How to use balance transfers sensibly to clear debt

Harriet Meyer / 08 May 2018 ( 25 March 2020 )

A guide to making use of interest-free periods to save money and clear your debt, plus tips to help you make the most of balance-transfer credit card deals.



Consumers saddled with credit card debt have a range of balance transfer credit cards to pick from offering 0% interest over several years.

These 0% cards can save a huge amount in interest payments by transferring balances from a card with a hefty rate. However, they are only useful if you repay the full sum owed before the interest-free period ends.

Balance transfer cards are a really useful way to clear debt – provided they are used sensibly.

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How they work

Let’s say you’ve built up various credit balances on cards with interest rates at an average 18% or more.

If you switch the outstanding balance to a 0% balance transfer card, you can stop paying interest altogether on your debt while the offer lasts. This could be as long as three years, or even more.

Compare transfer fees

There is a catch. You pay a percentage fee of up to 3% on the balance to move this onto one of these cards. 

So if you transfer a debt of £3,000, you pay a fee of £90. Consider this in any calculations when comparing cards.

However, you are still likely to save money with a balance transfer credit card. Interest rates on standard cards are likely to cost you more than the transfer fee on a balance transfer credit card.

There are cards with lower fees and shorter interest-free periods. Another option is a card that doesn’t charge this fee an offers a low rate of interest. Do the sums carefully to work out the best option for you.

Check the period

As long as you wipe your debt during the 0% deal, you won’t pay any interest on the sum owed. Think of it like an interest-free loan.

However, when the interest-free period ends, you will be charged interest at the card's standard rate on any balance left over.

Remember to cancel the card when the balance is cleared. This will avoid any temptation to use the card when the deal is over, seeing you potentially rack up more debt.

Set up a direct debit

The simplest way to manage debt and avoid unnecessary late payment charges is to set up a direct debit. You can work out how much this needs to be to ensure the total debt is wiped over the 0% period. For example, if the deal lasts 24 months, and you owe £2,400, set up a direct debit of £100 per month.

If you can’t afford to wipe your debt during the period, then consider switching to another 0% deal before the offer expires.

Alternatively, you could wipe out the debt in full at the end of the term.

However, you must ensure to set up a direct debit for the minimum payment each month. Make a note of when the offer ends, and check you will have sufficient funds to repay the debt.

A guide to using credit cards

Tips to help you profit from balance-transfer deals

Balance-transfer credit cards have become much more common and popular over the 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?

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

Common credit card mistakes to avoid

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.

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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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.

For more tips and useful information, browse our money articles


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.