Balance transfers: when a 0% card is worth it

The short answer: a 0% balance transfer is usually worth it if you’ll be carrying the debt for more than a couple of months. The fee, typically 2% to 3.5% of the amount you move, is about the same as one and a half months of interest on a card charging 24.9%. After that, every month at 0% is money saved. On £3,000 paid at £150 a month, staying put costs about £916 in interest, while a transfer card costs between £75 and £126 in fees and interest.

The break-even in one line

At 24.9% APR, £3,000 costs about £62 in interest every month. A 3.45% fee on the same balance is £104, so the fee is earned back in under two months. If you’ll still owe money in three months, a transfer almost certainly saves you something.

Four ways to handle £3,000 at 24.9%

These are example deals, similar to what the market has offered, not live offers. The table shows the total cost, the fee plus any interest, depending on how much you can pay each month.

Look at the first column: on £100 a month the debt takes 4 yrs at 24.9%, but a 34-month 0% deal clears it within the offer. The longer deal wins when you can’t pay much. When you can pay £250, the shorter no-fee deal wins, because you finish inside the 12 months and never pay a fee.

So the best card depends on how fast you can pay: work out your monthly payment first, then pick the shortest 0% period that clears the debt, or comes close.

The catches

• The fee is added to the balance. Moving £3,000 at 3.45% leaves you owing £3,104.
• You must pay the minimum every month. Miss one and you can lose the 0%.
• When it ends, the standard rate applies. Aim to clear the balance first. If £1,200 is still owing at the end of a 12-month deal, you start paying about £25 a month in interest again.
• New spending may cost interest. The 0% usually covers only the transferred balance.
• You may not get the limit you need. You’re offered a limit based on your credit record, which may be less than your debt, and transfers usually have to be made in the first few months.
• You can’t usually move debt between cards from the same lender group.
• Applying leaves a mark. Lenders run credit checks, and several applications in a short time can lower your score. Use an eligibility checker first.

When a transfer isn’t the answer

If you can’t clear the debt in the offer period and your credit record means you won’t get a good deal, a lower-rate personal loan can be cheaper than staying on a card. If you’re missing payments, speak to StepChange, National Debtline or Citizens Advice before taking on any new credit.

With several debts, see which to pay off first, and for one large card balance, how long £5,000 takes at different payments.

This is general information, not financial advice. Example deals are illustrative. Check the rate, fee, 0% length and eligibility on any card before applying.