Best Balance Transfers
Cut existing credit card debt costs

Do you have credit or store card debts? Shifting them to a new ‘balance transfer’ card can save you £100s or £1,000s. This daily updated step-by-step guide compares the best buy 0% and long term offers, takes you through choosing a deal and shows how to avoid nasty tricks.

Need a credit card for new borrowing? This article’s about cutting existing debt costs, for new borrowing see the Best 0% Card for Spending article.

What is a balance transfer?

It’s when one credit card repays debts on other credit or store cards; so you now owe it the money instead, hopefully at a special cheap rate.

For example:

• Current debts: Louiscard £3,000 at 18%, Sharoncard £1,000 at 16%.
• New credit: the Danniicard's 0% for 12 months on balance transfers.
• What happens: Ask the Danniicard to balance transfer the debts, it then pays £3,000 to the Louiscard and £1,000 to the Sharoncard.
• New situation: The Louis and Sharoncards are debt-free, as the debt has been transferred to the Danniicard; which you now owe £4,000 at 0%.

Most top balance transfer deals are for new cardholders, and require the debt to be shifted within a couple of months of opening the card account. Yet there are a few existing customer balance transfer deals which are very useful for more efficiently using credit you already have; full details on those are in the Credit Card Shuffle article.

It’s important you don’t confuse cutting the interest with paying less each month, as that’s determined by the minimum repayments. See the balance transfer Q&As for an explanation.

Choosing the right balance transfer deal

This depends on a number of factors… how much debt you’ve got, how quickly you can repay it, your credit score, and how on-the-ball you are financially. The following questions should help you pick the right deal.

BEST BUYS: Cheapest long term deals

This is the no-hassle route; simply get the card, move your debts, then put the card away and pay it off, knowing it’s cheap. Most people will be better off going for a long term cheap ‘stable relationship’ rather than trying to be a credit card tart; as it only takes a few mistakes to make tarting very costly.

The overall top deal: Barclaycard 6.3%.

The gold standard for long term cards is a ‘life-of-balance' transfer deal; here the cheap rate lasts until the debt you've shifted is repaid in full. The current cheapest is Barclaycard's Platinum* card at 6.3% life of balance; you must shift your debts to it within 60 days of opening the account to get this rate. This specific deal's only available through some commercial price comparison websites; this link will take you to the correct deal. Do beware though, this card operates a rate for riskSome credit cards operate a rate for risk policy. This means they have a range of credit cards and you will be offered one depending on their credit score of you. In the worst cases you can actually apply for a card, then be sent a much worse, totally unsuitable card from its range, thus leaving you with a wasted search on your credit file (read more on credit scoring and how it works).

This type of system should be banned, but isn’t, so beware; if you’re applying do consider first whether you’ve a realistic chance of being accepted.
Close policy.

Specialised Alternatives.

• Can you repay in 2 years or under? HSBC* is offering new cardholders 2.9% on debts shifted for 2 years plus a one-off fee of 2.5 % of the balance shifted; for anyone who can repay in two years or under this is a much cheaper option.



• Will it take over 4 and a half years to repay? The Citibank* Platinum iTunes Mastercard, charges 4.9% for the life of the balance, on debt shifted in the first 90 days, plus a one-off fee of 3% of the debt-shifted. After number crunching it works out cheapest if your debt takes roughly longer than four and a half years to repay (although of course taking longer to repay the debt will be more costly overall).

The most important warning about long term debt cards

There’s a hidden sting with these cards; if you spend on them, it’s at a high interest rate and can’t be repaid until all the cheap debt has been. They may try and tempt you with cashback or short term 0% deals on any spending; ignore it. The rule is simple; never, ever, ever, ever spend on these cards. If you do all the benefit will be lost. For a full explanation read the never spend on a balance transfer card section.

BEST BUYS: Top 0% credit card balance transfers

If you can pay your debts off in under a year, or are prepared to be a credit card tart and continually shift debts (read a full how to tart

Credit Card Tarting….

This is all about disloyally shifting your debt from credit card company to credit card company to constantly keep it at 0% interest. Simply shift all debts to a 0% card then six weeks before the deal ends, apply for another 0% balance transfer deal and move the debt over. It takes effort and good diary skills but is the cheapest system.

The problem with tarting

If you don’t shift the debt in time; you’ll pay the full APR (usually 15% - 20%) on all the outstanding debt. Within two or three months, you’ll have lost all that you gained from the 0% period. Tarting needs discipline and organisation, not good intentions. If that's not you, don't try; stick with a long term cheap deal.

Yet it also means, if you are going to tart, then you can ignore the standard APR rate as you’ll never hit it; it’s all about the 0% offer.

Close explanation) then you want the longest and cheapest 0% deal.

It’s not simply a case of the longer the 0% deal the better. Many cards charge balance transfer fees of up to 3% of the debt shifted. Thus it’s a question of balancing the 0% deal and the fee, depending on your needs.

• The Longest 0% deal. 15 months 0% with a 2.98% fee
  
  The longest 0% is with Virgin* which allows new customers to shift debts to it at 15 months 0%, with a fee of 2.98% for doing so. Do beware the Virgin card is part of the MBNA card family though, so if you already have one of you may not get this or be given a lower credit limit.
  
  If you've already got a a Virgin, MBNA or Alliance & Leicester credit card, the best deal is Barclaycard* at 0% for 14 months with a 2.9% fee.
  
  
• Can you pay off the debt in thirteen months? 13 months 0% with a 2.5% fee
  
  Tesco offers 0% for 13 months on debts new customers shift to it, for a one off 2.5% fee. If you can pay the debt off within the thirteen months, then the lower fee makes it a better pick than Virgin .
  
  
• The top fees-free cards. Six months 0% no fee.
  
  There are still a couple of cards around offering fees-free balance transfers. If you’re prepared to rapidly switch cards or can clear your debts very quickly; these are the winners.
  
  The Abbey Zero and Ulster Bank card both give six months 0% with no fee, followed by Capital One Balance Transfer Card at 0% until 1 November 2008 (it does operate a rate for riskSome credit cards operate a rate for risk policy. This means they have a range of credit cards and you will be offered one depending on their credit score of you. In the worst cases you can actually apply for a card, then be sent a much worse, totally unsuitable card from its range, thus leaving you with a wasted search on your credit file (read more on credit scoring and how it works).
  
  This type of system should be banned, but isn’t, so beware; if you’re applying do consider first whether you’ve a realistic chance of being accepted.
  Close policy though so is only for people with an excellent credit rating), the longest available. This is followed by five months with Northern Bank, only available from its Northern Ireland branches.


• Watch out for good junk mail.
  
  This is one of the few areas where junk mail can be positive. Very occasionally direct mail offers, targeted website offers or sign-up stalls in shopping centres offer better deals so keep your eyes open, but ensure you ask about any fees.

BEST BUYS: Top deals for poorer credit scorers The advent of the credit crunch means it’s more and more difficult for anyone with a less than perfect credit history to get good credit limits or decent deals. Assuming you’ve already checked your credit score and followed the tips there for improving it, there are still a number of ways to cut your costs.

• Only got limited/minor issues?
  
  If you haven’t tried in the last year or so, it’s still worth trying an application for the top cards, as listed above. There’s still a chance you’ll be accepted; if you are rejected, then follow the system below.


• Use a ‘credit worthiness' comparison.
  
  The comparison site MoneySupermarket* offers a ‘Smartsearch’ option; which effectively means it assesses your credit worthiness and then tries to match you up with the best card; a similar but far less wide ranging service is offered by Find a lender.

  Importantly, to do it, it doesn’t do a credit search, as that itself would hit your credit score. Instead it just asks a few basic credit history questions and works with credit reference agency Equifax to give a rough and ready assessment, followed by indicating ‘suitable cards’.

  These services are useful, but don’t cover all cards, so they should only be used if you think you may have credit issues. It’s also worth noting the comparisons are basic and exclude many issues; so always double check it’s the correct product for you, following the logic in this article before applying for a card.


• Get cheaper debts without new credit.
  
  You don't need a new card to get new credit. It's possible to play the system and get much cheaper debt by utilising existing customer balance transfer deals to more efficiently use your existing credit. For full details on how to do this, read the Credit Card Shuffle article.

Never, ever, ever spend on a balance transfer card

There is no single more important thing to remember about balance transfers than the following… No matter how often I write or say this, I’m still often asked, "I know you say never, ever, ever spend on the card; but I did and it’s costing me a fortune, what can I do?”. If you have debts from spending on a card with a cheap balance transfer deal it’s likely to cost you a fortune, the only real way to beat this is not to let it happen.

The reason behind this is complex, so if you don’t understand my explanation below don’t worry, just remember the ‘never, ever, ever’ rule and you’ll be fine.

Why it’s such an expensive nightmare

Credit cards allow us to do a number of different things such as spend on them, shift balances to them or withdraw cash. These are all different ‘transaction types’ and it’s the interactions between them that cause the problem.

• Each type of transaction has a different interest rate. Thus while it might be 0% for balance transfers, any spending is likely to be at a much higher interest rate and cash withdrawals even more.


• Your repayments are biased towards clearing the cheap debt first. You can’t choose what your money goes to, the credit card company does. And lenders almost always automatically bias your repayments to pay off the lower interest debts first.

This means the expensive debts from spending are effectively trapped, speedily accruing interest, and you can’t repay them until you’ve cleared all the cheap debt. Thus it can cost a fortune. This is very profitable for lenders; it’s why many cards with good balance transfer deals also have enticements like reward points, cashback deals or short term 0% deals for spending.

While it mightn’t look a big deal; it’ll cost you a fortune. So much so, it’s often cheaper to get a separate card for spending even if it has a higher ‘spending rate' (though of course better still get one with a cheap rate see Credit Card for Spending article). Therefore as a strict rule, never, ever, ever spend on these cards! Just transfer the balance, make the repayment and put the card away in a drawer.

As the table shows, over 6 months nothing beats 0% interest, it'll save a fortune. Yet over the longer time period, a stable relationship card beats everything but pure tarting.

The scale of the savings: £5,000 debt repaying £150 a month
.		After 6 months		Until debt repaid
Card	APR	Remaining Debt	Interest Cost	Time taken to repay	Total Interest	Saving
Standard Card: Smile	18.9%	£4,520	£420	46 months	£1,880	N/A
Bad Tart: 0% for 6 months Ulster Bank	0% & 19.9%	£4,100	£0	42 months	£1,240	£640
Stable Relationship Transfer to Barclaycard	6.3%	£4,240	£140	37 months	£500	£1,380
Good Tart: Rotating 0% offers	0%	£4,100	£0	34 months	£0	£1,880
Note: Assumes cards are only used for balance transfers

Balance transfer Q&As

Q. How do I practically go about doing a balance transfer

A. When you apply for the new card, it will usually include a ‘do you want to transfer debts from other cards?’ section. In this you just put in the details of the other cards; and if you’re successful getting the new card, it will pay them off. Even if you don’t do it at initial application; most cards normally allow you to do a transfer within a set period of getting the card (usually 30 – 90 days); all you need do is call up and send them the details of your other cards.

Q. Does having a new lower interest rate mean I pay less each month?

A. No. These are totally separate things. Unlike loans, with credit cards you choose how much you repay each month, though every card has a set ‘minimum monthly repayment’. The interest rate is the cost of the debt; for example, a rate of 20% on £1,000 means it costs you £200 per year (see the how Interest Rates work article for more).

This does mean in some circumstances you may shift debt to a new cheaper card, but if it has a higher minimum, you’ll need to pay more each month. If that may be unaffordable, ensure you check the minimum repayments before switching.

Q. How much should I pay off each month?

A. As much as you can, even 0% debt is still debt. The more you repay, the faster the debt disappears. Especially important is that you try and pay more than the set minimum. For more on that and tips on how to do it, read the Minimum Repayments: Danger! article.

Q. If lowering the interest doesn’t mean I pay less, what’s the point?

A. The cheaper the interest rate, the more of your repayment goes towards clearing what you owe than servicing the interest, meaning you’ll be debt-free more quickly and will have to pay less in total to do it.

Q. What should I do if the credit limit I get isn’t high enough?

A. Move what you can, then if needed simply apply for another provider's card and move the rest there. Don't leave it unused out of exasperation, it's already on your credit file so you may as well use it (read the Credit Card Limit: Didn't get what you wanted? article).

Q. How will the credit crunch impact balance transfers?

A. The credit crunch means it’s more difficult to get good balance transfers. One of the great worries is that as credit limits are getting lower, people will need two new cards to cover all the debts on one old card. This in turn means more applications which will hit credit scores. If this is something that’s happening to you, the sensible strategy is to turn to long term deals to ensure you have access to a cheap rate permanently.

Q. How many times can I do a balance transfer?

A. As many times as you like, you can balance transfer from card, to card, to card. The only limiting factor is whether your credit score is high enough to be accepted for new cards.

Q. At what point during tarting should I apply for a new card?

A. The best time to apply is roughly six weeks before your current 0% deal ends. This gives you enough time to apply, find out if you’ve got the card, and shift the debt, while your other card is still at 0%. Use the Tart Alert to remind you when.

Q. Does being a credit card tart hurt my credit score?

A. Multiple applications, especially close together, and high outstanding debts, even at 0%, diminish your ability to get competitive credit. The most important preventative measure is to spread card applications out.

Do this and most people with reasonable income and no missed payments should be able to tart without worry, though occasionally some get scored out (read Credit Ratings: How they work and how to improve them article).

Q. I understand the ‘never ever ever rule’ but what if my card’s got a cheap deal for spending too?

A. The basic answer is always err on the side of caution. However, if a card has a 0% deal for purchases and balance transfers that lasts exactly the same length of time, then it’s fine to spend on. However if they’re not identical e.g. 0% for purchases for 3 months and 0% on balance transfers for a year… don’t do it. If you haven’t cleared your spending debts (and it may not be possible to do so, depending on the repayment hierarchy) they’ll end up being trapped in like normal.

Q. Is the balance transfer fee interest free as well?

A. This depends on the specific card; and it does vary. Usually you do pay interest on the fee, yet it’s arranged so your first monthly repayment pays all of it off, so the interest is negligible.

Q. Which cards give the best credit limits?

A. This is almost impossible to answer, you’re credit scored depending on that lender’s wish list for a profitable customer. So it all depends on how well you fit what it wants. In general though Barclaycard has a reputation for lower credit limits and the MBNA range of cards higher limits.

Q. Why did it reject me, I’ve got a great credit score?

A. Remember lenders choose on their wish list for profitable customers, its not all about risk… read the credit scoring article for a full explanation. Of course you should check for errors on your credit file, but hard and fast reasons are difficult to come by, it may be as bizarre as it was choosing to give credit cards to customers it’s more likely to be able to flog a mortgage too.

Q. Why did it give me a different card to the one I applied for?

A. Some cards operate a rate for riskSome credit cards operate a rate for risk policy. This means they have a range of credit cards and you will be offered one depending on their credit score of you. In the worst cases you can actually apply for a card, then be sent a much worse, totally unsuitable card from its range, thus leaving you with a wasted search on your credit file (read more on credit scoring and how it works).

This type of system should be banned, but isn’t, so beware; if you’re applying do consider first whether you’ve a realistic chance of being accepted.
Close policy.

Q. Are there any other things I should look for when picking a 0% card?

A. If you want to get a little advanced, it is worth considering whether the card offers existing customer balance transfer deals (as explained in the credit card shuffle article). This is a useful option for long term tarts as it offsets the risk of being rejected due to a poor credit score.

The three best picks for this are as follows:

• MBNA card range: While most of these cards do have a balance transfer fee, MBNA tends to repeatedly offer good deals to existing customers, often at 0% though you need to call it and ask. If you're adopting this strategy it may be worth taking the hit of a fee to keep this facility open. The main cards are MBNA*, Alliance & Leicester* and Virgin*.


• Egg. Egg* has an anniversary deal which means on the anniversary of being accepted for the card you are allowed to shift debts to it at 0% for 5 months, although it charges a 2.5% fee. For more details on this read the Egg Loophole article.


• Barclaycard. Barclaycard* allows existing customers to shift debts to it at 6.9% life of balance (i.e. until all the debt is repaid) thus giving you a back up option of long term cheap debt if necessary. For more info see Barclaycard Loophole article.

Q. My question hasn’t been answered in the above list, what should I do?

A. If it’s a general question about how balance transfers work, then please ask it here and I will endeavour to include it in the article. If it’s a specific question about your situation or a product, then please use the question/discussion link which will take you to the Forum where you can chat about it with other MoneySavers.