Debt & Borrowing

How to reduce the cost of your credit with 0% balance transfer card

If you’re struggling to pay off credit card debt, a 0% balance transfer credit card may be the answer. It can help you pay off outstanding debt faster and save money doing it.


What is a 0% balance transfer credit card? 

A 0% balance transfer credit card consolidates debt from existing credit cards. For a set period of time, you do not pay interest on the debt you moved to the 0% card. 

Balance transfer cards do not reduce the amount of money you owe but a 0% interest rate can be a relief, especially if you are used to paying higher interest rates (or APR (Annual Percentage Rate) on your existing credit card debt. 

For example, if you have credit debt of £5,000 with a 15% APR, you pay £750 every year in interest fees. By moving to a 0% balance transfer card, you pay no interest on the £5,000 (while the promotion lasts), although there might be a transfer fee that reduces the overall savings. 


How does a balance transfer work? 

There are many 0% balance transfer credit card offers in the UK. In fact, many card companies offer a balance transfer credit card with no fee to entice new customers. 

You can apply online and once approved, the card company will help you organise the transfer(s) or arrange them for you. 


Can I get a balance transfer cards with poor credit?

There are balance transfer credit cards for bad credit holders. But having a good credit score gives you access to the best balance-transfer deals. 

For example, a strong credit score unlocks longer 0% balance transfer deals, lower balance transfer fees, a lower APR on new debt and lower APR on debt after the 0% promotion expires.

Do balance transfers hurt your credit? 

If you are trying to build your credit score, keep in mind that applying for a new credit card can temporarily reduce your score. So don’t apply to many at once. 

Also, your old credit card accounts will still be open until you close them. Closing those long-standing accounts can help you resist the urge to build more debt, but it can also temporarily hurt your score. 

On the other hand, on-time monthly payments on your new card should help boost your credit score. 


Is there a downside to balance transfers? 

Choose a balance transfer credit card 0% offer wisely, and take note of the details. The 0% promotion may be a limited time deal, such as 6 months or 28 months, and may only apply to the transferred sum, not new debt. 

And beware, many cards have a transfer fee. These can be up to 5% of the transferred amount, depending on the card. This can reduce your overall savings, but still be worth it. The calculator tool explained below can help you decide. 

As the cardholder of a 0% balance transfer card, you still have to make the minimum monthly payments on time or risk losing the 0% rate. Ideally, you can set up an automatic payment plan to pay off the debt before the promotion expires. If not, you may find that the interest rate on your remaining balance increases significantly.

You should also consider the new interest rate you will be paying after the end of the 0% period. Is it more higher or lower than you current rate?


Is it worth doing a balance transfer? 

Do the maths first. You should know how much money you might be able to save by transferring. 

You need to factor in your current outstanding balance, current APR, current monthly payments, and how that would change if you made the switch to a 0% balance transfer card with no fee, or with a fee, how long that 0% promotion period would last and the new APR at the end of the promotion period. 

Don’t worry, Which is providing a free calculator here

And if you’re a Money Dashboard user, you can use our budgeting tools to see how you can reduce your expenses to repay as much debt as possible while on the 0% period.


How do I find a good balance transfer card?

Use a comparison tool site like Money Super Market or Compare the Market to find the best deals. 


Remember to check your credit score before applying for cards. That way you know what cards you are eligible for, and lower the risk of rejection.

All content is for informational purposes only and is the opinion of the author. Nothing on this website should be interpreted as "advice".

Money Dashboard Ltd make no representations as to the accuracy, completeness, suitability or validity of any information on this site and will not be liable for any errors or omissions or any damages arising from its display or use.

Becca Lipman

Financial Editor