Balance Transfer Credit Cards

How do they work and what are the best deals?

author image-grace
By Grace Hickman
Updated on Thursday 17 August 2023

Money transfer

Credit cards are a great way to maximise your cash flow, get a quick burst of credit for something you need in an instant or just as a part of a general budgeting and finance management plan.

As time passes, however, the credit card deals that were great a year ago may have started to wane and you may find yourself paying high levels of interest on a credit card balance (or multiply credit cards, store cards, etc) which has become a little out of hand.

For example, a credit card with £1,000 owing on it could cost you up to £50 per month in interest, or more depending on the type of deal you have, and this is extra money that you don't necessarily need to be paying.

This is where 0% balance transfer credit cards come in handy.

In this guide, you will learn what a balance transfer credit card is, how it works, what to look out for and some of the best deals currently on the UK market.

In this guide:

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

How much is the fee?

How should I pay off the balance?

Can I use another balance transfer card to cover unpaid balance on the first?

Can I make purchases with it?

Do balance transfer cards affect your credit score?

Am I eligible? Check your credit score

Can I use my original credit card to make purchases?

Compare balance transfer deals

Important things to remember

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

For a small fee (depending on how much debt you transfer) a balance transfer will take the debt from one credit card (or multiple cards) and put it all onto a new balance transfer credit card at 0% interest for a set period.

This period can last for up to two years depending on the deal you have, which gives you the breathing space to pay off your debt in a structured manner and without any added interest, so it can be cleared much quicker.

It also helps to release the weight from your other credit card (or cards), giving you your cash flow back and allowing you to use it as normal while the new balance transfer card holds the debt.

Just bear in mind that if you are paying off a balance transfer, you should avoid spending too much money on your credit cards again – try to live within your means and only spend what you can afford to repay.

Balance transfer fee - How much is it?

The main benefit of a 0% balance transfer card is that it can save you a lot of money on interest, particularly if you are transferring debt from a high-interest card.

But if a balance transfer card gets rid of the interest, how do banks and lenders make money from this type of deal?

There are two ways in which balance transfer card providers make money:

  1. The cardholder must repay the debt within the interest-free period. If they don’t clear the debt before the 0% end date, they must start paying interest on the remaining amount.
  2. A fee is charged for using the balance transfer service – this often depends on how much debt you are transferring.

A balance transfer fee is usually a percentage of the debt you are transferring to the new balance transfer card. Typically, the fee is around 3%, usually with a minimum of £3 and it is added on to the total amount of debt you owe.

For example, if you’re transferring a debt amount of £2,000, the fee is likely to be £60 or thereabouts, depending on the provider and the type of deal.

You may be able to find deals with lower fees, but lower fees generally mean that it comes with a shorter 0% period. This may suit your budget better, but remember that you have to pay all the debt back before the end date to avoid being charged interest again.

Some providers may not charge a fee at all (you can see these below), but it is important you always ensure that you fully understand the terms of the deal you are getting and what’s expected of you in terms of paying it back. While there may not be a fee, there may be another catch.

Clearing a balance transfer credit card in time – how should I pay off the balance?

The reason for getting the balance transfer card in the first place was to avoid interest payments, but if you fail to make the debt repayments during the 0% period, you will have to pay interest again, which essentially defeats the object of getting one to help manage your debts.

It is also worth noting that defaulting on payments will negatively impact your credit score and therefore affect your future chances of getting credit.

It is vital that you pay off the balance before the interest-free period is up. The best way to do this is to take the total value of the balance, add the transfer fee, divide the total by the number of months you have on the interest-free term and pay that amount (or more) from the card each month.

For example, a card with 28 months interest-free balance transfer taking on a debt of £2,000 with a 3% transfer fee would have an opening balance of £2,060 and require £73.57 to be paid off per month to clear it before the interest-free period ends.

Should I just make the minimum payment every month?

If you simply pay off the minimum amount every month throughout the term, it will take you longer to clear your debt – there is a way, however, that you can speed this process up.

If you increase the amount you repay each month, this will help you clear the debt much quicker – but remember to pay what you can afford and don’t pay too much, especially if  you’re stretching beyond your means.

Can I use a second balance transfer card to deal with any unpaid balance on the first?

If you are stuck at the end of the interest-free term with a remaining balance, then it might make sense to run through the sequence again by getting another balance transfer credit card to free up the first.

However, you must be wary of becoming dependant on this cycle as it is easy to pull yourself into more debt and it could take you years to clear it. If you are going to move balance onto a second balance transfer card, it is advisable to cancel (and cut up!) the first one once it is clear. The interest rate on purchases is unlikely to be good enough to want to use it as your main card and running up further debt on it is going to be detrimental.

Can I make purchases on my balance transfer card? What happens with interest?

Remember why you got the balance transfer card in the first place – to clear your debt(s). At Compare UK Quotes, we do not recommend using your balance transfer card to make purchases if you’re still paying off your debt as this could result in more debt.

If you have a transferred balance (at 0%), and then you make a purchase with an attached interest rate (APR), what happens?

This is where it can get a little complicated.

Any minimum payment that you make on the card will go towards paying off a part of the 0% balance, and any excess will go towards lowering the balance of the higher interest items.

It can, however, depend on the bank or lender with which you have a balance transfer card.

An example:

The transferred balance of the card (at 0%) stands at £1,053.
A purchase is made of £190.
The card balance now stands at £1,243 (1,053 + £190).
The statement shows that the minimum payment is £43.

If the minimum payment is made, then the credit card company can choose to take it from the 0% (transferred) balance, leaving that at £1,013 and then apply the necessary interest on £190 from the purchase.

If £100 is paid, then £43 will be applied to the 0% balance (leaving the £1,010) and the remaining £57 will come off the £190 purchase balance, meaning £133 remains and will have interest added.

In order to clear the purchase balance, a total of £233 must be paid that month, covering the minimum 0% payment and a full £190 remaining to clear the purchase balance.  Remember, interest is likely to be added to purchases even if they are paid off in the same month, so be sure to check this with your provider.

This example shows that while you can use the balance transfer card for normal purchases through its life, doing so will seriously impede your ability to clear your debt. For this reason, we advise against making purchases on a balance transfer card.

If you are considering making purchases on your balance transfer card, you must be aware of the consequences of doing so and how it’s going to impact you. If you’re unsure, your lender will be able to tell you exactly how it works depending on their specific terms.

Do balance transfer cards affect your credit score?

To be eligible for a 0% balance transfer card, you will need to prove to the lender or bank that you will make the repayments on time. For reassurance that you will, they will check your credit history to get a picture of how financially reliable you are.

But how will applying for a balance transfer card affect your score?

It is generally known that applying for a credit card can have a negative impact on your credit score, but it shouldn't do too much damage provided you haven't applied for a lot of credit at the same time; you can soon build it back up as long as you make the monthly repayments on time and in full. In a similar way, by applying for a balance transfer card, you might immediately lose a few points on your rating.

It is important to remember that each balance transfer card application will be noted on your credit report, but you may want to use an eligibility calculator like that provided by MoneySavingExpert, as this will show you the deals you’re most likely to be accepted for - without having too many applications on your credit report.

Learn more: How to Build Your Credit Score with a Credit Card

Another negative impact to your credit score is the amount of credit you already have available to you. By adding the credit from an additional card, you increase that value and thus lose a few more points.

With a sensible repayment plan, however, you will lower the interest paid on your cards, lower the balance on them, and show good money management, all of which gains points on your credit score.

In the long term, the benefits of a well-managed balance transfer card will exceed the initial impact of applying and getting the card.

Am I eligible? - Check your score now

To stay on top of your finances and to secure the best finance deals on the market, you should regularly check your credit score.

At Compare UK Quotes, we recommend checking your credit report and rating with multi-agency site Checkmyfile, which uses the four main UK credit reference agencies to give you a more detailed report than anywhere else online.

You can sign up for a 30-day free trial, after which it will cost £14.99 per month. If you don’t want to pay, simply cancel your account before the trial period ends.

Read more: Checkmyfile Review

Can I use my original credit card for purchases?

Once you have transferred the balance away from your original credit card then it becomes free to use for purchases once more. This is both good (as you have access to some credit) and bad (as it is likely that you will slip into temptation and use up that credit).

Only you know whether keeping onto that original card is a good or bad idea for you. If you are able to properly budget and manage your money, then there is no harm in keeping the card for essential purchases little and often – perhaps you put it aside for emergency use only. If, however, you know that the temptation to spend will be too great then you should close that account and concentrate on paying back the transferred balance first.

Compare balance transfer credit cards

When it comes to getting a financial product, many people will stick with their existing bank because they feel it’s easier and that as a loyal customer, they must be getting the best deals on the market.

This isn’t always true, however.

To ensure you’re getting the best deal, you must compare the deals that are currently out there on the market.

You can do this by using comparison sites like or Compare the Market, or by doing your own research and contacting companies directly to see what type of deals are currently offering on balance transfer cards.

Ultimately, you need to find the best one that suits your budget and financial situation. MoneySavingExpert’s Martin Lewis says that “it’s best to go for the card with the lowest fee in the time you’re sure you can repay it. If unsure, play safe and go long.”

Some of the best balance transfer cards, as recommended by Mr. Lewis, are:


Term length

Fee (% of debt amount)


M&S Bank 28 months 0% 2.85%
  • 19.9% interest after 0% period
  • 0% on purchases for 6 months
Natwest / RBS / Ulster Bank 28 months 0% 2.75%
  • Existing customers only
  • 19.9% interest after 0% period
TSB 28 months 0% 2.95%
  • Some people may be offered 25 or 22 months at 0%
Virgin Money 24 months 0% 1.25%
  • 21.9% interest after 0% period
  • A 26-month deal is also available with 3% fee
MBNA Up to 26 months 0% Up to 3.49%
  • 20.9% after 0% period
HSBC 25 months 0% 1.5%
  • Minimum fee of £5
  • 21.9% after 0% period
Halifax Up to 24 months 0% Up to 3.49%
  • 19.9% after 0% period

Remember, the fee you are charged may change depending on the company and your creditworthiness.

Balance transfer credit cards no fee


Term length

Fee (%)


Natwest / RBS / Ulster Bank 20 months 0% No fee
  • Existing customers only
  • 19.9% interest after 0% period
Santander 19 months 0% No fee
  • 18.9% interest after 0% period

Bad credit score?

If you have a lower-than-average credit rating, you will need to search for deals that have been tailored to suit individuals with bad credit.

Some include:


Term length

Fee (%)


Fluid 9 months 0% 4%
  • 34.94% interest after 0% period

Aqua 6 months 0% 3%
  • 34.95% interest after0% period

Things to remember

If you are considering getting a balance transfer credit card, here are some tips to bear in mind beforehand:

  • Always pay at least the minimum monthly repayment (or more if you want to pay it off sooner and can afford to do so).
  • Clear your debt BEFORE the 0% period ends to avoid further interest and debt.
  • Avoid making purchases with your balance transfer card and don’t withdraw cash with it, otherwise you risk facing huge costs for doing so.
  • Try using an eligibility calculator to see what deals you are most likely to be accepted for (rather than applying for different ones, as this will impact your score).
  • If you find a deal that says ‘Up to…’, be aware that you may not get the term length you apply for if your credit score isn’t good.

And finally, make sure you fully understand what you are signing up for when getting a balance transfer card, and you must know exactly what’s expected of you.

For further information, read our related guides below:

Latest News