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Take control of your finances with a balance transfer credit card

Consolidating your debts on to one piece of plastic could save you money. Here we show you how

By Esther Shaw

Published: 07 January 2021

Hand checking bills

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Last year was a tough year, with a combination of job losses and salary cuts – caused by the pandemic – hitting many households hard. As a result, a lot of people relied on credit cards, and other forms of borrowing, to help make ends meet. While Christmas – and all the spending that comes with it – has only added to the problem, the expense of the festive period is now, thankfully, firmly behind us.

But looking forward to 2021, we’re here to help you make the right decision for you when it comes to your finances and it makes good sense to seize the opportunity at the start of the new year to tackle your debts.

Paying off your plastic and clearing what you owe could help put you in a good position financially to face whatever lies ahead this year.

How to go about clearing debts

If you’ve got existing balances on cards with different providers stuck on high rates of interest – or a chunk of debt you want to pay off – it makes sense to combine this onto one card.

One of the best ways to do this is to transfer your debts to a balance transfer card offering 0% interest for a  period.

This will give you the breathing space needed to pay off what you owe.

Representative example: If you spend £1,200 at a purchase rate of 19.9% (variable) p.a. your representative APR is 19.9% APR (variable)

How to choose a balance transfer deal

If you are looking to consolidate debts with a transfer card so you can pay off your debt gradually, you can compare deals here.

Some of our credit card providers offer long-duration interest-free periods up to 29 months.

Watch out for the balance transfer fee

While a balance transfer card with a lengthy 0% window may sound very tempting, you must remember to factor in any fee levied for transferring debt – to work out if it is worth it.

Fees are usually around 2% of your balance, but can be as high as 3% which you pay upfront.

For some borrowers, it may make sense to opt for a balance transfer card that has a shorter interest-free period, but a much lower fee – or no fee at all. The key is to do the maths to find the right card for your needs.

Before signing up, also check whether the card you are considering has an annual fee – as over time, costs could mount up.

Representative example: If you spend £1,200 at a purchase rate of 19.9% (variable) p.a. your representative APR is 19.9% APR (variable)

Plan to clear your debt

As a borrower, it’s important to remember that when the promotional 0% window on your balance transfer card ends, you will start getting charged interest.

In some cases, this annual interest rate – known as the ‘annual percentage rate’ (APR) – could be above 20%.

With this in mind, you should plan ahead to have cleared what you owe before the interest-free window expires. If not, you could see your rate of interest soar.

That said, all is not lost if you don’t manage to clear what you owe in time. You just need to be ready to shift the remaining balance to a new 0% card.

Crucially, though, you need to remember that you can’t keep shifting your balance forever, as your debt will need to be repaid eventually.

Representative example: If you spend £1,200 at a purchase rate of 19.9% (variable) p.a. your representative APR is 19.9% APR (variable)

Tread carefully when applying for a card

When applying for a new credit card, you need to be aware that a ‘hard credit search’ will be noted down, leaving a ‘footprint’ on your file. If you end up with multiple searches on your record, this can have a negative impact on your credit score, making it harder to get accepted by other lenders.

To avoid this, make use of our Eligibility Checker tool. You can use this to compare card offers and find out which ones you are more likely to get accepted for, without your credit score taking a hit.

Don’t assume you’ll get the advertised rate

When applying for a card, note that you might not qualify for the advertised rates of interest. The very best rates are often reserved for those with the top credit scores. If your credit record isn’t squeaky clean, you could end up getting charged a higher rate of interest.

With all credit cards, only 51% of applicants have to be offered the advertised rate.

Not only this, but you could also find you’re offered a shorter 0% period, meaning fewer months interest-free.

Also be aware that when it comes to the credit limit, the actual amount you get offered may be dependent on your credit rating. If you’ve got any blemishes on your credit record, you may not get the limit you see advertised.

However, when you search for a card with us, you may see you’re pre-approved for certain cards. The interest rate, the interest free period, and the fee, if there is one, are all guaranteed – the only thing we can’t guarantee is the credit limit you’ll get. Essentially the deal you see is the deal you’ll get, subject to the lender’s final checks.

Representative example: If you spend £1,200 at a purchase rate of 19.9% (variable) p.a. your representative APR is 19.9% APR (variable)

Check your credit score

It’s good to get into the habit of checking your credit score. You can do this quickly and easily – and as often as you like – with our Credit Monitor* tool. There’s also lots of hints and tips on offer, and details of simple steps you can take to boost your score.

*Available to UK residents aged 18 or over

Top tips when using a balance transfer card

  • Resist the temptation to go from month to month making only the minimum monthly payments on your credit card. By paying off more than this – as and when you can – you will clear your balance a lot faster.
  • Better still, try and clear your card in full each month.
  • Never miss a payment. A late or missed payment will usually incur a £12 fee, and could also lose you your 0% promotional offer. In addition, it could have an impact on your credit rating – making it harder to borrow in the future.
  • A good approach is to set up a direct debit to automatically repay your card as soon as your payment is due each month.
  • Don’t use a balance transfer card for new spending, as this means you will start to amass fresh debt. If you are serious about getting your finances on track, you need to be disciplined about clearing what you owe.

Representative example: If you spend £1,200 at a purchase rate of 19.9% (variable) p.a. your representative APR is 19.9% APR (variable)

Our pick of balance transfer cards

The Sainsbury’s Balance Transfer Credit Card, for example, offers 0% on balance transfers for 29 months, with a 3% fee (minimum £3)

Note that, depending on your circumstances, you may also be offered a 0% interest period on balance transfers of 25 or 21 months instead, depending on your individual circumstances. You may be offered a balance transfer fee of 3% or 4% at application depending on your individual circumstances.

Once the 0% period is up, you’ll pay 21.95% pa (variable), so try to clear your balance before then. The card has a representative rate of 21.9% APR (variable)*.

When you apply for this card through us, you’ll get an exclusive £20 e-gift card when you transfer a balance of at least £1,000 within 30 days of your account opening. You will need to be a new customer and not self-employed. Offer ends 31 January, 2021. T&Cs apply.

**Representative example: If you spend £1,200 at a purchase rate of 21.95% (variable) p.a. your representative APR is 21.9% APR (variable)

If you are confident you don’t need as long as this to clear your balance, it could be cheaper to opt for a card that offers a shorter interest-free window but no transfer fee.

The Santander Everyday Credit Card, for example, offers up to 18 months at 0% on balance transfers, and there’s no transfer fee to worry about.

After the 0% deal is up, you’ll pay 18.9% pa (variable). The card has a representative rate of 18.9% APR (variable).**

At the end of the 0% period, a 3% balance transfer fee will apply to any new balance transfers.

***Representative example: If you spend £1,200 at a purchase rate of 18.9% (variable) p.a. your representative APR is 18.9% APR (variable)

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