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How to make the most of a balance transfer credit card

Balance transfer credit cards can be great for organising your debt and making it easier to pay off over time.

You can also save money on interest charges if your card offers low or 0% rates on balance transfers.

What is a balance transfer credit card?

A balance transfer credit card is one that offers low, or even 0% interest rates on any existing credit card balances you transfer to your new one for an initial fixed period.

How do balance transfer credit cards work?

As an example, a credit card might offer you 0% interest on balance transfers for the first 12 months.

You could transfer one or multiple balances from other credit cards to this card, and you won't pay any interest on that amount for the first year of having your card. That's as long as you make the minimum repayment each month.

This is helpful for:

  • consolidating your debt so it's easier to keep track of
  • saving you money on interest, which means you can pay off your debt quicker

How much could you save with a balance transfer?

Here's an example of how interest is charged on your credit card balance to give you an idea of how much you could save in a 0% interest period.

Let's say you have an outstanding credit card balance of AED 5,000, and your current card has a Fixed Annual percentage rate of 41.40%.

How much interest you pay in total would depend on how quickly you're able to fully repay your balance. But a balance transfer card with a free interest period could save you a good amount.

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Quick tips for using your balance transfer card

Know your card

It might seem obvious, but make sure you're aware of all the following conditions for the card you choose:

  • the duration of your 0% interest period
  • whether there's a processing fee for your balance transfer(s)
  • whether this transfer fee would outweigh any interest savings you'd make
  • what the Fixed Annual percentage rate is for your balance transfer card after your interest-free period ends

It's worth making a note of when the interest-free period ends, and consider setting up a Direct Debit to make payments automatically each month.

Ideally, you'd completely clear your balance before the interest-free period ends.

For example, if you have a balance of AED 6,000 and a 12 month 0% interest period, paying AED 500 per month would clear your debt without you being charged interest.

Keep up with your minimum repayments

Even if you're within your 0% interest period, you'll still need to make the minimum repayments towards your balance each month.

If you don't pay the minimum amount due, you'll be charged a fee, and it could also negatively affect your credit score as it'll be classed as a missed or late payment.

Setting up a Direct Debit for your repayments makes it one less thing to remember each month.

You could still be charged interest on purchases

Unless your card offers a 0% purchase rate on top of balance transfers, you'll still be charged interest for things you buy with your card. This is also the case for cash withdrawals.

It's worth trying to avoid spending more on your card until you've cleared your existing balance.

Or, if you know you're still going to need to use your card, it may be a good idea to look for one with 0% periods on both balance transfers and purchases.

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Review your options at the end of your 0% interest period

If you still have a balance left over at the end of your 0% interest period, consider swapping again and moving your debt to another card.

Although it may be time consuming, having done the process before should make it easier, as you'll know what you're looking for - and the savings on interest charges could be well worth it.

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