Post-Christmas debt? How a 0% balance transfer can help

If you overspent at Christmas, a specialist balance transfer credit card could help you avoid paying interest on your debt. Here’s what you need to know.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

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Now that the biggest day of the festive season is behind us, you may be fearing your January credit card statement. Thankfully, there’s an easy way to tackle any post-Christmas credit card debt.

Here’s everything you need to know about balance transfer credit cards, and how getting one can help give your finances a boost.

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How do balance transfer credit cards work?

A 0% balance transfer is a specialist type of credit card that can receive existing debt from other credit cards. Transferring your debt means you’ll owe the new card instead, so any interest you were previously paying on any old cards will no longer apply.

As your shiny new balance transfer card has a 0% period, you won’t be charged interest during the interest-free term. This makes it easier to clear your balance. That’s because all of your repayments will go towards clearing your debt, rather than servicing interest.

What are the best balance transfer credit cards?

Right now, the market-leading balance transfer credit card is from Virgin Money. It offers an interest-free period lasting for 35 months. This means that if you get accepted for the card, then you’ll get a break from paying credit card interest for almost THREE YEARS!

However, anything you transfer to the card will incur a 2.94% fee, and if you fail to clear your balance – or transfer to another balance transfer card – within 35 months, you’ll be charged 21.9% rep APR interest.

Alternatively, M&S Bank offers a balance transfer credit card with a slightly lower 0% period of 31 months. While it’s a shorter interest-free period than Virgin’s offering, it has a lower 1.99% fee to transfer your debt. So, if you don’t need the extra four months, then you’ll probably be better off with this card. Ensure you repay your balance in full within the 31-month period to avoid 21.9% rep APR interest.

For more options, see our list of top-rated 0% balance transfer cards.

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What are the best balance transfer credit cards with no fee?

If you know you can clear your credit card balance within 20 months or so, you may wish to consider a balance transfer card with no fee. That’s because you won’t have to pay anything to shift your debt to the new card. This means you could potentially clear your debts without having to pay anything.

The longest no-fee 0% balance transfer card is offered by Sainsbury’s Bank. The card gives up to 21 months at 0%. However, not everyone will be offered the full 21 months. Those with poorer credit scores could instead be offered 17 or 13 interest-free months. The rep APR is 20.9%, which you’ll be charged if you don’t clear the card before the end of the 0% period.

If that’s not for you, then HSBC also has a no-fee balance transfer card that offers a 0% period of 20 months. This card doesn’t offer those with poorer credit scores a shorter interest-free period, so you’ll either get accepted for the full 20 months or be rejected. The card has a rep APR of 21.9%, but you can avoid this if you repay your balance within 20 months.

Balance transfer credit cards: what else do you need to know?

Balance transfer credit cards present a nifty way to cut your credit card debt. However, before getting one, bear in mind these five key rules.

1. Always make (at least) the minimum repayment

Even if you have a lengthy 0% balance transfer card, you’ll still need to make at least the minimum monthly repayment to keep the interest-free deal. The easiest way to do this is to set up an automatic direct debit.

2. Clear your debt before the 0% period ends

It almost goes without saying, but if you don’t fully clear your balance transfer card before the interest-free period is up, then you’ll be charged interest. To avoid this, ensure you have a plan to repay back what you owe within the 0% period.

If you can’t do this, the next best thing is to complete a further balance transfer to another 0% card. 

3. Check your chances of getting a card before you apply

Every application for a credit card goes on your credit file, so it’s best to minimise your applications. To help with this, you can use the services of a credit card eligibility checker to see your chances of acceptance before you apply.

4. Transfer your debt within the specified time frame

Many balance transfer cards stipulate that you must transfer your debt within a set period in order to get the 0% deal. Always check!

5. Don’t shift debt from the same banking group

It’s often the case that balance transfer cards don’t let you shift debt from a credit card within the same banking group. For example, shifting debt from a Halifax card to a Lloyds card wouldn’t be permitted.

For more need to knows, see our article that explains the dos and don’ts of a balance transfer credit card.

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