Balance transfer credit cards
You may have multiple reasons for using a balance transfer card or you might be unaware of how it may help you, that’s why we’re here. Our job at Clearscore is to make your finances easier, calmer, and clearer to understand.
A balance transfer card is a card that allows you to switch other debt from one existing card to another. They may offer a 0% period for a set period; this can last anywhere between 0-30 months depending on what you are offered.
When you take out a balance transfer card, you’ll provide which balances you are transferring from which credit card depending on if you have more than one. Your new provider will usually charge a small percentage fee when transferring over your debt. These cards are designed to pay off your debt faster while not incurring charges.
Multiple cards into single cards
Balance transfer cards can be extremely useful when dealing with existing debt as the interest rates are leaving you in a never-ending cycle. Interest rates may be causing you problems as every time you think you’re getting closer to paying off your debt, more charges incur, not to worry, as with these cards you can switch over your existing debt from one or more credit cards to one new single credit card.
Same providers will not offer you a card
It’s important to remember that the same provider won’t provide you with a balance transfer card so be aware of this when applying for one. An example would be if you have one credit card and your provider is capital one or Amex or Barclays for instance, the same provider you are with currently is not going to offer you a balance transfer card so it’s important to keep note of this.
Some cards may charge a balance transfer fee
You should understand that your provider may charge you a balance transfer fee which may usually range from 0-9%. This means whatever your current balance is on those credit cards you need to transfer, 0-9% of that balance will be charged if you are approved for the card. The advantage however is that you pay 0% or very low interest for a period.
Set the period to pay off the balance transfer
Depending on your credit card offer and your provider, you will be offered a set duration of when your 0% interest lasts. This is very important. Within this timeframe, you should aim to pay off your debt in full. After this fixed duration has ended, the standard APR (annual percentage rate) will be applied and you’ll most likely be charged on any remaining debt left.
- Balance transfer cards save you money on interest payments. This could be seen as beneficial because it would allow you a shorter time to pay off your debt and therefore increase your offerings as your credit score increases.
- The more that you pay off your debt, it shows credit lenders that you are becoming less in debt and therefore may slowly increase your credit score which also affects how many products you are offered. The better the credit score, the better the offer.
- As you may have two or more credit cards, balance transfer cards allow you to consolidate all your debt into one, therefore, making transactions more seamless. This means that you may be able to focus more on one debt interest-free instead of a range of debts with interest charges, therefore, making one monthly payment instead of multiple.
Less time taken
- It is much quicker to pay off your debt this way as you do not have to worry about incurring interest every month. If you pay off within the period, this will allow you to not pay any extra charges.
A variety of card providers charge a transfer fee when switching over your balance. It’s important to be aware of this as the 0% interest fee may throw everyone off. This means that just because it says 0% interest fee does not mean there is not a fee to pay to switch over your balance. It’s important to note that it will be 0% interest on the debt you currently have. Whichever balance you choose to switch over will come with a transfer fee ranging from 0-9% of the total debt.
You must make regular payments to these cards as these are still classed as credit cards therefore the minimum payment should be paid at least once a month.
Missing payments or late payments could affect you negatively as this may lead to the 0% interest being withdrawn and therefore being charged at the full APR % rate.
Transferring your balance from one card to another is not recorded on your credit file, you can transfer your balance as many times as you like.
It’s best to bear in mind however that hard searches will be applied every time you make an application for a new credit card, therefore, this might impact your score, not the balance transfer itself. You could avoid this by picking preapprovals with a high percentage rate of being accepted.
- If you worried about lenders watching your credit report for many hard searches the best way to avoid this is to view cards that are pre-approved.
- If you’re pre-approved for a credit card or loan, this means the lender has told us you’ll be accepted for that product if you pass their fraud checks, and your application details are correct.
- Not only does this give you more certainty when applying, but it also means fewer hard searches on your credit report, protecting your score.
The right 0% interest card for you may be dependent on your financial situation. When picking a card, it’s important to keep a realistic timeframe that you need to pay back your lenders. The best way to find this out is to calculate how much debt you’re in and how long it would take you to pay back with affordable monthly payments.
Balance transfer calculator
As interest is added to your credit card balance every month, you could calculate how much you would save using a balance transfer calculator. It might also be useful to calculate a suitable time frame to pay off the debt. You may be offered a longer or shorter duration on your 0% period depending on your credit score.
- It’s important to remember that with these cards you cannot switch over your existing balance to the same provider. Your choice of company will be largely dependent on your credit score as credit lenders offer different cards dependent on your credit score. If it’s too low, you might not be offered as much as you would with someone with a high credit score.
- If you would like to know how a balance transfer card could save you money without applying for one, use our balance transfer calculator here
If your unaware of how your offerings are processed, meaning how you are offered products within Clearscore, many lenders determine a person’s creditworthiness through their credit scores which goes through algorithms. We offer products dependent on what’s most relevant for you using your credit report.
An example would be if you were new to credit, based on your credit report our system will automatically find you the best products that offer credit building cards.
or if you are struggling with payments every month our system could find you the best offering in our purchase and balance transfer cards.
We work with your credit report this saves you from spending hours looking for the right solution.
If you would like to apply for a balance transfer card, log in to the Clearscore app and see what you could be pre-approved for
We hope you’ve enjoyed this article, remember we aim to make your finances easier to understand, that’s why our credit report will be free forever.