🥸 Not all credit card debt is bad

You’ll have seen us repeat like a mantra to always pay off your credit card balances in full every month. There is one exception to that rule - when your credit card is on 0% interest.

For how long you might ask? Well, that depends but sometimes you can get even up to 12 months on 0%. Be advised though, we consider this to be an advanced type of credit and should be used with discipline and caution (we’ll explain why). It is also worth noting that they all attract a one-off processing fee.

In this article, we’ll cover what credit card balance transfers are, how they work, how to make best use of them and what to be careful with.

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What is a 0% credit card balance transfer?

A 0% credit card balance transfer allows you to transfer balances from your existing cards onto a new one, and have a 0% interest rate apply to that balance for a limited period of time (usually 3, 6 or 12 months).

In essence, it’s another way that banks attract customers to get one of their credit cards and gives you a period of low-cost financing (it’s low cost, not zero cost, because you have to pay a processing fee).

When should I use a balance transfer?

A balance transfer is a great tool that allows you to consolidate your debt from credit cards. It gives you breathing room whilst you save up to clear that balance after the 0% period ends. The one-off processing fee is much smaller than if you were to pay credit card interest on your normal cards.

It should never be used if you’re not certain that you will be able to pay off the transferred balance at the end of the interest-free period. Otherwise, you risk getting into a debt spiral. For the same reason, we don’t recommend it to be used for new purchases.

Here is how credit card balance transfers work:

1. Apply for a new card with a bank that supports balance transfers

2. Once the card is issued, apply for a balance transfer with that bank - you will need to decide how many months of 0% interest you need

3. Review the terms of the balance transfer carefully, as they will differ by customer and make sure you’re happy before proceeding

4. Tell the bank which cards (with other provides) and how much of the balances to transfer (you can transfer partial balances, from a number of cards)

5. Pay the one-off processing fee (which will be a percentage of the transferred balances)

6. Enjoy the 0% interest period whilst accumulating funds to pay off the full balance at the end

7. Repay the minimum amount of the balance required by the bank every month (usually around 5%)

Important facts

• Make sure you accumulate funds to pay off the full balance at the end of the 0% interest period, otherwise, this will quickly become expensive

• You will need to make minimum monthly payments on the balance of ca. 5%

• Banks will allow you to make balance transfers of 75-90% of the approved credit limit on the new card

• Applications for a balance transfer usually have to be made within 30 days of the new card being issued

• There is often a minimum balance transfer amount of AED 1,000 and/or a minimum processing fee so don’t use this to transfer small balances

• Banks may charge a cancellation fee / exit fee of ca. 1% of the outstanding amount, should you wish to pay off the balance transfer sooner

Some of the best deals out there

The processing fee should be your key decision factor and is usually driven by the length of the 0% interest period. We included a selection of offers across various periods below, but as always, please make sure you do your own research before proceeding.

The one-off processing fees here are the best you can get, but banks may deviate from them based on your circumstances. Make sure you understand what the bank is offering.

0% interest period	Bank	One-off processing fee
Up to 3 months	RAKBANK	1.95%
Up to 6 months	Commercial Bank of Dubai	1.99%
	Emirates Islamic	2.99%
	Citibank	3.00%
	Standard Chartered	3.00% (min. Dhs 300)
Up to 12 months	FAB	Up to 4% (may be less for shorter periods)
	Commercial Bank of Dubai	4.00%

Note, you can always get shorter 0% interest periods than the “up to” amount. For example, you could get a 3-month 0% interest free period with CBD at the 1.99%.

Final words

We cannot stress enough that credit card balance transfers are on the complex side so please make sure you read the important facts above. Most importantly, manage your debt effectively and always work to reduce it.

If you have found or recently used a better product, we’d love to hear from you.

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Disclaimer: Please bear in mind that this email does not constitute financial advice. Any choices you make you are solely responsible for. We always aim to provide highest quality, independent views but do your own research to ensure you’re comfortable with any changes you make to your personal finances.