation: When you are looking at different balance transfer deals it’s essential to find the one that is suitable to your budget. Calculate how big your debt is and how much you can realistically afford to repay each month, thus how long the balance transfer period should be. If you are confident you can pay the balance in a short period of time, or are expecting a lump sum of money to become available to repay your debts, a short balance transfer with a 0% rate is an ideal way of saving yourself some money.

Try not to spend on your credit card until the balance is repaid: The best way to use a balance transfer card is to put it away in a safe place and concentrate on repaying the debt. Banks arrange your repayments – the order of payments – according to the amount of interest applied to different card features and rates. This means that the part of your debt with the least interest (in this case the balance transfer) is repaid first, while the parts of the debt attracting higher rates (purchases and cash advances) are paid off last, so the card issuer charges you more interest in total. For this reason it is best practice to avoid making any purchases and cash advances and use your card purely as a tool for clearing debts until the balance transfer offer has ended.

Take advantage of the balance transfer while it is available: Balance transfers have a limited life span, and there maybe a limit on how long after you receive your new card you are able to apply to make use of this feature. Presumably you will have chosen the card because you intend to make a balance transfer, so take maximum advantage of the time available by applying for the transfer straightaway. The initial credit card application form contains a special section to request a transfer of one or more balances, so it is best to complete this when you first apply for the new card.

Move your balance from card to card, but take note of any hidden clauses: In theory, you should be able to move your balance to a new credit card from a different provider, make use of the low interest rates of the introductory offer, and then move your debt onto a further new card when the offer expires. You must be aware, however, that credit card issuers may add clauses in their terms and conditions to prevent you switching to a new card at the end of the introductory period. The strategy of moving your debt from card to card also requires a good credit rating to get repeated approval for fresh balance transfers, and a great deal of planning and budgeting. As such it is usually best to focus on repaying your debts in the shortest time possible.

Typical Balance Transfer Features

Interest rate and duration of introductory offer: This is the special interest rate that is applied to your balance during the promotional period, and the length of the promotional period. Generally, the longer the introductory period the higher the balance transfer rate. At the end of the balance transfer period the interest applied to any outstanding balance reverts to a significantly higher rate.

Annual fee: This is the amount the bank charges each year to use their product. The fee covers the general maintenance of the card, and can be a way for the issuer to generate more profit. The annual fee varies greatly between different deals, and it is essential to choose a card with a fee that doesn’t negate the benefits and savings you can make by using the balance transfer feature.

Purchase and cash advance rates: These are the standard rates applied to any purchases and cash advance transactions made using the credit card. As mentioned above, it is best to avoid using a balance transfer credit card for anything other than as a means of clearing your debts during the introductory period. If, however, you do intend to use the card for normal payments, then it is essential to see how interest is applied to these transactions. When the introductory balance transfer period finishes any outstanding balance usually attracts the standard purchase or cash advance interest rate, so it is important to be aware of these figures from the outset. You should also examine all the other features included in the deal such as rewards schemes and other perks, along with ongoing terms and conditions, especially if you intend to continue to use the card after the promotional period ends.