How to find the best 0% balance transfer deal
What's a 0% balance transfer credit card?
Balance transfer cards usually offer a low or 0% interest rate for a set length of time. Moving existing debt from higher interest rate credit cards and/or store cards to a 0% balance transfer credit card can save money, especially if the debt is paid off within the 0% interest period. And with no interest to pay, debts can be cleared quicker.
While they can be useful for eliminating debt, it’s important not to use 0% balance transfer credit cards as a way of freeing up existing credit cards for further spending. This could lead to problems down the line, particularly if there's still outstanding debt after the 0% interest period expires. Our full guide here has more detailed discussion about potential savings, information on how to transfer balances and pitfalls to look out for.
How to find the best deal
The main benefit of a 0% balance transfer is paying no interest on existing borrowing for a set period. But at the end of the agreed interest free period, any remaining balance will incur a higher APR so deciding on the best deal means taking into consideration a few other important factors including: the amount of debt; the length of time the 0% deal is available; the cost of transfer fees; and the representative APR that comes into effect once the deal ends.
Keeping up with minimum payments
Different providers offer varying lengths of time during which interest on transferred balances is kept at 0%. These also vary based on individual circumstances, with shorter 0% balance transfer periods and different representative APRs possible.
Any outstanding debt at the end of the agreed interest-free period is moved to a higher APR so it's vital to calculate how much will need to be repaid each month in order to clear the debt. Missing a minimum payment can result in losing the 0% interest deal so it's necessary to be realistic about how much is an affordable amount to pay each month before committing to a card.
Paying off debt
The amount of debt will influence whether it can be paid off while the interest is still at 0%. If it's unlikely the debt will be paid off before the higher interest rate comes into effect, it may not be beneficial to take out a 0% balance transfer and could instead be better to pay off debt over a longer period. In order to decide on the best route to take it's most important to work out which means paying less interest overall.
Typically a one-off fee is charged for balance transfers so it's also necessary to take this into consideration when working out if a deal will offer value for money. Fees are charged at a percentage of the total amount transferred - usually around 3%. For example, on a £1,200 balance transfer with a 3% transfer fee, the amount to pay is £36. So in many cases, the savings gained from not having to pay interest will usually cancel out the transfer fee - particularly if the debt is paid off within the 0% interest period.
0% on purchases
Most of the benefits of balance transfer credit cards come from being able to clear debt quicker, however providers also tend to offer varying interest free periods on purchases. These are often for a much shorter length of time than for balance transfers and once the interest free period ends, a higher APR is charged. It may be better to use a lower interest credit card for spending if it’s likely debts will roll over beyond the interest free period.
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