Balance Transfers Explained: 0% Periods, Fees and What Comes After

A balance transfer moves debt from one credit card to another, usually to a card offering 0% interest for a fixed period. It is not a debt solution on its own, but a temporary pause on interest, sold in exchange for a fee and a bet by the lender that you will still owe something when the pause ends.

How the offer works

You apply for a card with a promotional rate on transferred balances, often 0% for somewhere between six months and two years depending on the market and your credit profile. Once approved, the new issuer pays off part or all of your old card, and that amount appears as a balance on the new one. The old card stays open unless you close it.

Three numbers define every offer:

• The promotional period — how long the reduced rate lasts, usually counted from the date the account opens or the transfer completes, not from when you start paying.
• The transfer fee — typically a percentage of the amount moved, commonly in the low single digits, sometimes with a minimum flat amount. It is added to the new balance on day one.
• The revert rate — the standard APR that applies to whatever remains once the promotion ends.

The transfer limit matters too. You may be approved for less than you hoped, leaving part of the debt on the old card at its original rate.

How the issuer makes money

A lender offering 0% for 18 months is not running a charity. Its revenue comes from the upfront fee, from interest on new purchases and cash withdrawals made on the card, from late fees, and — mostly — from balances still outstanding when the promotion ends and the revert rate kicks in. The business model works best for the issuer when the customer does not finish repaying in time. Knowing that makes the pitfalls below easier to anticipate.

A worked example

An illustrative balance of £3,000 sits on a card charging 22% APR. The cardholder can afford £175 a month.

Staying put: at £175 a month the balance is cleared in about 21 months, with roughly £635 in interest.

Transferring to an 18-month 0% offer with a 3% fee: the fee is £90, so the new balance is £3,090. At £175 a month it is cleared in about 18 months, inside the promotional window. Total cost: £90.

Transferring to a 12-month 0% offer with the same fee, reverting to 24%: after twelve payments, £990 is left. That remainder takes about seven more months at the revert rate and adds around £71 in interest. Total cost: roughly £161 — still well below £635, but nearly twice the 18-month option, and only because the payments never slipped.

The lesson is simple division: transfer amount plus fee, divided by the months of the promotion, is the monthly payment needed to finish at zero. If that number is above what you can pay, plan for a remainder at the revert rate and compare on that basis.

Pitfalls that erase the saving

1. Paying only the minimum. Minimums on promotional balances are small, and paying them for the whole period leaves most of the debt to hit the revert rate. See credit card interest explained for how minimums are calculated.
2. New spending on the transfer card. Purchases often carry the standard rate from the start. In the US, payments above the minimum must go to the highest-rate balance first; in other markets allocation rules vary, so check the terms.
3. Missing a payment. Many agreements allow the issuer to withdraw the promotional rate after a single late payment, in addition to charging a fee and reporting it.
4. Re-filling the old card. Clearing a card by transfer frees its limit. If it fills up again, the total debt has grown, and the household is now paying on two cards.
5. Deferred-interest products. Some US store cards advertise "no interest if paid in full" — if a balance remains at the end, interest is charged retroactively on the original amount. That is a different mechanism from a true 0% rate.
6. Chaining transfers. Moving a balance to a new 0% card each time a promotion ends can work, but it depends on future approvals that are not guaranteed, and each move costs another fee.

Effects on your credit file

Applying creates a hard search, and the new account lowers the average age of your accounts. On the other hand, the extra limit can reduce overall utilisation if the old card is kept open and unused. The net effect is usually modest and temporary, as described in how credit scores work, but it is worth knowing if a mortgage application is coming soon.

Practical guidance

Before applying, calculate three figures: total interest if you stay put, total cost of the transfer including the fee and any expected remainder at the revert rate, and the monthly payment needed to finish within the window. Then:

• Set up an automatic payment for at least that monthly figure, not the minimum.
• Note the promotion's end date somewhere you will see it.
• Avoid using the new card for purchases, and decide in advance what happens to the old one.
• Compare against a fixed-term loan, which removes the cliff edge entirely — see our personal loans guide.

Eligibility checkers that use a soft search can show likely approval without marking your file. If the debt is part of a wider problem, a free debt advice service or a regulated adviser can help with individual circumstances.