Balance transfer credit cards

There are a number of factors that affect your credit score, including the number of credit applications you’ve made, your employment status and whether you’re on the electoral register.

As such, making a new credit application – even for a balance transfer credit card – can cause an initial drop in your credit score. However as with any kind of credit product, if you make your repayments on time your score should eventually start climbing again.

When you compare balance transfer credit cards, pay attention to the following factors to help you decide which card to take out:

• Your 0% interest period: This is the length of time you won’t pay any interest on your balance
• The standard APR after this period: This is the rate you’ll be put on once the introductory 0% interest period ends
• Any fees you’ll need to pay: There may be a fee for transferring your balance over as well as a monthly or annual usage fee

When you get your new credit card, you should destroy any old ones you have – even though they may be expired or the account may be closed, an identity thief can still use the information on the card.

You should be able to transfer any existing credit card balances on to your new credit card.

Most providers will let you transfer balances between £100 and £10,000 to a new card – at most, around 90% of your current credit limit.

Balance transfer fees are generally given as a percentage of the overall amount you’re transferring – this will usually be between 1% and 3%, but could range anywhere from 0.5% to 5% of the total sum.

Divide the amount you transfer by the number of months your interest-free deal lasts for. The result is the amount you need to pay each month to clear the debt. You must always pay the minimum monthly amount as set by your card provider otherwise you will be hit with late fees and interest.

If you do not clear your card balance by the end of the 0% period, you will be charged interest on what you owe. Sometimes this interest rate can be relatively high.

If you know you’re not going to clear the balance within the 0% period, you could consider transferring to another card to take advantage of another interest-free period.

 The majority of 0% balance transfer cards apply a much higher interest rate on any new spending using the card – so it is best to avoid this if you can.

For example, a balance transfer card might charge zero per cent interest for 24 months on balance transfers but a standard rate of 18% on purchases. Or it might charge 0% on purchases, but only for six months. Make sure you know how your card works for different types of debt.

If you know you will still need to use a credit card to make purchases it could make sense to have a different card for this.

Avoid exceeding your credit limit or you might face penalties such as losing your interest-free deal.

Don’t forget about any debt you might have on old cards. Sometimes it may not be possible to switch the whole balance across to the new 0% card so you must remember to make the necessary monthly repayments on your old cards until the debt is cleared in full.

If you do not clear the balance by the end of the interest-free period, you should aim to transfer that sum to another 0% balance transfer card if possible.

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