A balance transfer is when you move the balance from one credit or store card to another credit card with a different provider, usually to take advantage of a low or 0% interest rate. If you’re struggling to pay your credit card bill, find out if balance transfer is right for you.

Pros and cons of balance transfer

There are pros and cons of switching to a credit card with a lower interest rate.

Pros

• Manage all your card balances in one place.Pay less interest each month on what you currently owe – most balance transfers offer a lower interest rate (often 0%) for an introductory period.
• Some credit card providers offer rewards when you take out a balance transfer card, such as cashback or shopping discounts.
• Some providers allow you to ‘check your eligibility’ first and do a ‘soft credit search’ before you apply, so it doesn’t affect your credit score.

Cons

• Credit card companies usually charge a fee for each balance transferred, often around 2-4% of the amount you’re transferring. The fee is added to your statement balance. Make sure the fees don’t cost more than what you’re saving.
• Make sure you pay off your balance before the introductory offer runs out. If not, you could lose any low promotional rates you might have and be charged at a higher standard rate. Check how long any 0% balance transfer is open for and what the interest rate is after that.
• If you spend using your balance transfer credit card, these new purchases might not be included at the low or 0% introductory rate.
• The maximum amount you can transfer can vary, depending on your individual credit limit and the existing balance on your credit card.
• Don’t assume you’ll qualify for another balance transfer deal and be able to move the balance on to a new card.

Making a money transfer

A money transfer is like a balance transfer, but instead of the money going from one credit card to another, the money from the credit card goes into your chosen current account.

This allows you to pay off an overdraft, or cover an essential or unexpected bill using a credit card. Before you make a transfer, check the charges and interest rates with your card provider as doing this is usually more expensive.

Alternatives to balance transfer

Making a balance transfer can seem tempting if you’re struggling to keep up with credit card payments, but there are alternatives. First, talk to your credit or store card company. Telling your creditor that you’re struggling will help them to help you. It’s worth finding out if there are any support options that will work for both of you. If you have a physical disability, experiencing mental health problems or are vulnerable, they might also have specialist teams to represent and support you.

You might also consider:

• Salary advance – this is an employee benefit that involves taking some of all or your pay before payday.
• Credit unions – might be an option if you have a low income and you need to borrow a small amount for a short time.
• Community Development Finance Institutions – offer loans to people who struggle to get credit, but their interest rates tend to be higher than credit unions.
• Bank overdrafts – if you keep within the limit and don’t get default charges, this will be cheaper than home credit. Interest rates can still be around 40%, so it’s important to pay it off as soon as possible.