If you have some credit card debt to pay off, you might be looking for a 0% balance transfer credit card deal. But might you be better off taking out a personal loan instead? 

The impact of the cost of living crisis in recent months has seen the average interest rate on a personal loan of £7,500 hit a six-year high of 5.2%, according to Moneyfacts.co.uk.

Balance transfer credit cards, on the other hand, continue to generate attractive deals. The average interest-free introductory balance transfer term rose to 613 days in the second three months of the year, the highest point since May 2018, with multiple providers increasing their 0% offers.

Here are the pros and cons of each, as well as some of the best deals on the market right now, updated every week.

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0% balance transfer credit cards

0% balance transfer credit cards might seem like the best option if you want to pay off your existing credit card debt. But there are some things to bear in mind:

  • 0% balance transfer credit card deals aren’t generally free. Although the credit card company won’t charge you interest, you’ll normally pay a balance transfer fee. This can be anything from 0.5% to 3% of the amount you transfer.
  • There are some 0% balance transfer credit card deals that don’t charge a fee. However, they’re not offered all the time.
  • You might not qualify for the longest balance transfer period. Some credit card companies offer 0% balance transfer deals of three years or more. But you have to have the best credit rating to get them. If you don’t have such a good credit rating, you may get a much shorter period to pay off your credit card.
  • You may be tempted to spend more money. Some balance transfer credit cards also come with a 0% interest period on purchases, so you may be tempted to use your credit card for spending. But that could mean you end up spending money you can’t afford.
  • If you pay the minimum, you won’t have paid off your credit card balance by the time the deal runs out. Credit cards generally only specify the minimum amount you have to pay off in order to maintain the contract. But if you only pay the minimum, you won’t have cleared your debt by the time the 0% balance transfer deal runs out.

What are the cheapest balance transfer deals?

Several credit card providers offer lengthy 0% introductory periods on balance transfers, but make sure you check how much you’ll have to pay to move your balance across. Here’s our rundown of some of the best 0% balance transfer cards currently available.

BarclayCard Platinum Credit Card

What it offers: What it offers: 0% introductory rate on balance transfers for up to 29 months (though some could get just 14).
Rate after introductory periods ends: 24.9%
Balance transfer fee: 3.45%.
Apply: Online at BarclayCard

M&S Credit Card Transfer Plus

What it offers: 0% introductory rate on balance transfers for 28 months.
Rate after introductory periods ends: 23.9%
Balance transfer fee: 2.99% (min £5)
Apply: Online at M&S

Natwest Balance Transfer Card

What it offers: 0% introductory rate on balance transfers for 14 months.
Rate after introductory periods ends: 24.9%
Balance transfer fee: No fee
Apply: Online at Natwest

(Rates correct at time of writing 4.12.23)

Low rate personal loans

Although you won’t get an interest-free personal loan, you may be able to get a loan that charges less than 3% interest, depending on how much you want to borrow. For some people, taking out a loan may be a better option than using a 0% balance transfer credit card deal.  Here are some pros and cons:

  • You’ll pay off the loan at the end of the term. As long as you keep up the payments, you’ll know you will have cleared the loan at the end of the loan period.
  • You make a fixed payment every month, so you know exactly how much you have to pay.
  • You can overpay on your loan.. Although loans are designed to be paid off over the fixed term, the rules allow you to pay your loan off faster, and you’ll only pay a small penalty. In fact, you’re allowed to pay off up to £8,000 extra every year. The most you’ll be charged by way of a penalty is 1% of the extra amount you’re paying off.
  • Loans aren’t interest free. Interest rates on loans vary from less than 3% to over 15%. Generally, supermarket banks and non-traditional banks charge the least, and high street banks charge more.
  • You may not get the interest rate that’s advertised. Only 51% of those who’ve successfully applied for a loan have to be offered what’s called the representative annual percentage rate (APR) – this is the interest rate, plus any fees you have to pay. Depending on your credit rating, you may be offered a loan at a higher interest rate.
  • The lower the amount you want to borrow, the higher the interest rate. Most personal loan providers charge tiered interest rates. You’ll often pay the lowest interest rate if you want to borrow at least £10,000 (this level varies between providers). So if you only want to borrow a few thousand pounds, you may end up paying quite a high interest rate.

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Where can I find the cheapest personal loan rates?

The personal loan rates you’ll be offered will depend on the amount you want to borrow and which provider you go to, so compare rates before you apply. Below is a selection of best buy personal loans on borrowing between £7,500 up to £15,000 with a repayment term of 1-5 years.

Loan provider: Tesco Bank
APR*: 5.9% for Clubcard holders
This rate is available on loans between £7,500 and £20,000.

Loan provider: Sainsbury’s Bank
APR*: 6.2% rep APR
Must have a Nectar card, not open to anyone self-employed
This rate is available on loans between £7,500 and £20,000.

Loan provider: Santander
APR*: 6.3% rep APR
This rate is available on loans between £7,500 and £15,000.

*Rates shown are representative annual percentage rates, which means at least 51% of applicants will be offered this advertised rate. Rates correct at time of writing 4.12.23.

Applying for a credit card or personal loan

If you make an application for either a credit card or a personal loan and it’s refused, don’t then go straight to other providers and submit more applications. Every application you make will be recorded on your credit file, so if you make several in quick succession it could look to lenders as though you’re in financial difficulty and desperately need to borrow money.

If you want to check whether your credit application is likely to be accepted, many lenders now offer online eligibility tools that can tell you how likely you are to have your application accepted without performing a full credit search that leaves a mark on your file.

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