Repayment
Balance transfers work until the promotional period ends
A transfer is a tool for clearing debt on a schedule, not a way of making it cheaper indefinitely.
What follows is an argument about balance transfers, and about where the received version of it stops being true.
The argument in brief
- The fee is charged upfront and is part of the cost comparison.
- The promotional rate ends on a fixed date and reverts sharply.
- New purchases on a transfer card are usually a trap.
Do the arithmetic first
A transfer costs a fee, typically a percentage of the amount moved, charged at the outset. It is worth doing when that fee is less than the interest it avoids over the period you will actually take to repay. For a balance you will clear in two months, a fee-free but shorter offer may beat a longer one with a fee.
Set the repayment against the deadline
Divide the balance by the number of promotional months and pay that amount, rather than the minimum. Paying the minimum through a promotional period leaves most of the balance intact at reversion, which defeats the purpose. Setting a standing order at the calculated figure removes the decision each month.
Do not spend on the card
Purchases on a balance transfer card usually attract the standard purchase rate immediately. Payment allocation rules generally direct payments to the highest-rate balance above the minimum, so purchases can persist.
The clean approach is to transfer, freeze the card and repay.
Transfers do not reduce what you owe
The debt is unchanged; only its cost has been paused. Serial transferring without repaying is a common pattern that ends when applications stop being accepted. Each transfer also creates an application and a new account on the file.
Adjust the size of it until it is something you would actually do tired.
When a transfer is the wrong tool
Where repayments are already unaffordable, a transfer postpones a problem that needs addressing. Free debt advice services in most jurisdictions can negotiate, arrange formal solutions and stop interest entirely. Using them is not a last resort and does not cost anything.
The takeaway
Divide the balance by the promotional months and pay that. Otherwise it is a postponement.
Small and repeatable beats ambitious and abandoned, almost every time.
Questions readers ask
What happens if I miss a payment during the promotion?
Many issuers withdraw the promotional rate entirely for a missed payment. Set up a direct debit for at least the minimum as protection.
Can I transfer between cards from the same issuer?
Usually not. Transfers are generally only accepted between different issuing groups.
