How to profit from balance-transfer deals

05 January 2015

Four tips to help you make the most of balance-transfer credit card deals.



Balance-transfer credit cards have become much more common and popular over recent years. They allow you to move a debt from one card to another which charges a lower rate of interest or no interest at all for a certain period. This helps cut your outgoings and gives you a longer period to pay off what you owe.

So how do you make the most of a balance-transfer credit card deal?

1. Check the credit card transfer fee

In best-buy tables, balance-transfer cards are usually ranked by how long their interest-free periods are.

But there is another important factor to consider: balance-transfer cards charge an initial fee, which is a percentage of the sum you are moving.

For example, a card offering 24 months interest-free may charge 3% while an alternative 15-month zero-interest card charges just 1.5%.

On a debt of £10,000, this would equate to £300 and £150 respectively.

If you are confident you can clear your transferred debt within 15 months, the card with the lower fee is likely to be a better bet.

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2. Clear your debt during the interest-free period

Balance-transfer cards are a cheap or free way to borrow within the interest-free period. But rates can leap to as much as 20% a year as soon as this period ends.

If you don’t clear your debt by this point, you’ll start racking up interest charges at a fast rate. Divide your total debt by the number of months you have interest-free and set up a direct debit or standing order to pay off this amount every month.

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3. Don’t miss credit card repayments

Most lenders stipulate that you have to make at least a minimum repayment on your credit card every month – as an example, this might be the greater of 3% or £5.

In the small print on many 0% balance-transfer cards, however, is a clause stating that any borrower who misses a monthly repayment will have their interest-free deal withdrawn.

This means the full interest rate of typically around 20% a year will be charged on the debt from this point on, and could prove extremely expensive.

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4. Check the spending rate on your credit card

If you have a 0% balance-transfer card, it doesn’t necessarily mean that any new spending on the card will be interest-free. If you want to use your card for both purposes, check the rate before you sign up.

Low-interest balance-transfer cards often have a significantly higher rate of interest for new purchases.

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The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.