Balance transfer credit cards

"Okay, so what is a 0% balance transfer? This is for cutting the cost of existing debts. It's absolutely the crucial weapon. I want to really break it down for you. Let's imagine you have £2,300 worth of debt, one on a Stalecard and one on a Rottencard, both at relatively high rates of interest.

"So what do you do? Well you apply for a new card that's got a specific balance transfer deal to shift the debt. Here we go. The new card. We'll call it the Martcard. Hey, why not? It's 31 months at 0%. You've got a £2,000 credit limit. So what do you do? Well, the first thing is you look at the most expensive debt. That's the one growing quickest.

"That's the one you want to get rid of. And you say, “Please pay the debt off that one.” And that's what the balance transfer is. There we go. The new card pays off the debt on the old card. So you now no longer owe it. It's debts gone down to £0 and you now owe £1,400 pounds, but at 0% for 31 months.

"But you've got a credit limit of £2,000. Now, in terms of balance transfers, they only let you balance transfer 90% of the credit limit. So that's £1,800 in this case. So we've got £400 left. Well you may as well do it again. There we go. Pay off the Stalecard. Now you've got £1,800 worth of debt here and only £500 worth of debt on the Stalecard.

"So if we think of it, roughly your average before was around 23 or 24% APR on £2,300 debt, about £600 a year interest you were paying, now that's all interest-free. You got only £500 debt on there. So that's what, just over £100. That's £500 of interest saved, which means far more of your money is clearing the actual debt rather than just paying the interest. And that gets you debt free quicker. That's why balance transfers are so important.

"You have something? [speaking to his co-host]. "Yeah I have. Anne’s been in touch [referring to user who has written in to the show], she wants to know on this one...

“I have a £4,500 credit card debt, and I'm thinking of a 0% balance transfer. I've been offered a 13 month interest-free credit card for £2,750. Is it worth me doing this as doesn't cover the full amount?”

"Yes yes yes yes yes. Okay. Right. You've made an application. It's gone on your credit file. Your credit file is already affected. You've already spent your creditworthiness and you spent it on a really good thing cutting the cost of your debt. People often get in touch and they say the credit limit they’ve given me is too low. What should I do?

"Well, use it even if it's for £200. £200 at 0% is better than £200 at 25%. So if we talk about that £2,750, assuming you're on a typical APR is £700, £800 a year, you're paying and you could now be paying 0%, even though the rest of your debt you're still paying interest on.

"It's quite like this scenario [referring to the Stalecard, Rottencard and Martcard from earlier]. It's still worth doing. Then once that money's been shifted across, then now get back onto an eligibility calculator, more on that in a moment, and let's see if you can get another balance transfer for the rest. It might be slightly more difficult. You might not be able to get it, but at least you're bringing your interest rate down. So if you get a low credit limit, still use it. You've spent it, back with the application, use it.

[His co-host speaking] "Okay, now I think people want to know Martin about the best deals." [Martin replies] "And that’s my job, that’s what I do." [His co-host continues] "Lorna that's been in touch here. Lorna’s asking...

“What is the best and cheapest way to get rid of credit card debt?”

[Martin continues] "Well, let me carry on to my next page. Okay. So my big message to anyone who's paying interest on credit card debt. If you cannot afford to clear your credit card debt or your store card debt, you can't afford not to try to lower the interest rate, maybe to interest free.

"So rule number one is protect your credit history. Use an eligibility calculator first. That is a tool. Better to do one where you get a comparison. It will tell you your odds of getting the top cards, and it does that before applying so you can see which [you] are most likely to get so you can home in and hopefully apply where you're going to be successful to minimise the impact on your credit file. So I'd always apply via an eligibility calculator. Some individual card firms have them, but I go for one that gives you a spread of different cards, so you can see what's most likely.

"Rule number two. When you do a balance transfer there's usually a one-off fee, the amount you're shifting. So if you're shifting £1,000 and the fee is 3%, you pay £30 to do it. So, the longer the card, the bigger the fee. If you can repay more quickly and you're sure you can repay more quickly, go for a shorter card, lower the fee because it'll cost you less. But if you're not sure, just go long. Have a longer 0%, play safe.

Cheap balance transfer deals are designed to make lenders money when the 0% period is over, as interest rates jump massively (typically to between 18% and 40%). Yet this can be avoided...

• Aim to clear the balance before the end of the 0% transfer period. Quite simply,  divide the amount you owe by the number of months at 0%, then pay at least this every month to pay it off in time.

• If you can't clear it in time, balance-transfer again to another 0% offer. If you can't afford to repay in time, the next best bet is to shift the debt again, before the end of your 0% period. If you're not eligible for any cards, you could consider transferring back to the original card you shifted the debt from, if it's still open and cheaper than the interest rate on your current card.

Just because you grabbed a 0% deal DOESN'T mean you can get away with paying nothing – you must pay at least the minimum monthly payments, preferably more. Otherwise you will be hit with penalties and some card providers will withdraw the deal, leaving you on an expensive rate.

How much should I aim to pay?

Your aim should be to pay more than the minimum – unless you've pricey debts elsewhere, in which case focus max repayments on them. Minimum payments are designed to make debts last as long as possible, which you should try to avoid – see our Credit Card Minimum Repayment Calculator for tips to beat this.

While balance transfers made to the cards in this guide are interest-free for a number of months, other uses such as spending and cash withdrawals are usually not – and will incur charges and interest. 

For cash, you'll usually pay any interest from the date of the withdrawal until it's paid off.

This means you'll most probably see an interest charge on the first statement after the withdrawal, which is the interest charged from the date you made the withdrawal until the date the statement was issued.

But you may also see interest charged on the following statement. There'll be a delay between your statement being drawn up, and you paying it. It may be a couple of days, it may be a couple of weeks. But interest will be charged on the withdrawal until you pay it off.

There are special cards if you need to shift debt AND spend

If you also need to spend on the card, it's best to get an all-rounder card, which has a 0% length for balance transfers AND spending, and means you only need to apply for one card. Check our 0% balance transfer & spending guide for full info, or alternatively you could try a separate 0% credit card for purchases.

For most cards, the 0% period is only reserved for balance transfers that are made within the first 60 or 90 days – though always check your card for its time limit, as it does vary. After this has passed, any transfers would incur expensive interest at the card's normal rate, unless it's paid off in full.

This can sometimes apply to the one-off fee too, so it's likely you'd pay a higher fee on later transfers, in addition to interest.

There are some notable exceptions to this though, with certain cards requiring you to request the balance transfer when you apply, and others allowing transfers at any point during the 0% period. But as the 0% period usually starts on the day the account is opened, you'd have less interest-free time if you waited.

How to request a balance transfer

When you apply for the new card, it will usually include a 'Do you want to transfer debts from other cards?' section. Here, put in the details of the other card(s). If you're successful in getting the new card, it will pay the other one(s) off. 

If you don't do it at the initial application, you can usually submit the request via your card's online banking or by calling the lender. 

For balance transfers, one rule is clear – you can't transfer a balance between two cards issued by the same bank (for example, from one Barclaycard to another).

However, for some cards it's a bit more complicated, as certain providers extend this to prevent transfers between cards from the same banking group:

If you balance-transfer to a card at a special cheap rate, but already hold debts on it with a higher interest rate, the provider biases your repayments towards the higher rate debts first. This is good, as it means the most expensive balance disappears first (it used to be the other way around).

However, it means to get the absolute most out of the shuffle, there's an extra step to follow:

Only focus repayments until the expensive debt's repaid. Once you've done the shuffle, and you know the priority with which you should pay off each lump of debt, make sure you stop once all the expensive layer is gone. For example, if you had

Card A. £1,000 balance: £700 at 6%, £300 at 25% interest.
Card B. £400 balance at 18% interest. 

You'd want to pay enough to clear the high-interest £300 first and then switch to clearing the £400, before finally paying off the £700. Though remember to always pay at least the minimum on the card you're not focusing on. 

The credit card shuffle needs careful management but if you follow the steps above, you could cut the total amount you have to repay by thousands.

Here's an example, showing the interest you'd pay doing a credit card shuffle vs not doing the shuffle:

With normal debts of £1,500 on Card A, £500 on Card C and £5,000 on Card D, the average interest rate is 17.4%. Repay £100/month on each card and by the time you've cleared the cards in full, the interest totals £1,948.

Yet shuffle as much as possible on to Card A's 6.9% existing-customer offer for new debt and the rest to Card B at four months 0% then 16.9%, and then repay the most expensive debts first. This way the average interest rate is reduced to just over 14%, meaning the interest is only £792, less than half the cost – meaning a massive saving of £1,156.

Don't worry if your eligibility chances don't look great. It can still be worth applying, as Martin explains...

Martin Lewis

MSE founder & chair

Remember percentages are a clinical measure. A 50% chance means half those in your situation will be accepted. And while 95% seems almost certain, you can still be the 1 in 20 who doesn't get it.

My worry is many are wrongly put off by low odds. I often tell a tale of something that happened a few years ago, which may help...  

I sat with a MoneySaver who had large, costly card debt and a poor credit history. Her eligibility showed zero chance of all balance transfers, except a 20% chance with Halifax. She looked despondent and asked me: "Is there any point?"

I explained that as it was the only credit she needed - there was no mortgage application or similar due - it didn't overly matter that a rejection would mark her file. The reason to protect your credit history is so you can get maximum use from it when needed. 

This was her most pressing financial need, so a 20% chance was better than nowt. The worst that could happen was a rejection. She applied and got a 26mth 0% card with a £1,500 limit.

For more on this, and what you can do to improve things, see my related blog: Why you shouldn't worry too much about your credit score - it's not actually a real thing.

Here's Martin's view...

Martin Lewis

MSE founder & chair

The application is now on your credit file anyway, so make use of it. Use the new card to shift as much debt as you can to cut costs.

Once that's sorted, you can use our 0% Balance Transfer Eligibility Calculator again to see your chances of acceptance for other providers' cards. Though try to spread future applications out, as too many in a short space of time can hurt.

If you have spare credit limit, this is usually allowed, as Martin explains...

Martin Lewis

MSE founder & chair

Yes and it's worth looking at. Some cards will give existing cardholders special offers (eg, 12mths 0% for a 3% fee), not as good as new customer deals, but useful, especially as it won't usually go on your credit file.

Even if you don't get a special rate, try and move all your debt to where it's cheapest. For example, if one is 18% APR, another 30%, ask the 18% card if you can shift debt from the other to it, it'll help. For a full step-by-step, see the credit card shuffle for how this all works.

It's all about interest rates here. Over to Martin...

Martin Lewis

MSE founder & chair

The best thing to do is list all of your debts in order of the interest rate (APR) with the highest first. Then focus all spare cash on clearing that highest APR debt – as that's growing most quickly – and just pay the minimum on all others. For many people this will be the overdraft at first, as at 40% it's often more than double a high street credit card. So reducing your debt on it is the priority. Once you’ve cleared the costliest debt, shift your spare cash to the next highest APR, and so on. This way you’ll pay less interest and more of your money will be clearing the actual debt.

No. When you transfer debt from one card to another the old card stays open, and you're able to use it if you wish – although if you're trying to pay debt off, it's usually not wise to keep spending on credit.

If you want to close your old card, you will have to let your old card provider know. Just not using the card or cutting it up doesn't close the account. Read full pros and cons of closing old credit card accounts in Should I cancel old cards?

Shifting a balance from one card to another isn't recorded on your credit file, so you're free to balance transfer as many times as you like. However, a footprint is added to your file every time you apply for a new credit card. 

Multiple applications, especially close together, and high outstanding debts, even at 0%, can affect your ability to get further credit. See our Credit scores guide for full information.

The most important preventative measures are to spread card applications out and use our eligibility calculator to check your chances of acceptance, before applying blind.

If you've a current 0% deal that's ending and you've a need to transfer the balance again, the best time to apply is roughly six weeks before. Use our eligibility calculator to see which card you've the best chance of getting. 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%.

That can happen, especially for those on lower incomes or with a poor credit history (see how to improve it in MSE Credit Club).

Yet if your credit limits on existing cards aren't maxed out, try to see if you can shift debt from one card to another if it's cheaper. So if one credit card charges 18%, and has half the credit limit left, and the other card is at 30%, ask the cheaper card's firm if you can shift debt from the more expensive one to it, saving you cash. Even better, some cards also have 'existing-customer balance-transfer offers', eg, 12mths at 0%. See the credit card shuffle for how it works.

If none of these are a goer, the priorities are repaying in the right order.

Before you think about doing this, be aware that the debt then becomes yours. Even if you have an informal agreement between you that they will make the payments, the credit has been provided to you, so it's your responsibility to pay it off.

Make sure you think carefully before taking on your partner's debt – especially if you're feeling pressured to do it – as while you may be in a trusted relationship now, there's always a risk things could go wrong in future.

But if you're sure, some lenders allow you to transfer a balance from a card that's in someone else's name (as long as it's not with the same provider). 

Here are the policies of several major lenders:

If your lender doesn't allow this, and you can't get a card from one that does, there is a slightly trickier option of taking out a 0% money transfer credit card. These cards give the option of moving money to your current account, which you can use to pay off your partner's card. You'll then owe the amount on the new card.

You'll pay a one-off fee to do it (often higher than a balance transfer fee) and while it will have a 0% period, these are shorter than the top balance transfer offers. For full help and top picks, see 0% money transfer credit cards.

Getting a credit card is not always the right thing to do, and if you have a poor credit history or too much debt already, you might be rejected for one (or more) cards anyway.

If you're struggling to pay for your outgoings or meet your debt repayments, or are building up more debt just to pay for day-to-day living, getting another credit card could just add to any debt problems in the longer term. Our full debt help guide runs through the practical steps you can take if you're struggling with debt, including specialist resources and charities you can contact for free one-on-one debt counselling and advice. 

Yes, in most cases – though you may have to call the new card provider if it can't process the transfer request online. American Express usually has 15-digit card numbers, rather than the standard 16, so some systems are unable to process the shorter number (for example, Santander, Tesco Bank and TSB have told us this is the case for most requests).

If this happens, calling the provider is your best bet or you could try adding a '0' to the beginning or end of the card number to 'trick' the system. 

There are some notable exceptions though, as cards issued by NewDay such as Aqua, Fluid and Marbles above won't accept any transfer from an Amex. Equally, Sainsbury's Bank advises to call to check the Amex card(s) you hold can be accepted in advance and Virgin Money will only accept UK-issued Amex cards.