Balance Transfers Explained: How 0% Deals Actually Work

A balance transfer moves existing credit card debt to a new card, usually at 0% interest for a fixed promotional period. The point is simple: every pound you pay goes toward reducing the debt itself, not servicing interest on it.

Most cards charge a transfer fee of 1-3% of the balance upfront. Transfer £5,000 at a 2% fee and you pay £100 on day one. That still makes sense if your original card is charging 22% APR, because the interest you avoid over the promotional period will far exceed that fee.

The one rule that catches people out: miss a minimum payment and many lenders will void the 0% deal immediately, reverting your balance to the standard APR. Set up a direct debit for at least the minimum payment before you do anything else.

Beyond that, the strategy is straightforward. Divide your transferred balance by the number of months in the 0% period and pay that amount each month. Clear it before the deal ends and you pay no interest at all.

Do not spend on the new card. Purchases on a balance transfer card typically accrue interest from day one at the standard rate, while your payments are allocated to the 0% balance first. New spending just sits there accumulating interest until the transferred balance is fully cleared.