Transferring the balance from one credit card to another could save you money. But what are 0% balance transfer credit cards, how do they work and can anyone get one?

How do 0% balance transfer credit cards work?

A balance transfer credit card, as the name suggests, allows you to transfer the balance or debt from one credit card to another that charges a lower rate of interest over a specified period of time, helping you save money and pay off some of your debt.

The majority of balance transfer credit cards offer 0% interest on balance transfers for a specified term, which means that as long as you don’t continue to build debt on the new card and you pay the minimum monthly payment, you’ll pay no interest on your debt until the deal ends.

For example, if you’ve built up a debt on a credit card that is charging you 15% on whatever you owe, but transfer the balance to a 0% balance transfer deal for three years, as long as you manage to pay off your debt before the deal ends you’ll have paid zero interest instead of 15% interest on whatever you owe. Effectively you’ll have used the 0% balance transfer period as a kind of interest-free loan.

Balance transfers on credit cards are quick and easy to action, but as with all credit cards you’ll need to apply for one and have your application approved first. All cards have application criteria ranging from how much money you earn to not accepting transfers from certain other providers. So, make sure you read the small print before you apply as being turned down for a credit card could affect you credit rating.

[Read more: How to check your credit rating and get a better one]

Are there any charges for transferring your balance?

While you may make huge savings by not having to pay any interest on the debt you transfer for a given period of time, you will almost definitely be charged for the privilege of moving your balance from one credit card to another. Most balance transfer credit cards charge a fee for the transfer.

The fees are usually calculated on the amount of debt you want to transfer and the length of the 0% balance transfer period. As a general rule of thumb the larger the debt you transfer and the longer deal remains interest-free, the greater the fee you can expect to pay.

What to watch out for

Transferring your balance from one credit card to a 0% balance transfer credit card is a great way to give you a bit of breathing space from high interest rates and soaring debt. However, you still have to pay off your credit card debt.

Balance transfer providers will stipulate what the minimum monthly payment on your balance is when you sign-up, so make sure you can afford to pay it. If you default on your payment you may find your 0% interest rate revoked and replaced with a higher rate of interest than you were paying before you made the transfer.

Once you’ve transferred your balance make a payment plan and stick to it. At the very least make sure you make the minimum payment each month and if possible pay off more to help clear your debt before the deal ends.

Don’t use your credit card to make purchases or to withdraw cash. Generally, the 0% deal only applies to the balance you’ve transferred or has a limited period of 0% interest on purchases.

Any purchases made after the introductory period will be subject to interest at the card's usual APR.

As with all credit cards make sure you shop around for the best deal to suit your circumstances. If you intend to pay off your debt in a short period of time go for a balance transfer credit card with a shorter deal time as you’ll probably spend less on transfer fees.

And bear in mind you can’t transfer balances between cards from the same providers.

Don’t forget, if you haven’t paid off the balance on your card once the low or no interest introductory period ends you will be notified of an increased interest rate for the remaining balance.

You should make sure that you are then able to at least make the minimum payment each month otherwise you risk racking up more debt.

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