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Financial
Services > Credit
Cards > Glossary
> Balance
Transfers
This is where the amount owed on one credit card is transferred
over to another card, due to the lower rates being offered. Balance
transfers are often used by credit card issuing companies
as a way of attracting new business. However, your current card
issuer may well offer you attractive balance transfer
deals, especially if you have not used your card for a long period
of time. You may also find that they have balance transfer offers
which they are not currently publicising, if you call them and ask.
Interest Rates
Balance transfer interest rates are usually substantially
lower than typical purchase or cash advance APR's. However, beware
that when you pay off your credit card bill each month, you'll be
paying off the balance transfer first,
and therefore the best way to use them is to transfer the balance
on to a card which has not had any other spending or cash advances
applied to it (i.e. one with a zero balance), and to make sure you
do not use the card
for anything else. If you need to make additional purchases, use
a debit card, or another credit card. We advise you to cancel the
card you have just transferred the balance from - otherwise you
will merely extend your borrowing.
Time Limits & Minimum Spends
Look out for the time limit on your balance transfer,
which is often six months, after which the rates may revert to a
much higher level. Some card issuers may also make it a requirement
that you use the card a minimum number of times, or spend a certain
amount, in order for the balance transfer rate
to apply. If you must use the card once each month as part of the
conditions of the balance transfer, make sure that you buy as small
an item as possible - for example you can now buy London Underground
tickets using a credit card.
Thinking Long Term
For a longer term solution, you may wish to consider a personal
loan, or a re-mortgage
to release capital for debt
consolidation at a much lower interest rate.
Apply Now
The majority of credit card companies will offer you a balance
transfer deal when you apply for their cards. However, the long
term interest rate should be your major concern, as the low interest
period will be over very quickly. Our comparison
section gives an honest appraisal of all the current credit
card offers. For a balance transfer over a longer period, consider
applying for a Barclaycard,
where you can get an APR of 6.9% for the life of the balance - a
rate lower than most personal loans. Remember that this is only
useful if you use the card for nothing
else until the balance is paid off.
Find more balance
transfer offers.
Overdraft Balance Transfers
Credit cards aren't the only form of borrowing which allows you
to transfer your balance from one account to another. Banks such
as Citi Bank also allow you to transfer your overdraft at competitive
rates:
[More about this][Apply
now at www.citibank.co.uk ]
Balance Transfers on Loans & Overdrafts
Some credit card issuers, such as Egg, allow you to benefit from
their 0% balance transfer rates when you transfer loans or overdrafts
across to them. However, bear in mind that this must only be used
as a short term solution, as the rates then revert to a higher level
at the end of the interest free period.
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