What is a balance transfer credit card and how does it work?

5 min Read Published: 28 Nov 2022

What is a balance transfer credit card and how does it work?Borrowing with a credit card is expensive and if you have built up a balance on a credit card that you want to clear quickly then using a balance transfer credit card could be a great option.

With a balance transfer credit card you can transfer the balance from an existing credit card, with a high interest rate, onto a card with a lower or even 0% interest rate. The 0% rate, or any other low interest rate, will only be available for a set period of time and so to make the most of a balance transfer credit card you should ideally repay the balance before the offer period ends. Failure to repay the balance in full before the end of the offer period would leave you at risk of paying a much higher interest rate, typically somewhere between 17.9% and 39.9%. 

At this point you may be wondering why a credit card company would offer a 0% interest rate and how can they make any money. Well, the answer is simple, they understand human nature and know that once you have signed up to a credit card then you are likely to keep it and eventually be tempted to use it. In other words, it's a marketing tactic to attract new customers. However, used wisely a 0% credit card can help you become debt-free in a shorter period of time.

What happens when the low interest period on a balance transfer credit card ends?

The low interest rate period differs between card providers and often between individuals, depending on the personal information provided on the application. Once this period ends any outstanding balance will start to incur interest at the rate stated in the terms & conditions provided when the card was issued, or at the rate stated on any subsequent updates provided at a later date. Also, the interest rate charged will differ between card providers and often between individuals, depending on the personal information provided on the application.

Does getting a new credit card affect my credit score?

When you apply for a credit card the provider will make inquiries about what other credit you already have and how you have managed this credit.

There are two types of credit file enquiry and each type will affect your credit score differently.

  • Soft inquiry - this type of inquiry does not impact your credit score and is used, for instance, when you check your own credit rating
  • Hard inquiry - a lender will use this type of inquiry when they are considering whether to lend you money and a hard inquiry will leave a mark on your credit file that others can see. This can negatively impact your credit score in the short term, however, it should only remain on your credit file for 2 years

Some other factors that can negatively impact your credit score:

  • if you can't confirm your income or have an irregular income
  • if you have had a number of jobs in a short period
  • if you have a lot of existing credit arrangements
  • if you have defaults registered regarding previous credit
  • if you have incorrect entries on your credit history

If I get a new credit card will I have to close my existing credit card account?

If you get a new credit there is no requirement to close any existing credit card account but you should be aware that the more credit cards you have, the greater the temptation may be to use them, which will only result in increasing your debt burden. If you are getting a new balance transfer credit card then you will need to keep your existing credit card until the balance transfer card has been issued and any balance transfer completed. I would then suggest cutting up your existing credit card to avoid any temptation to use it again. Check out our article 'Will cancelling an unused credit card affect my credit score?'

How long does it take to complete a balance transfer?

A balance transfer will normally be completed within a few days and you can request a balance transfer online by providing some information on the debt you are looking to transfer. With some credit card providers, you can request a balance transfer during the application process for a new card. 

How much does it cost to do a balance transfer?

Many balance transfer card providers will charge a fee when transferring a balance with the typical charge ranging from 1% - 3%. The charge applies to the amount you are looking to transfer, so a £1,000 balance transfer with a fee of 3% would cost £30. Always read the terms & conditions of your chosen card provider so that you know how much you are going to be charged. 

Is a balance transfer credit card right for me?

A balance transfer credit card is a great option if you have a credit card balance on an existing credit card and are determined to clear this balance as quickly as possible. Using a balance transfer card may also be a good option if your current card has an interest rate higher than the balance transfer card standard interest rate. This means that you will get a low or zero interest rate for a period then move onto a rate lower than you are currently being charged.

At this point I think it would be worth sharing an insight into credit card debt:

If, from today, you never use your credit card again and only pay the minimum monthly amount off the balance it will take around 27 years to clear the outstanding balance!

At first, I found it difficult to believe the above statement but when I looked at the calculations it dawned on me how having credit card debt and not trying to clear it as quickly as possible is financial madness. To find out more about how to clear your credit card debt read our article 'The 5 simple steps to clear your credit card debt'

Pros and Cons of a balance transfer credit card


  • allows you to consolidate debt from other credit cards onto one card which will allow you to make one monthly payment rather than several payments
  • save money on interest payments with a lower interest rate
  • the low interest rate could enable you to clear your debt quicker


  • may have to pay a fee on any balance transfer
  • lower interest rates are only applicable for a short period
  • having an extra credit card could tempt you into incurring more debt

What are the best 0% balance transfer credit cards?

We have written this comprehensive article regarding the best balance transfer credit cards 'Compare the Best 0% purchase credit cards'. In this article, we provide information on a number of credit cards including how long the interest rate offer period is and what the interest rate will be when this period ends.

Balance transfer credit card top tips

  • don't apply for more than one credit card at a time as this may affect your credit rating
  • make sure you read the terms & conditions for the credit card before applying, you can find these on the credit card provider's website
  • use the low interest rate period to pay off your debt, don't make any new purchases which will leave you with a larger outstanding balance at the end of the period
  • pay more than the minimum amount to pay off your debt quicker

Balance transfer credit v personal loan

If you have a large balance on your credit card you may be contemplating whether to transfer this debt to a low interest credit card or take out a personal loan. In our comprehensive article 'Is it better to get a credit card or a personal loan?' we look at this question in great depth, providing the pros and cons of each option together with some interest calculations on each option.