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What is a balance transfer credit card? The quick & easy guide
What is a balance transfer credit card? The quick & easy guide
Managing your credit cards, and their associated debts can be hard. Especially since the interest rates on credit cards can be incredibly high. A possible solution can be to use a balance transfer credit card. Why use one? Because you can move debt from a card with high rates to a balance transfer card with zero apr.
Balance transfer cards are not the only way you can get in control of your credit card spending, but they can be useful. Below you’ll find other ways to budget control, and why it’s important. Just here to read about balance transfer cards? Scroll down below and you’ll find out how it works, what it costs, and which card is best for you.
How to manage your credit card spending
Budget control is important. Credit cards are an easy way to spend online, but they can make it easy to spend too much as well. Overspending and unexpected financial challenges can result in a mountain of credit card debt.
There are plenty of ways to prevent credit card spending from cascading into debt. There are key habits you can teach yourself to prevent getting into debt. Another good method is to use a prepaid credit card instead of a regular credit card. With a prepaid credit card, you have all the benefits of a credit card, but since they don’t work on debt, you don’t have to worry.
Interested? You can get a Transcash ticket or another prepaid credit card right here on Recharge.com in just a few seconds. So you can start getting in control of your finances right now.
What is a balance transfer credit card?
Prepaid credit cards are a good method of preventing credit card debt. But what if you’re trying to manage your existing debt? In that case, a balance transfer credit card is perfect for you.
What is it? A balance transfer is a kind of credit card transaction where you move credit card expenses from one account to another. If you’re currently paying high interest on your credit card you can save serious money by moving to a card with low, or zero interest.
Zero-interest? Yes, many card providers offer an interest rate of 0% for a set period after you get the card. For instance, the Bank of Ireland offers the Eir credit card with zero-interest for the first 7 months after applying for the card. After that, the rate jumps up to 26.6%.
Take the following things into account if you’re thinking of using a balance transfer with a credit card:
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How much you owe on your current credit card;
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how quickly you can pay it off;
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the interest rate on your current card;
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how high the balance transfer fees are.
Say you have a credit card debt of €2000, for example, with an interest rate of 22.9%. If you do a balance transfer to a credit card with 0% interest for 12 months with no fee, you can save €232. However, that’s only the case if you can pay off your balance by the end of the 12 months.
What can you use a balance transfer credit card for?
As stated above, a balance transfer credit card can be the perfect way to save money and get out of debt quicker. But that’s not the only way you can use it.
You can use it to simplify your finances. By transferring the balances of multiple credit cards you can consolidate many monthly payments into just one bill.
Or help out with a partner’s debt. Some card issuers allow joint balance transfers that can help you lend a hand to a struggling loved one.
Some card issuers also allow you to add other kinds of debts, such as a loan, to your balance transfer credit card. That way you can simplify your debts and save even more.
How does balance transfer work?
So how do you actually do a balance transfer with a credit card? It changes from card to card, but these are the general steps you’ll take:
1. Apply for a card with an introductory 0% interest rate and cheap balance transfer rates
The biggest things to keep in mind are the 0% interest rate, the length of the introductory rate, and the costs of the balance transfer itself. Keep in mind you do have to qualify for another credit card for a balance transfer to be a possibility. You can find a guide on the best cards for balance transfer in Ireland below. Something to keep in mind: it’s generally not allowed to use balance transfer on credit cards from the same issuer. You can’t transfer from a Bank of Ireland card to another Bank of Ireland Card.
2. Initiate the balance transfer
You can generally do this from the online banking environment of the issuer of your card. How this works exactly depends on the issuer of your card, but most allow you to do it online or by phone. Sometimes, balance transfers can also be initiated using checks, or through the mail. Check the terms and conditions of your credit card provider to see how they allow you to use balance transfer to a credit card and what fees they charge for the different methods.
3. Wait for the transfer to go through
Once your balance transfer is approved the issuer of your new card will usually pay off your old account. Your old debt — plus the balance transfer fee — will show up in your new credit card account.
4. Pay the balance on your new card
By now the balance transfer to your credit card is complete. You’ll have an interest rate of 0% for a set amount of time. Now you’ll need to make the best of that time by making monthly payments to your new credit card account. If you pay it all down during the introductory 0% interest period you will have saved yourself a lot of money on interest.
What are the fees involved in balance transfer?
As stated above, some card issuers will charge you for the balance transfer. Most charge balance transfer fees of around 3%-5% of the transferred balance. This means that if you transfer €500, you’ll have to pay between €15 & €25.
Ideally, your balance transfer credit card has no such transfer costs, combined with a €0 annual cost and a long period with 0% interest. Unfortunately, ‘triple-zero’ cards like this are hard to find.
So why does any of it matter? Why not just pay the transfer fee? If your debt, or your current interest rate, is low enough, then the transfer fee could in fact cost more than you’re saving on your interest rate. In that case, you are better off sticking with your current credit card.
But if you need to take longer to pay off your current debt, or if your current interest rate is extremely high, then a balance transfer credit card becomes more and more beneficial.
Best balance transfer credit cards in Ireland 2021
So which card is best for you? We’ve collected three cards that work perfectly as a balance transfer credit card in Ireland in 2021.
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Ulster Bank transfer balance credit card: One of the elusive ‘triple-zero’ credit cards mentioned above. This card from Ulster bank offers 0% interest for the first 18 months, no balance transfer costs, and an annual fee of €0. In order to use the 0% interest rate, you do need to do all your balance transfers in the first 3 months. You can find out more about this card, and if you can apply, on the Ulster Bank website.
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An Post Money Classic: With this card, you get a 0% interest rate for the first 12 months and no balance transfer costs. You can find out more and check your eligibility on the An Post website.
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Bank of Ireland Classic: Bank of Ireland is the biggest issuer of credit cards in Ireland. Their classic card offers 0% interest on the first 7 months and no balance costs. Bank of Ireland gives you other benefits as well, such as contactless payments and an emergency cash service. For more information and to check your eligibility visit the Bank of Ireland website.
Written by
Ravian Ruys
