What is a balance transfer?
A balance transfer is when you move the money you owe from one credit card to another. Usually, this is to benefit from a better deal, such as lower interest rates. It can help to save money on interest and make paying off debt faster.
What happens to my old credit card?
Nothing automatically happens to your old card after a balance transfer. You can either close your account or keep it. The right decision for you will depend on:
Keeping your old credit card account open:
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Pros |
Cons |
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Can help your credit score, as you will have a higher average account age, something lenders favour.
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Heightens the risk of spending, increasing your debt, and making it harder for you to clear both balances.
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Gives access to backup funds in case of emergencies or unexpected expenses.
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Risks additional fees. Some providers charge an annual fee for membership. Work out whether the cost of any fees doesn’t outweigh the benefits of keeping your account open.
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Could improve your credit utilisation, if you clear the old credit card balance but don’t close the account. This would increase the amount of credit available to you that you’re not using.
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Could make handling your finances harder with multiple accounts open at once. Managing several cards could increase the risk of missing payments. |
Closing your old credit card account:
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Pros |
Cons |
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Reduces the risk of spending, especially if the main goal of the balance transfer is to pay off your debts quicker.
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Reduces your total available credit. If you carry balances on other cards, your credit utilisation ratio may increase. This can negatively affect your credit score. |
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Simplifies your finances, with fewer accounts to manage.
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Shortens your credit history. Since the length of your credit history affects your credit score, closing a long-standing card can lower the average age of your accounts and potentially reduce your score.
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How do balance transfers work?
Transferring your balance can be completed in a few steps:
- Find a balance transfer card that offers a better deal, like a lower interest rate. Remember to check for the balance transfer fee when shopping around. This will be added to your balance statement.
- Tell your balance transfer provider how much debt you want to move move from your old card to the new one during the application. The credit limit of your new card will determine how much of your existing debt you can transfer. If you have a balance left on your old card, it's important to keep up with repayments. That means paying off both your old and new credit cards until you have cleared the balances on both.
- Continue to pay your old credit card while your balance is moved to the new card. This can take anywhere from a few days to several weeks to complete. The new provider will pay off the agreed-upon balance on your old card. If you aren't accepted for a full balance transfer, you will have to keep up with payments on both your old card and the new one until the balance is clear.
- Start paying off the new card. You should start to pay off your balance straight away. Remember, the more you can repay within the introductory period, the better.
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Fiona Peake
Personal Finance Writer
Fiona is a personal finance writer with over 7 years’ experience writing for a broad range of industries before joining Ocean in 2021. She uses her wealth of experience to turn the overwhelming aspects of finance into articles that are easy to understand.
