How to transfer a credit card balance

If you've run up a big credit card debt and don't know how to clear it, a balance transfer credit card could dig you out a hole.

These 0% credit cards give you the opportunity to clear your debt without paying a single penny in interest, over a period stretching up to three years.

Why pay an APR of 19.9% when you could slash that to zero, and potentially save hundreds or thousands of pounds in interest?

Balance transfer credit cards are among the most generous financial products, but they have pitfalls so you need to get the balance right.

Zero interest

So what is a balance transfer card? It is a standard credit card aimed at existing borrowers who want breathing space to pay off their debt.

Effectively, you use your new credit card to pay off the old one, then pay zero interest for anything up to 36 months, or three years.

The first step is to find out which card suits you best. Your existing credit card provider will not let you simply switch to another one in its range, so you need to find a new issuer.

Here are three of the best balance transfer cards around today.

Most cards charge a transfer fee, which range from 0.99% to 3% of your balance, which would cost between £99 and £300 on a £10,000 balance.

The longer the introductory rate, the higher the fee, so if you can clear your debt faster then search for 'low fee balance transfer credit cards' instead.

Big savings

That transfer fee is a price worth paying, though. If you had a £10,000 balance at an APR of 18.9% and only made the minimum 2.5% payment each month, you would pay an incredible £1,749 in interest a year.

You can apply by telephone or online, or even an app. Once your application has been accepted, tell your new lender how much you would like to transfer and give them the 16-digit number and other details of the old card.

Typically, you can transfer from £100 up to a maximum 90% of your new card's credit limit

Sadly, like all 0% credit cards, they are not open to everybody. If you have a poor credit record, you may be offered a less attractive deal, or be rejected.

Pay it down

Then the hard work begins, as you should aim to clear your debt within the introductory period, rather than simply making the minimum monthly repayment.

That's because when the introductory rate expires, you will automatically transfer to an APR of around 19.9% again.

Although you could pay it off with another balance transfer card, there is no guarantee you will be accepted.

Also, resist the temptation to make purchases on your credit card, because then you pay the full APR on new spending.

With a little care, you can swing the credit card debt balance firmly in your favour.

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