How to Choose the Right Balance Transfer Credit Card


If you currently have a lot of credit card debt hanging around your neck, then if you are ever going to achieve your goal of paying it all off, it could make sense to look for a new balance transfer credit card in order to take advantage of a 0% interest balance transfer offer.

Balance transfer offers are designed to reduce or eliminate the interest you are currently paying on your credit card debt for a set period of time, allowing you to reduce the amount outstanding on the card at a much quicker rate than you would if you were constantly having to pay a heap of interest at the same time. With so many different 0% interest balance transfer credit cards available though, how can you choose the one that is right for you and your circumstances? Here are a few things you should consider before making an application for a 0% balance transfer credit card.

The Length of the 0% Interest Rate Period

The first thing that most people look at when they are trying to choose the best balance transfer credit card, is the length of the interest free period that is being offered with the card. Usually you will want to find the longest period possible. At the time of writing there are some credit card companies offering interest free periods of up to 36 months, which is a lot longer than you would have received had you been looking for an interest free balance transfer card just a few years ago. Just because a credit card company is offering a long 0% interest rate deal however, this doesn’t necessarily mean that this is going to be the right card for you. There are still a few other factors to consider before applying for a card.

The Balance Transfer Fee

The size of the balance transfer fee is one factor that might make a long 0% interest rate period on a credit card look much less attractive than it at first seemed to be. Let’s say that you are transferring a balance of £5000 onto a credit card that is offering an interest free period of 36 months on balance transfers, where the balance transfer fee is set at 3% of the value of the transfer. In this case you will pay a £150 one-off fee which will be added to your overall debt, just for the privilege of transferring your balance to the new card. What if there is another balance transfer card available that is offering a slightly shorter 35 month interest free period though, but that card has no balance transfer fee at all? We can see that this second card could work out to be a much better deal if you were able to pay off the majority of your debt within 35 months, meaning that there was only a meagre amount of interest – if any – left to pay in the 36th month. You could effectively save yourself £150 by taking out the second card instead, as you will not have to pay a balance transfer fee at all.

What about the APR on New Purchases?

Although I’d hope that you would be transferring the balance of your credit card to a 0% balance transfer card with the aim of being able to pay off your debt in full, I do understand that for some people this may not be the intention and you might want to have the option to continue spending on the card. In this case, giving some thought to the APR rate on new purchases may also be a wise move.

If you have a balance transfer card offering 36 months interest free on balance transfers for example, but the card has an APR on new purchases of let’s say 29.9%, then this might not be all that appealing if you intend to make a lot of new purchases. If there is another card available however which offers a slightly shorter 35 month interest free balance transfer period, but that card has a lower APR of 15.9% on new purchases, then we can again see that the second card would likely work out to be the best option if you intended to carry on spending. This is because you would pay a lot less interest on your new purchases, which would probably more than make up for the seeming drawback of having one less month on the balance transfer offer.

Just to reiterate, we would never condone increasing your credit card debt, but the APR should certainly be taken into consideration when choosing a balance transfer credit card, as it will not only affect how much interest you pay on new purchases but it will also affect the amount of interest you pay at the end of the interest free period if you haven’t managed to clear your transferred balance by then.

Does the Balance Transfer Card Carry an Annual Fee?

Another thing to consider is whether any of the balance transfer credit cards you are looking at come with an annual fee. This could especially be true if you are only transferring a small balance, as the cost of the annual fee might well outweigh any savings made by paying less interest on your transferred balance. If this is the case then it would make sense to look for a similar card which doesn’t carry an annual fee.

Which Credit Card Provider are you Transferring From?

When you are looking for a new credit card with the intention of transferring a balance, it is important to know that many credit card companies won’t allow you to transfer balances from one card to another if your new card is funded by the same lender. What do I mean by this?

When you take out a credit card from a supermarket or department store, it is not usually the supermarket that is actually lending you the money. There will often be a bank or some other financial institution partnering with that company to offer you the card. An example of this can be seen with the John Lewis credit card. The John Lewis Partnership card is actually funded by HSBC, and HSBC also fund the M&S Bank credit cards. Because of this, you might be restricted from transferring balances between these cards. There may be ways of getting around this but on the face of it, the transfer may be prohibited.

Are you Eligible?

So you’ve looked at all of the factors mentioned above and you still feel that you have found the right balance transfer credit card for you. Now you need to know if you are eligible for the card and if you are likely to be accepted. The reason that this is so important is because making too many applications for credit in a short period of time can temporarily hurt your credit rating, so it is important that you only apply for a card when you know that you fit the criteria set out by the card issuer. The things lenders may look for are:

  • A minimum level of income
  • A minimum age for application
  • A certain length of residency in your current country
  • They may require you to have been employed for a minimum period of time
  • They may not accept self-employed applicants
  • Your current credit rating/score will obviously be important – is it good, fair or bad?

If you’ve looked at the criteria and you still feel that you are eligible for your balance transfer card of choice, then you can go ahead and apply. There is still one more thing that might make the card less attractive however.

Changes to the Balance Transfer Offer and APR after Application

When you are searching for a balance transfer credit card and you examine the features of the card, you will often come across a line that reads something like ‘The APR and length of the promotional offer are dependent on your personal circumstances’. This simply means that if a situation arises whereby the card issuer isn’t 100% happy with some aspects of your application, then they may still give you the card but under different terms – such as with a higher APR or a shorter 0% balance transfer period. Keep your eyes open for this because if you are not an overly observant person, you might not realise that the rates have even changed until after you’ve made the transfer, by which time it may be too late.

Now it is Your Call

Because the offers available on balance transfer credit cards are constantly changing and the criteria and features vary so widely, it is very difficult for an outsider to give you a concrete answer as to which balance transfer card is absolutely the right one for you, at least not without knowing all of the details of your current circumstances and examining the current deals that are available with your circumstances in mind. Some credit card comparison sites will have tools that can guide you along some of the way but they will by no means be perfect. With this in mind, it is important that you take the time to examine all of the points we’ve mentioned in this post when choosing a 0% balance transfer credit card, to ensure that you get the best credit card for your own circumstances. It may take you some time initially but it will be worth it in the long run, especially if it saves you a whole heap of money and hassle if you were to discover that the credit card which you have chosen isn’t the right one for your needs after all.

Don’t Fall into the Balance Transfer Trap

If you are transferring your credit card balance onto a 0% promotional rate balance transfer card with the intention of repaying your debt in full, then be extremely careful that you don’t fall into the common trap of placing your old debt onto a new card, only to then spend on the old cards once again. It really is an easy trap to fall into and you could just end up doubling your debt over time. If you want to pay off your credit card debt then it is essential that you stay focused, cut up your old cards and use the facility of a balance transfer credit card in the best possible way, that being a way that enables you to pay off your debts for good.

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