It’s normal to carry credit card debt once in a while. But if you are paying too much interest on your debt, it might be time to look into a balance transfer credit card. This type of card allows you to transfer one or more balances from your existing credit cards to a single card with a lower or even a 0% interest rate.
In this article, I’ll tell why now might be the best time to apply for a balance transfer credit card.
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How do balance transfer credit cards work?
When you transfer your credit card balance to a balance transfer credit card, you will be offered an introductory 0% interest period lasting a number of months. That means that there will be no interest to pay on your debt for this period.
If you are paying a high interest rate on your current credit card debt, you could potentially save hundreds or even thousands of pounds in interest.
Check out our balance transfer calculator to find out how much money you could actually save by transferring your debt to a balance transfer credit card.
The length of the 0% introductory period varies from card to card. But for most balance transfer cards, the time is usually more than enough to clear your debt.
Why is now a great time to apply for a balance transfer card?
According to a recent report by Moneyfacts, balance transfer credit card deals have become more attractive recently with longer 0% interest periods.
Moneyfacts reports that the average interest-free term has surpassed 600 days for the first time since 2008. The average interest-free period on balance transfers is now 602 days. This is up from 577 days in December and 530 days this time last year.
Balance transfers have also become cheaper. According to Moneyfacts, balance transfer fees have dropped from an average of 2.23% a year ago to 1.95% right now. This is the lowest level since 2006.
Furthermore, the number of balance transfer deals has also increased (after falling to a record low in 2020).
There are currently 68 balance transfer deals on the market with an interest-free introductory period. There are also 62 deals with an interest-free period on purchases.
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What else do you need to know about applying for a balance transfer credit card?
When it comes to applying for a balance transfer credit card, make sure you shop around and compare different options. This will increase your chances of finding the best deal for your needs. The Motley Fool has compiled a list of top-rated balance transfer credit cards available in the UK right now to help you with this.
Keep in mind that lenders are only required to offer the headline rate to at least 51% of applicants. So, if you apply for a balance transfer credit card, you are not guaranteed to receive the longest 0% term advertised.
In some cases, it may be preferable to avoid the longest 0% period. Cards with longer 0% periods typically come with higher balance transfer fees. So, if you don’t require 33 months (the market’s longest 0% period) to pay off your balance, choosing a card with a shorter 0% period can help you avoid higher fees.
Finally, remember that any credit application will result in a hard credit search on your credit report. This may lower your credit score. If you have a high number of declined applications, it may make you less attractive to lenders. This could reduce your chances of getting credit in the future.
By using The Motley Fool’s eligibility checker, you can find out your chances of being accepted for a balance transfer credit card before you apply. This won’t affect your credit score. More importantly, it could help you minimise the number of declined applications that could affect your ability to get credit in the future.
The post Why NOW is the best time to apply for a balance transfer credit card appeared first on The Motley Fool UK.
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