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How much could you save by switching to a 0% balance transfer credit card?
Interest-free terms hit 18-month high as new data shows half of credit card balances are incurring interest
Half of credit card balances are currently incurring interest, according to experts UK Finance.
If you have expensive credit card debt, you could save money by moving it to a 0% balance transfer card. And with 0% terms hitting an 18-month high, now is a good time to shift your borrowing.
Here, we explain how much you could save by switching, and offer advice on how to find the best card for your circumstances.
The benefits of balance transfer cards
A 0% balance transfer card lets you move debt from an expensive card and freeze the interest for a set period of time.
This can help you save money and pay off your debt more quickly, as all of your repayments will go towards paying off the debt itself, rather than the interest.
For example, a £2,000 debt on a card charging 24% APR that you pay £65 a month towards will take more than three years to clear and cost you £949 in interest.
However, a £2,000 debt moved onto a 0% balance transfer card, with the same repayments of £65 a month, will take around 31 months to clear and cost you nothing in interest.
Interest-free terms hit 18-month high
If you're shopping around for a 0% card, the good news is that choice is improving.
Data from Moneyfacts shows the average 0% term on a balance transfer card is currently 529 days – around 17 months. That's the highest it's been since September 2023.
The number of deals on the market has also risen slightly over the past 12 months, with 65 offers to choose from, compared to 61 a year ago.
Longest balance transfer deals
The longer the 0% balance transfer period, the more time you have to pay off the debt before it starts incurring interest.
The longest 0% deal currently on the market is 32 months, offered by Tesco Bank, MBNA, HSBC and Barclaycard.
As well as the term, you'll also need to consider any balance transfer fee and the provider's reputation.
- To find out more about the longest deals on the market and which cards we’ve rated Best Buys, visit our guide to the best 0% balance transfer cards.
Comparing 0% terms and balance transfer fees
In order to find the deal that will save you the most money, it’s crucial to understand the relationship between transfer terms and transfer fees.
Most cards charge a fee for transferring a balance – and while 0% terms are rising, so too are fees.
According to Moneyfacts, the average balance transfer fee is currently 2.47%, up from 2.4% a year ago. This works out at just under £50 on a £2,000 debt.
Generally, the longer the 0% term, the higher the fee will be. The four cards currently offering 32-month interest-free periods all charge fees above 3%.
This means it may be cheaper to choose a deal with a shorter interest-free period and a smaller fee, as long as you’re confident you can afford to pay off the debt within the timeframe.
How find the best 0% balance transfer deal for you
The best card for you will depend on how much you owe and what you can afford to repay each month.
For example, it would cost around £70 to transfer a £2,000 balance to a card that charges a 3.49% transfer fee and offers a 32-month 0% period.
You would then need to pay £65 per month in order to clear the debt during the interest-free period.
However, if you can afford to pay more per month, you could choose a card with no transfer fee to avoid paying extra charges.
If you transferred a £2,000 balance to a card with no balance transfer fee and a 14-month 0% period, you would need to make monthly repayments of £143 to avoid incurring interest.
You wouldn’t be charged anything for the balance transfer, saving you £70.
To find the best deal for you, use our balance transfer calculator to work out your ideal 0% period and then look for a card with the smallest balance transfer fee.
Paying off your 0% balance transfer card
Most balance transfer cards charge a high rate of interest, so you should aim to pay off the debt before the 0% term ends.
Once you’ve worked out what you can afford to repay each month, set up a direct debit to make sure you stay on track and don’t miss payments.
If you don’t manage to pay off the debt before the end of the 0% period, you should consider switching the remainder to another 0% balance transfer card.
Avoid making purchases – or consider a combined 0% purchase and transfer card
Making purchases on a balance transfer card is usually expensive, so you should try to avoid additional spending.
If you want to shift expensive debt but also plan to make purchases, you could look for a card that offers a 0% period on both purchases and balance transfers.
You’ll need to plan carefully, as some cards offer different 0% periods for purchases and transfers.
For example, if you choose a card that offers 0% interest for 23 months on purchases and 20 months on balance transfers, you'll need to keep track of two different interest-free periods.
- Find out more: best interest-free purchase credit cards
