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Last updated February 2021
A balance transfer credit card is a card that lets you move existing debt from one card to another. If you have a credit card with high-interest rates, you can transfer that balance to a new card with a better rate.
Balance transfer cards work by allowing you to transfer your existing debt on one card to another credit card. There is usually a fee to pay for this, which may or may not be worth it depending on how much interest you are being charged.
Many balance transfer credit cards have introductory offers which will let you do free 0% balance transfers for a set period. If you have mounting debt on one credit card with high-interest rates, opening a balance transfer credit card could be the best way to save money and clear your balance faster.
Sometimes balance transfer credit cards also have an interest-free period as well as free balance transfers. This means that the debt you transfer to your new card won’t be subject to interest rates.
A balance transfer credit card can be a fast, simple and pain-free way to save yourself money. Interest rates can pile up and become very costly, all while making it harder to clear your original balance. A balance transfer credit card solves that problem.
Here are some other advantages of a balance transfer credit card:
While the advantages of a balance transfer credit card are a great way to save money, there are also some downsides to be aware of.
We have listed out some frequently asked Balance Transfer Credit Card questions.
Balance transfer fees usually work as a percentage of the amount you want to transfer. This percentage will differ between banks, but it usually ranges between 1% to 3% of the total amount you wish to transfer.
Taking out any type of loan or credit card will have some impact on your credit rating. This may cause an initial drop in your rating, but it isn’t necessarily a bad thing. If you are trying to clear your debt and can commit to paying the minimum (or preferably more) off each month, a balance transfer credit card can actually be a good way to build a healthy credit rating.
Lenders will always look at your credit rating to approve or reject any applications for credit. There are specific credit builder cards and credit cards designed for people with bad credit on the market. However, just because you have bad credit doesn’t mean you can’t get a balance transfer credit card. Be aware that your credit limit may only be small, and you may attract high-interest rates.
If you are not planning to use the card again, you may want to destroy it. Even if it expires or your account is closed, an identity thief may be able to use the card’s information for fraud. However, there is a downside to closing your old credit card account. This reduces your overall credit utilisation, which is how much credit you’ve taken out versus how much you can take. If your credit limit is smaller, this turns whatever debt you have into a bigger percentage of your overall credit limit.
As everyone’s circumstances are different, there is no ‘best balance transfer credit card’. However, by using a comparison website, you’ll be able to find the best balance transfer credit card for your needs.
Depending on your circumstances, it may be possible to get multiple balance transfer credit cards. However, you can not have more than one balance transfer credit card from the same bank, or in some cases, a banking group.