Balance Transfer Credit Cards

A couple are shown using a balance transfer credit card online

Balance transfer credit cards allow you to transfer an existing debt from one credit card to another. It is only possible if the cards are issued by different banking groups. In this article we discuss:

  • The benefits of transferring your credit card balance
  • How balance transfer credit cards work
  • How you can transfer a credit card balance
  • Whether you can transfer a balance from someone else’s card

What are the benefits of transferring my credit card balance?

One advantage of transferring a credit card balance is that you can consolidate your debt into one affordable monthly payment. This makes it easier to keep track of your debts and not miss a payment.

Many balance transfer credit cards come interest-free for up to 36 months

Another benefit of using balance transfer credit cards is that many come with an interest-free period of up to 36 months. This means that any repayments you make go towards reducing the debt rather than on paying interest. Not only do you pay off the outstanding debt faster, but you can save a lot of money on interest charges.

How do credit card balance transfers work?

After your application for a balance transfer credit card has been approved, the new card provider will pay off the existing debt on your old card on your behalf. Once this debt has been cleared, you have the option to close down your old credit card account. The new credit card provider will charge you a one-off fee for this service. This is usually 3-6% of the amount transferred while there might be an annual fee as well. These charges are added to your outstanding balance.

Your new credit card issuer will inform you of your new monthly minimum repayments, when they’re due and your new credit limit. If you have an interest-free period for this debt and/or new purchases, they will tell you when this promotional offer expires.

A credit card is depicted changing hands

It’s absolutely crucial that you read the terms and conditions of your new credit balance transfer card extremely carefully. If you are late making a payment, miss a payment and/or exceed your credit limit, your issuer will cancel the offer of an interest-free period.

Questions about UK credit cards:

What is a credit card?

A credit card is a card attached to an ongoing loan of a certain credit limit, similar to an overdraft, which is normally repaid in monthly instalments. The amount of credit available to you depends on your personal financial circumstances and the credit limit awarded to you by the credit card issuer. Interest rates vary considerably between various lenders so it is wise to shop around for the best deals on credit cards.

What is a balance transfer credit card?

A balance transfer credit card is a card which allows you to transfer an outstanding balance from one loan provider to another. In many cases, credit card companies will offer incentives or reward programmes to transfer a balance, such as low interest rates or extended lines of credit. The new card issuer will settle your balance on your previous card while opening a line of credit for you on their own issued credit card for the same or greater amount. You can continue to use your previous credit card unless you cancel after you have transferred the balance.

How do credit cards work?

Credit cards work by allowing you to spread the cost of credit over a period of time in return for higher interest rates. When you apply for a credit card you are usually assigned a credit limit depending on your earnings, commitments and your credit history and rating. Whatever portion of the credit limit you spend is taken from your available credit and a minimum monthly repayment is required. Certain credit cards may require you to repay the entire balance in full at the end of each month.

How can I transfer a credit card balance?

Once you’ve researched the different balance transfer credit cards on the market, you can apply for the card that best suits your circumstances. You should also have made sure you meet the card issuer’s eligibility criteria regarding age, income, credit score, etc.

If you are late making a payment on balance transfer credit card, miss a payment or exceed your credit limit, your issuer will cancel the offer of an interest-free period.

During the application procedure, you give details of the credit card balance you’d like to transfer including information about how much the debt is, the name of the provider, the card number, etc. The transfer itself takes 1-4 working days.

Can you transfer a balance from someone else’s credit card?

Some credit card providers will allow you to transfer a balance from someone else’s credit card. Some people choose to do this for a partner, relative or friend because they have a better credit score and therefore lower interest rates.

Putting someone else’s debt in your name isn’t a decision that should be taken lightly. Once it has been approved and the debt added to your own, you become liable. If payments are delayed or missed, then you will be responsible for paying. Any problems will affect your credit score and possibly, your future access to other financial products.