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What is a balance transfer? Understanding balance transfers

What is a balance transfer? Understanding balance transfers

A balance transfer is where part or all of the debit balance (or debt) you owe to another lender is transferred from one credit or store card to another, usually to save on interest repayments.

A balance transfer credit card can be a good way to keep track of your balance and payments with everything in one place.

If you’ve recently compared credit cards and discovered one that charges you less interest, transferring debt from one credit card to the other could save you money. That’s the main benefit of a balance transfer.

By reducing the overall cost of what you owe, a credit card balance transfer could help you pay off your outstanding balance sooner, and even reduce your outgoings. Transferring high interest balances to a credit card which features a promotional offer or lower rate could save you money on interest repayments.

Balance Transfers Video

Video Transcript


How do balance transfers work?

By transferring high interest balances to a credit card which features a promotional offer or lower rate, you could save on interest repayments, although remember that handling fees might apply to any transfers you make.

Credit card providers typically promote interest-free periods on their card offers, which could help you save even more and pay off your balance faster – as long as you can pay it off during the initial interest-free period.


How to do a balance transfer

When applying for a new balance transfer credit card online, most providers will ask if you would like to make a balance transfer as part of your application. Simply fill in the details for any cards you’d like to transfer the balance from and subject to acceptance, the lender will pay off your old balance and transfer it to the new credit card.

If you already have a credit card, your provider might allow you to transfer a balance to your card, subject to acceptance and your credit limit. At MBNA you can request a balance transfer online, through our app, or by giving us a call.

Remember: you’re still responsible for the balance, but it’s now owed to a new and different provider. You may also be paying a different rate and there is usually a fee to transfer a balance. You’ll need to make at least the minimum payment each month, but you won’t usually be charged extra if you’d like to pay more each month to clear your balance faster.


How long does a balance transfer take?

For existing customers, approved transfers will reach your credit card account the next business day, unless you make your request after 6pm, or on a weekend/bank holiday, when it will take an extra business day. That’s as long as your request passes our normal security checks, and there aren’t delays with your existing credit provider.


Balance transfer fees

You may be charged a handling fee for any transfers you make, which will normally be a percentage of the balance you’re transferring. As an example, if you want to transfer £1,000 and the balance transfer fee is 3%, it would cost you £30 to make the switch.

Remember, it’s always better to pay more than your minimum payment each month in order to pay off any debts in the promotional rate period. If you make only the minimum payment each month, it will take you longer and cost you more to clear your balance.


Important to remember

All transfers are subject to approval. The lowest amount you can transfer is £25 and the maximum is 95% of your available credit limit, including any transfer fees.

You can’t transfer balances between MBNA accounts and once a transfer has been processed you can’t cancel it and any fees can’t be returned. The fee will only be returned if you have made the transfer within the first 24 days of the account opening and you change your mind about having the card and exercise your legal right to withdraw from the agreement altogether.

Other lenders may charge a fee for settling a loan early.

Promotional offers: if you’ve taken advantage of a promotional offer, but you haven’t paid off the transfer amount in full before that offer ends, interest will be payable on the remaining amount at the standard interest rate applicable at that time.

Remember to stay within your limit and to make your monthly payments on time, otherwise you’d lose the promotional offers on your MBNA account and pay the standard interest rate instead.


0% interest cards explained

When you’re looking for a credit card with a lower interest rate, you may find some cards offer a promotional rate of 0% interest for a specific period of time.

Promotional 0% interest durations on balance transfer credit cards vary greatly, but can last for some months, giving you more time to clear your balance.

Whether or not you’re offered the full 0% interest duration promoted is likely to depend on your personal circumstances and credit history. If you’re an existing customer and request a balance transfer, it’s treated the same as applying for a new card and will be subject to approval.

That’s why it’s good to have an idea of your credit rating before you apply. Follow these tips to make sure your credit score is as healthy as it can be:

  • Don’t apply for multiple credit cards in a short space of time
  • Stay on top of other borrowing and don’t miss or make late payments
  • Register on the electoral roll and install a landline (if you haven’t already)

For more information on improving your credit score, take a look at our guide.

A balance transfer can be a great way to help you stay on top of your repayments, but before applying think carefully about what you can afford to pay back.