Many credit card companies offer balance transfers currently. The process, put simply, allows you to move your balance from your current credit card on to another, effectively, the card company you transfer to buys your debt from your current card company. To make this attractive to you, many offer interest free periods after transfer, some 0%, which is likely to be less than your current rate of interest. They offer this rate over a specificed period, some over a year, which in turn will save you each month as you will be paying off only the captial and not the interest on your debt.
Beware however, as they will usually add a fee on to your balance when you transfer, usually up to 3% of total balance. This is likely to be less than you would pay over that period on your previous card so therefore can save you money. It is sensible to transfer if you have an outstanding balance that you are paying high amounts of interest on, usually therefore paying minimal capital off your debt. When you make the balance transfer try to pay the sum off within the interest free balance transfer period, because when it runs out you will be liable to pay interest once again and you are back to square one paying high interest rates. Also, where possible, try to close the account you balance transfer from, this is best for your credit history and less tempting than having multiple cards!
Student Tip - Reduce the interest payments on your credit card debts using a 0% balance transfer deal
| Best Credit Card Deals | Balance Transfers | Purchases | Representative APR (Variable) | Apply | |
|---|---|---|---|---|---|
 |
Halifax All In One Credit Card 0% on balance transfer made within first 90 days for 13 months!(3% charge applies) 0% on purchases for 13 months |
0% for 13 months |
0% for 13 months |
17.9% | Go to site |
| Representative example: assumed borrowing of £1,200, representative 17.9% APR (variable). Purchase rate 17.95% PA (variable). Halifax, The Mound, Edinburgh EH1 1YZ If you are accepted at our highest rate of 23.9% APR variable you may not be offered an introductory period on balance transfers and purchases. | |||||
 |
HSBC Credit Card 15 months free balance transfer (2.9% fee), 3 months free purcases, HSBC current account needed, students account holders DO NOT need to pay minimum salary amount into account |
0% for 15 months |
0% for 3 months |
16.9% | Go to site |
| Representative example: Typical 16.9% APR variable. Based on £0 annual fee, assumed borrowing of £1200, rate of interest (variable) annual 16.9% | |||||
Well, credit card companies not only want you as a customer, but they also want to take on your debt. At the moment you're paying interest on your £1000 debt with Egg. If for example the interest rate is 16.9% then you would be paying approximately £15 per month in interest alone. Now there would be no point in switching this debt over to somewhere else if you still have to pay the £15 interest per month - you wouldn't be winning. This is where the balance transfer offers come in. Suppose a company said to you, move that £1000 debt over to me, and instead of having to pay £15 amount per month from now, we'll give you the first few months free. Well, by free, I mean, you don't have to pay any interest.
This sounds good - you have a £1000 debt, but you don't have to pay any interest on it. In a way you may think that this is just a holiday period, they'll make up for it later. In a way you'd be right in thinking this. If the 0% interest on balance transfers is for 9 months then although you wouldn't have to pay anything off for the first 9 months, after that the normal interest rate kicks in and you have to start paying it off.
So is it just a holiday period where I don't have to pay my debt back - yes, it is. But there's another benefit.
1) If you have £1000 worth of debt, you would normally be paying £10 - £15 per month interest (roughly). After 9 months you would have paid around £90 - £135 of interest. With the balance transfer offer though, if you can pay back the whole amount within the offer period then you don't pay any interest at all.
2) Or.. after 9 months you can transfer the money to another credit card with a 0% interest balance transfer offer as well, again saving you interest payments.
Balance transfer fees - credit card companies charge you for transferring your balance. The usual rates are between 2.5% and 3%. This can still make a balance transfer a good option though. If your debt was £1000 the fee to transfer it might be £30.. but if they are offering 9 months at 0% interest and the interest rate is 14.9% then you still be making a saving of over £80..
Applying for too many credit cards - if you apply for lots of credit cards it may affect your credit score. Your credit score is what credit card companies and mortgage companies etc look at when they decide whether or not to loan you money / give you a mortgage. There is no set figure on what is too many and what is ok, but bear this in mind if you apply for lots and lots of credit cards!
Spending money on your balance transfer card - This is a really really important point! If you do a balance transfer onto a credit card make sure you do NOT use the card anymore for normal purchases! Whenever you pay money off on a card the amount in "offers" is paid off first. Basically, if you transfer £1000 onto a 0% interest for 9 months credit then you should not get charged any interest for those 9 months. If you use your card straight away after doing the balance transfer to buy something for, for example, £50 then you are going to get charged interest on this amount.. The problem is that you will be charged interest until the £50 is paid off.. and the £50 is not paid off until you have paid off the full £1000 first.
If it takes you a year to pay off the full £1050 on your card then you will have had 9 months interest free on balances.. but the £50 would have started building up interest since month 1.. and would have been building up interest all year until you paid off the last bit on the card to put it at 0 balance. Please be aware of this!! It does not mean that you should not get a balance transfer card - it does mean that you have to be careful and use it wisely though!
We've got details of the best balance transfer cards above - use them properly and they could save you a lot of money!
