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> Balance Transfer Credit Card - UK Guide
In a nutshell
Taking out a new credit card that will accept the transfer of your existing credit card balance(s) on to it.
Best Credit Card For
People looking for better deals or rates or those trying to control their credit card spending.
The amount you will be given as a credit limit for any credit card will depend on your salary and your credit rating - and the internal specifications of your card company and the card you want. The better your credit rating is, the higher your limit may be. Conversely, with a bad credit rating, you can't expect too high a limit initially (although this may rise with time). If you want premium cards then you must have a salary in excess of a certain level (i.e. £20,000+). You'll automatically get higher credit amounts here - in some cases, you get unlimited credit.
If you apply for a new balance transfer card the chances are you'll be doing it to improve your APR - so, you'll immediately benefit from lower interest rates which can save you significant sums. You can even now find balance transfers that operate at 0% - so you can put your existing credit card debt (and sometimes other loans) on to your new card and you won't be charged interest at all for as long as your deal lasts. This can be a great way to get your card borrowings under control. Some balance transfer cards also offer 0% or low interest deals on new spending as part of the deal - so you'll benefit in your introductory period from this as well.
What to look out for
Your balance transfer offer may look good for the period of your deal but you also need to look at how high your APR will be once the deal is done. You may find that it is much higher than low rate credit cards which would cost you more in the long run.
Balance transfers at 0%/low interest are often used by people with big credit card debts - they view them as a 'breathing space'. No or little interest is added, so you can simply work to pay off the capital you owe and will potentially make much more headway. But, this only works if you do work to pay off your debts and certainly won't work if you get carried away by the savings you make in interest and spend even more. If you have credit history problems then you may not be accepted for many balance transfer deals - especially those that offer 0% for long periods. Balance transfer cards have the same rules as any credit card - if you don't make at least the minimum payment every month then you'll be charged a penalty fee. If this happens regularly then your missed payments will start to appear on your credit rating which could cause you problems further on down the line. And, as with any loan, if you can't pay anything back at all, your card company can take legal action to use your property/possessions to recover their money.
This is generally your best choice for cutting interest/APR.