If you have credit card debt, then January can be a particularly difficult time. That’s because new year bills can give a fresh dose of reality, especially if you’ve overspent on your credit card over the festive period.
However, if you are paying interest on your credit card debt, did you know that getting a balance transfer credit card can put an end to it?
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Right now, there are a host of balance transfer deals to choose from, so it’s a good time to take action. Here’s the lowdown.
How does a balance transfer credit card work?
A balance transfer credit card is a specialist type of card. When you get one of these cards, you can move any existing credit card debt to it. This means that you owe your new balance transfer card instead of any existing cards.
The good news is that pretty much all balance transfer credit cards offer a lengthy 0% period. So if you shift credit card debt from a bog-standard credit card to a balance transfer card, then you’ll stop paying interest for the duration of the interest-free period on the new card.
This means that if you’re currently paying significant interest on a large amount of debt, then you could potentially save yourself hundreds or even thousands of pounds.
Plus, if you clear your balance before the 0% period ends, it’s possible to avoid paying any further interest at all!
What are the longest 0% balance transfer credit cards available?
Right now, the longest balance transfer credit card, from Virgin Money, offers a whopping 35 interest-free months. This means that if you shift your debt to the card, you’ll have almost three years to clear the balance. A 2.94% fee applies to anything you transfer. You must also make at least the minimum payment each month to keep the 0% deal.
As with all balance transfer credit cards, aim to ensure you clear your balance before the 0% period ends. If you don’t, you’ll have to eventually pay interest. The Virgin card has a representative APR of 21.9%.
If you don’t need 35 months to clear your credit card debt, then you may be better off with HSBC’s balance transfer credit card, due to its lower 2.7% fee. Plus, if you move over at least £100, you can bag yourself £25 cashback on top. The HSBC card has a representative APR of 21.9%.
If neither of these cards is right for you, see The Motley Fool’s list of top-rated 0% balance transfer credit cards for more options.
Can you shift debt without having to pay a fee?
The longest 0% balance transfer cards will charge you a fee for shifting your debt. However, it’s possible to move your balance without having to pay anything at all. No-fee balance transfer cards can be a better option for those who don’t need an ultra-long 0% deal.
Currently, NatWest, RBS and Ulster Bank offer the longest no-fee 0% balance transfer cards at 22 months (they’re all part of the same banking group). However, to apply for these cards, you must have a savings account, credit card, mortgage or current account with one of these banks. The cards have a representative APR of 21.9%.
If you aren’t a NatWest group customer, then the next-highest no-fee balance transfer card comes from Sainsbury’s Bank. It offers a no-fee card offering up to 21 months at 0%, though poorer credit scorers may be offered just 17 or 13 months at 0%. The card has a representative APR of 20.9%.
Alternatively, HSBC has a no-fee card offering 20 months at 0% and a representative APR of 21.9%.
What else should you know about balance transfer credit cards?
As with any credit card, you must pass a credit check to be accepted. As a lot of applications in a short space of time could harm your credit score, it’s best to spread out the number of applications you make. In other words, if you get rejected for a card, don’t then apply for several other cards.
To help minimise the number of applications you make, it’s worth using a credit card eligibility checker to see your chances of being accepted for any particular credit card.
Also, bear in mind that you often can’t shift over debt from a card within the same banking group. In other words, you can’t shift debt from a Lloyds credit card to a Halifax credit card (or vice-versa).
Finally, 0% periods on these cards typically only stay active as long as you make at least the minimum monthly payment. To ensure you don’t forget, consider setting up an automatic direct debit as soon as you get the card.
For more tips, including why you shouldn’t spend on these cards, see our article that outlines the 10 dos and don’ts of a 0% balance transfer card.