What to do when your balance transfer deal ends
What to do when your balance transfer deal ends
Balance transfer credit cards typically offer a 0% interest period for anything from six to 24 months. But what should you do when the interest-free period comes to an end?
How do balance transfer cards work?
A balance transfer card lets you move existing credit card debt to a new card charging less interest – normally 0% – for a set number of months.
If you switch your debts to a card charging 0% interest, 100% of your repayments will go towards repaying your debt, not towards paying interest. This means you can pay off your debts more quickly and save money too.
Understand what you are signing up to
It’s important you understand what you are signing up to when you take out a balance transfer credit card.
Read the “credit card summary box” and look out for the following information:
The length of the 0% balance transfer offer
Whether you need to make the balance transfer within a certain time period (normally 60 or 90 days)
Any balance transfer fee charged
The go-to interest rate when the 0% balance transfer period ends
The purchase APR on the card
How much the monthly minimum repayment will be
How to use a balance transfer card
Transfer your debt
When you apply for a balance transfer card, the application form will include a space to put in the details of existing credit card debts you want to transfer.
When you get the new card, it will pay the other one off and the debt will appear on the statement of your new card.
Factor in the balance transfer fee
The balance transfer fee will be added to your debt. For example, if you transfer £500 and the balance transfer fee is 4%, you’ll owe a total of £520.
Make a note of when the 0% period ends
After this date you’ll be charged interest on any debt on your card. The rate can often be relatively high.
Don’t spend on the card
Although, technically, you can make purchases on a 0% balance transfer card, it’s best not to do so as you’re likely to be charged interest on your spending.
Don’t withdraw cash from the ATM
Cash withdrawals will usually incur interest from the moment you take the cash out, including a fee from your credit card provider. It is also possible that there could be an ATM fee too.
Pay at least the minimum each month
You’ll need to make at least the minimum payment each month – if you fail to do so, you could be charged a late payment fee and there is a risk the credit card company may cancel the 0% offer. The minimum payment will be on your statement and expressed as a percentage of your debt with a minimum cash value.
Pay more than the minimum if possible
Just paying the minimum will mean chipping away at your debt slowly. Ideally, you should pay more each month.
Aim to repay your entire debt before the 0% interest period ends
To work out how much you need to pay each month, divide your debt by the number of months you are not being charged interest.
For example, if you owe £500 and the balance transfer card offers nine months at 0%, you’ll need to pay £55.56 a month (£500 / 9) to repay the balance within the interest-free period.
What to do at the end of the 0% interest period
If you have repaid your entire debt…
If you’ve paid off the entire balance on your card, your goal has been achieved.
Think about whether you still need a credit card. If you do, check the conditions of your credit card to see whether it still suits you. You might be better off getting a new credit card offering 0% interest on purchases or cashback on spending.
If you don’t need a credit card any longer, contact the provider to close your account. This will stop you being tempted to spend on the card, and could also improve your credit score.
If you still owe money…
If you haven’t been able to repay the full debt, look at what the interest rate will change to after the 0% period ends. In most cases the rate will be a lot higher.
If it is, you can transfer your remaining debt to a different 0% balance transfer card and continue paying off your debt at 0% interest. You’ll have to pay a balance transfer fee to move your debt again – work out whether this still makes it worthwhile.
Balance transfer tips
Shop around for the right balance transfer card for your situation
Check your eligibility before applying for a card
Read the credit card summary box
Make a note of when the 0% interest period ends
Factor the balance transfer fee into your calculations
Make the transfer within the permitted stated time from getting the card
Don’t use the card for purchases or ATM withdrawals
Aim to pay off your entire debt during the 0% interest period
If you’re still in debt at the end of the 0% period, consider switching to a new 0% balance transfer card
See if you'll be accepted before you apply
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Use your card sensibly — if you don’t make repayments on time or stay within your credit limit you will pay extra charges, forfeit the 0% offer and getting credit in the future may be harder and more expensive.