A 0% balance transfer card is the cheapest way to pay off small debts. If you move your credit card debts on to one you could pay no interest for over two years and in doing so you could save hundreds or even thousands of pounds.
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You use a 0% balance transfer card to pay off all your other credit cards. Your money then sits on the card earning no interest for a set period of time.
This gives you the opportunity to pay off your debts without interest charges constantly adding to what you owe.
The average balance transfer is around £2,100. If that stayed on a typical credit card charging 18%APR it would cost £378 a year.
So, you could be £378 a year richer just by using a 0% balance transfer card.
Let’s say you have £5,000 sitting on a Shark Card at 18%APR. On this balance = you’ll be paying up to £69 a month in interest. However, if you take out a Dolphin Card offering 0% interest on balance transfers for 12 months, you would save yourself £789 in interest charges.
What’s more, you can move debts from multiple cards onto a single balance transfer card. With some cards you can even move overdraft debt onto them, potentially saving you thousands of pounds.
Let’s say you have £3,000 sitting on a Tiger card at 16%APR, plus £1,000 on your Clothes R Us store card at 35%APR, and a £500 unauthorised overdraft that’s costing you £100 a year. Consolidating all of these balances onto a 0% balance card would save around £812 in interest.
Not much. There is a fee to pay when you move your debt to a balance transfer card though. This is typically between 1% and 3% of the balance that you’re transferring. However in nearly all cases this is dwarfed by the savings you’re likely to make.
If the Dolphin Card has a 2.9% balance transfer fee you would pay £145 if you moved your £5,000 Shark balance over. Yet, even taking the fee into account, you would still save £644 a year by moving the debt to the Dolphin Card.
You can see exactly how much money you would save with our comparison tool. Simply tap in your credit card balance and we’ll show you the savings you could make including the balance transfer fee for each card, making it easy to see which card will give you the biggest savings.
During the hunt for a balance transfer card you need to weigh up the length of time it will take you to clear the debt against the size of the balance transfer fee. The shorter the 0% interest period the lower the balance transfer fee tends to be. You also need to factor in your credit history as this will affect what 0% deals are available to you.
Historically, figuring out which card saves you the most money was complicated.
Now though, our advanced credit matching technology does all the hard work for you. Simply tap in some details about yourself and it will order the results by which cards will save you the most money and which are most likely to accept your application.
If you miss a payment, or are late making a payment, you may find you incur a financial penalty. This could be anything from a small fine to your 0% deal ending early. Avoid this happening by setting up a direct debit to repay at least the minimum payment each month.
The best balance transfer cards only offer 0% interest on balances moved onto the card from another credit source. If you start using that card to spend you’ll pay interest on the balance you build up through spending. When you reduce your credit card debt your payment is used to clear the debt with the highest interest first – so in this case your money will be used to clear the balance you’ve built up with new purchases first.
This causes two problems. Firstly, the standard interest rate on these cards tends to be quite high so if you aren’t paying back enough each month to cover your spending you could quickly start to rack up interest. Secondly, it will take you longer to clear the debt on the card meaning you may not pay it all off before the 0% period ends.
If you do need a card that you can transfer a balance to and spend on you should look at combined balance transfer and purchase cards which offer interest free deals on both. For more information take a look at our best balance transfer and purchase credit card page.
The 0% interest deal on your card is only for a limited time. When it runs out any remaining balance will start earning interest at a distinctly noncompetitive rate (usually around 20%APR). Avoid this by either making sure you have cleared the debt before the 0% period runs out or switch the debt to a new balance transfer card. Make sure you don’t forget by setting a reminder or making a note in your diary.
If you are going to switch to another deal make sure you allow enough time for the new application to be processed,. Start shopping around for a new card at least a month before your current interest free offer runs out.