Promotional rates and how they work
While promotional rates won’t make your debt disappear, by managing them properly, you can use them to help you pay less interest
Balance transfer offer
A balance transfer is when you move an amount you owe from an existing credit or store card onto another card with a lower APR. There may be a charge, often called a balance transfer fee, which is added to the total amount that you owe.
A purchase offer lets you pay 0% interest on new purchases you make for a fixed time. We don’t charge a fee when you take up a purchase offer.
This is a credit card with a balance transfer offer and a purchase offer of the same duration.
They’ll end either on a fixed date, for example, 31 December, or after a set period of time. If you haven’t cleared your balance by this date, you’ll start to be charged your purchase rate on the amount you still owe.
When the offer starts, there might be a fee, which will be added to the amount you borrow.
For a fixed time, you’ll pay a promotional interest rate on both the amount you borrow and the fee – as long as you pay on time and don’t go over your credit limit.
When the fixed time has ended – or if you go over your credit limit, or don’t make your minimum payment in time – you’ll start to pay the purchase rate.
For balance transfers, there’s usually a fee for a promotional offer. This fee is worked out as a percentage of the amount you transfer. When you take up the offer, we’ll add the fee to the total amount you owe us.
For example, on a balance transfer of £2,500
0.6% fee – £15
1.49% fee – £37.25
2.99% fee – £74.75
0% sounds like a good offer. And it can be, but only if you’re sure you’ll be able to manage your account properly. By this, we mean staying under your credit limit and paying at least your minimum amount on time every month. If you don’t manage your account properly, you’ll lose your promotional rate and it could affect your credit rating.
1. Mark the end date of your balance transfer in your calendar
It’s easy to forget a date that might be in two years’ time, so add a note to your calendar. That way, you can check you’re on target to pay off your balance transfer before your offer ends.
Important because… if you haven’t cleared your balance by the end date, you’ll start to pay the standard purchase rate.
2. Set up a Direct Debit
Setting up a Direct Debit can help you keep your promotional rate by making sure that your payments are on time every month.
Important because… paying the minimum amount on time each month means you’ll avoid extra fees and keep your promotional interest rate. Remember, to clear your total balance as quickly as possible, you’ll need to pay more than the minimum amount each month. Setting up a regular, fixed payment could help you do this.
The example below shows a transfer of £2,500 to a 37-month balance transfer card, with a 1.49% transfer fee. It assumes there are no other transactions on the account, payments are made on time, and the account stays within its credit limit
Balance remaining after promotional offer ends
Direct Debit set up to pay the minimum payment only (your first minimum payment would be £57, which falls each month as the overall amount you owe reduces)
Direct Debit set up to pay a fixed amount of £57 each month
Direct Debit set up to pay a fixed amount of £71 each month
£0 (this will cover both your balance and the transfer fee within the 37 months)
3. Keep within your credit limit
Make sure you have enough funds in your account so you won’t go over your credit limit.
Important because… if you go over your credit limit in any month during the promotion, you’ll lose your promotional rate. This will happen from the date you went over, and will affect your credit rating.
There are three main things to keep in mind
1. You can still benefit from up to 56 days interest-free.
To avoid standard interest, you’ll need to clear your balance each month – excluding any promotional balances. Otherwise, interest will be charged on anything new you buy, from the date the transaction appears on your account.
2. You’re more likely to have to pay extra interest on your purchases
If you make purchases or withdraw cash using your card, you’ll have to pay a higher interest rate than your promotional rate.
What can I do?
If you don’t have a purchase offer, try to clear your balance in full by your payment due date to avoid paying interest. We’ll charge interest on all sterling cash transactions
from the date they’re added to your account, to the date you pay them off. This applies even if you clear your total balance in full by your payment due date.
3. You might not pay off your balance transfer amount in time to keep your promotional rate.
If you’ve made purchases, you’ll need to increase the amount you pay off each month if you want to clear your balance transfer before your promotional offer ends.