Find the best credit cards for debt consolidation
If you have a number of credit cards on the go, it can be difficult to keep on top of them. The average Australian credit card interest rate is 20.99% p.a., which becomes an unstoppable wave of increasing debt if you’re not paying off your card each month.
Paying the minimum on each card isn’t enough to stop the interest from accruing. Depending on the size of your balance, you could stay in debt for years while paying out a small fortune in interest. That’s a stressful scenario.
One option is to consolidate your credit card debt using a balance transfer offer on a new credit card. You can roll your existing balances onto one card at a reduced interest rate, or none at all, for a period of time. This allows you to pay off your balance faster.
In this guide, we’ll help you pinpoint the best credit cards for consolidating your debt.
Example Case StudyFrank has run up a debt of $10,000 on his credit card. With an interest rate of 20% p.a., interest is really starting to stack up. However, Frank thinks that if he pays the minimum repayment on his card, he will clear his debt eventually. While Frank will indeed clear his debt eventually, it will take him 61 years and 3 months if he only pays the minimum each month (and that’s without any new spending on the card). Over that time, he will pay back the $10,000 he owes on the card, plus a whopping $42,073 in interest. Alternatively, Frank could opt for a balance transfer to save on interest as he pays down his debt. By choosing a 0% p.a. balance transfer offer offered over 22 months, Frank could clear his transferred balance within that time by paying off $455 per month. Doing this, Frank would save $2,923 in interest (compared to if he were to let his balance carry over during that same 22 month period). |
What’s most important is that balance transfers can offer a way out of debt. That’s so important today when 47% of Aussies - over 5.8 million people - struggled to make repayments in the last 12 months. Do your homework on balance transfers, and see if it could help you get out of debt faster.
How does a balance transfer work?
Card issuers will advertise balance transfer offers as a special feature on their credit card. Applying for one is fairly straightforward. Just note that some credit card’s will allow you to transfer a balance after application, and some will only allow the transfer during application.
Here’s what it looks like to apply for a balance transfer:
- 1. Use the card provider's application page to begin the process.
- 2. Fill in the details of the credit card debt you want to transfer (this may be required or you may be able to apply after approval).
- 3. Allow the bank to transfer the funds on your behalf.
- 4. Make a plan to consistently pay down the debt before the promotional period ends.
- 5. Close any old credit card accounts.
From there, you’ll need to make the repayments on time, and aim to pay off the entire debt before the promotional period ends and a higher interest rate kicks in.
Key features of the best debt consolidation credit cards
Balance transfer offers can vary enormously, but the key features to compare will be the same:
- An introductory interest-free or low-interest period
- A setup fee (some don’t have a fee)
- A revert rate once the introductory period ceases
- Terms and conditions that void interest-free periods on regular purchases
What to look for in each feature
The introductory period:
Some credit cards include a balance transfer as a standard feature with a lower interest rate than the usual Annual Percentage Rate (APR) on everyday purchases. Others offer it as a special extra with a lower interest rate or none at all for a limited time.
For example, a credit card might offer 6, 12, 18 or up to 26 months interest-free on balance transfers when you sign up as a new customer.
Once the promotional period ends, the interest rate reverts to the standard APR or the cash advance rate, which is often even higher.
The setup fee:
Unfortunately today, most balance transfer offers come with a one-off fee. That fee might be anywhere between 1% and 4% of the amount being transferred to the new credit card.
As an idea, here are the applicable fees on a variety of transfer amounts:
| Transfer Amount | 1% Fee | 2% Fee | 3% Fee |
|---|---|---|---|
| $500 | $5 | $10 | $15 |
| $2,000 | $20 | $40 | $60 |
| $5,000 | $50 | $100 | $150 |
As you can see, the fees are not exorbitant and with 0% interest rates on offer, generally worth it. Fees are added to your balance transfer amount to be paid off over time. But, there are still $0 fee balance transfers offers out there, too.
How to compare fees: Use this formula to calculate the fee before you apply:
Transfer amount × Fee percentage in decimal = Balance transfer fee in dollars
For example: If you transfer $2,000 and the fee is 2%, then you would calculate 2000 × 0.02 = $40
The revert rate:
The revert rate is the interest rate that applies after the promotional period has ended. Some credit cards revert to the standard APR that’s applied to all ordinary transactions, and some revert the cash rate.
This is where the warning comes in. The cash rate is often much higher than the APR, which is what catches people out. For instance, the ANZ Low Rate credit card offers 0% p.a. on balance transfers for 26 months, but once the offer ends, any remaining balance on your transfer is charged 21.99% p.a. The card’s normal APR is just 13.74% p.a.
That’s why it’s so vital to choose a promotional period that allows you to pay off your balance and stick to your repayment plan, before the interest kicks in.
Terms and conditions:
Balance transfer offers come with terms that change the way your credit card works. Here are some common ones:
- Having an active balance transfer may void your interest-free period on regular transactions. That means any purchases you make on the card will be charged interest immediately. You’ll need to read the card’s PDS carefully to check the interest-free terms.
- Minimum monthly repayments still apply to your balance transfer. For the promotional interest rate to remain valid, you’ll need to make minimum repayments each month toward your balance transfer. Of course, your goal should be to pay it off completely, which means making repayments higher than the minimum.
- You won’t earn reward points on balance transfers. And, it’s generally better to avoid using your card for everyday reward-earning purchases until the balance transfer is paid off, so you stay out of the interest-accruing snowball.
- Your old credit card account won’t close automatically. Make sure you cancel your old card so you aren’t paying annual fees.
What’s your goal? Comparing the top features for maximum impact
Balance transfer offers can be a lifeline, but only if you choose one that helps you meet your financial goal. Here is a simple way to determine which features to look for when you’re comparing the best balance transfer offers.
| Your goal | Key feature to compare | What to look for | How it affects your goal |
|---|---|---|---|
| Pay off debt with no interest | Introductory balance transfer rate | 0% p.a. or low-interest rate for a fixed period | A lower rate means more of your repayments go toward reducing the balance, not interest |
| Clear debt before interest kicks in | Length of promotional period | A promo period long enough to repay your balance in full | Any remaining balance after the promo ends can be charged a much higher revert rate |
| Keep upfront costs low | Balance transfer fee | Low (1–2%) or $0 balance transfer fee | Fees are added to your balance, increasing the amount you need to repay |
| Avoid high interest later | Revert rate | Revert rate that matches the purchase rate (not the cash advance rate) | Cash advance rates are often much higher and can quickly undo savings |
| Use the card for everyday spending | Interest-free days on purchases | Whether interest-free periods still apply while a transfer is active | Some cards charge interest on purchases immediately if a balance transfer exists |
| Minimise surprises | Terms and conditions | Clear rules on repayments, interest-free days, and exclusions | Balance transfers change how a card works — fine print really matters |
Popular credit cards with debt consolidation balance transfer offers
This card offers 0% p.a. on balance transfers for 20 months with a 3% balance transfer fee (then the cash advance rate applies). It comes with a $59 annual fee.
You can use 0% p.a. on balance transfers for 12 months with a 3% balance transfer fee to pay off credit card debt (then the cash advance rate applies). The annual fee is $58.
The NAB Low Fee credit card includes 0% p.a. on balance transfers for 12 months with a 3% balance transfer fee. It reverts to the cash advance rate. However, the card’s annual fee is just $30, making it one of the lower‑cost balance transfer cards for consolidating smaller debt amounts.
HSBC Platinum Credit Card – 0% Balance Transfer Offer
HSBC’s balance transfer offer includes 0% p.a. on balance transfers for 12 months with a 2% balance transfer fee, which reverts to the cash advance rate. There is no annual fee the first year, but $199 p.a. thereafter. It has a higher annual fee because it comes with other perks like travel insurance.
This card does include an interest rate on the balance transfer, but no fee. You’ll need to calculate if the lack of fee outweighs the interest you would pay on your debt. There is also no annual fee the first year, then $59 p.a. after that.
A walkthrough guide to consolidating debt
If you need a deeper dive into the best options for consolidation debt and how balance transfers work, we’ve provided even more information here. Remember to read our credit card review on any card you’re interested in to find out more about the balance transfer offer.
Options for consolidating debt
There are three typical options for consolidating debt: balance transfers, personal loans, and refinancing your mortgage. We’ll break down each one for you, and include a deeper guide into balance transfers below.
Personal Loans
A personal loan could be a good option if you have a number of different types of debt that you want to roll into one. For instance, you might have a car loan, student loan, credit card debt, and Buy Now Pay Later debt. Taken out over one to seven years, a personal loan could also work well if you need more time to pay off your debt than a balance transfer can provide. It’s worth bearing in mind that a longer timeframe may mean you pay more in interest, so do your sums to work out whether it’s the right option for you. Establishment fees and ongoing monthly fees should also be taken into account.
Home Loan Refinance
If you are a homeowner, you may consider rolling your debts into your home loan in a refinance deal. While this will take the pressure off, remember that paying off your short term debts over a much longer period will likely mean it costs you more in interest. You will also need to deal with a fair amount of paperwork to apply for the new loan, while also meeting your lender’s credit requirements for the higher amount you’re looking to borrow. There may also be a refinance fee.
Balance Transfers
A balance transfer could be a good option if you want to move high-interest credit card debt, or in some cases certain personal loans or Buy Now Pay Later balances, onto a single card with a low or 0% introductory interest rate. This gives you the space to clear your debt without additional interest charges. Balance transfers might include a one-off transfer fee, and it’s important to make at least the minimum monthly repayments to keep the promotional rate in place. They are best suited to people who can stick to a repayment plan and aim to pay off the balance before the low-interest period ends, otherwise any remaining balance will revert to a higher standard or cash advance rate.
To help you find the right option, here is a side-by-side comparison of credit card balance transfer offers, personal loans and home loan refinancing.
| Feature | Balance Transfer Credit Card | Personal Loan | Home Loan Refinance |
|---|---|---|---|
| Typical interest rate | 0%–5% p.a. for promotional period, then reverts to purchase or cash advance rate (~15–22%) | Fixed 6%–12% p.a. (example: 9%) | Variable 5%–7% p.a. (depends on lender & loan type) |
| Fees | 0%–4% one-off balance transfer fee | Usually 0–2% establishment fee | Exit fees, setup fees, legal costs may apply |
| Credit limit / loan amount | Up to 95% of approved credit limit | Can borrow exact amount needed ($10,000 in example) | Typically up to 80%–95% of property value (equity dependent) |
| Monthly repayment | Minimum repayments required; optional higher repayments to clear balance within promo | Fixed monthly repayment to fully repay loan within term | Regular mortgage repayments; may be larger but spread over longer term |
| Interest savings (example) | Potentially high if debt cleared before promo ends; risk of high revert rate | $1,720 saved over 3 years on $10,000 at 9% vs. 19% credit card debt (Attain Loans) | Potentially higher savings on larger amounts, but longer repayment term spreads costs; depends on rate differential |
| Flexibility | Can use for multiple debts; ongoing credit available | Fixed loan amount; funds available immediately for consolidation | Funds tied to property; not flexible for additional borrowing without remortgage |
| Suitability | Best for disciplined paydown and short-term transfers | Best for predictable savings and structured repayment plan | Best for large debt consolidation if you have significant home equity and want lower rates, but with long-term commitment |
| Risks | Promo ends early → high revert rate; missing payments void promo | Generally lower risk; fixed repayments ensure payoff | Debt secured by home; failure to pay risks foreclosure |
How to verify that a balance transfer is your best debt consolidation tool
You want to pay less interest on your debt
One of the main reasons you would opt for a balance transfer to consolidate your debt is to pay less in interest. The balance on your current card could be accruing interest at a rate of 23.99% p.a. or higher. Over time, those interest charges will really stack up, making it harder to pay off what you owe. By choosing a balance transfer offer, you could consolidate all your debts attracting a high rate of interest into one balance with a rate as low as 0% p.a., potentially saving you hundreds, if not thousands in interest.
You want to pay down your debt faster
You want to get out of debt fast? A balance transfer offer could make that happen. While you will need to put in the effort to clear your consolidated debt within the introductory period, this type of offer could give you the motivation you need to pay it down faster.
You want one balance, not multiple balances
Juggling multiple debts can be stressful. Keeping on top of multiple balances, each with a different interest rate and repayment date is not easy. By opting for a balance transfer offer, you could consolidate all your debts onto one card – with just one repayment date and one interest rate. And, if you choose the right offer, that rate should be significantly lower than the rates on your current cards, over the introductory period at least.
You want a new card
Whether your needs have changed since you first applied for your current cards – or they’ve simply never been right for you – a balance transfer could allow you to switch the balance from all your other cards onto a card that better suits your needs. And all the while, you enjoy a much lower rate of interest on your transferred balance over the introductory period. Win win.
TIP: If you are unable to cope and you don’t know how you’ll get out of the hole you’re in, getting some professional advice is a good place to start. The National Debt Helpline is a not-for-profit service that helps Aussies tackle their debt problems, with professional financial counsellors that offer a free, independent and confidential service.
Making Your Balance Transfer Work
Okay, so you’ve decided a balance transfer is your debt consolidation route of choice. How do you make it work for you?
Step 1. Choose The Right Offer: Compare balance transfer offers to find the right one for you. Think about what debts you want to transfer, how much that balance will come to, and how long you will need to pay if off. Try to match those needs with a balance transfer offer that will give you the lowest balance transfer rate and a sufficient intro period to get your debt cleared.
Step 2. Choose The Right Card: If your sole goal is to pay down your debt, try to focus on the offer rather than the card. While you will need to look at factors such as the card’s annual fee and revert rate, other features such as rewards should really be ignored for now. By choosing a card that encourages spending (such as rewards cards and cards with bonus points offers), you may find it difficult to focus on what’s important – clearing your transferred balance.
Step 3. Create A Repayment Plan: Once you’ve been approved and your balance has been transferred, you will know exactly how much you need to pay off – and how long you’ve got to do that. Work out how much you will need to pay off each month to clear your balance within the introductory period, and set up automatic payments to make it happen.
Step 4. Close The Old Account: You now have a bunch of credit cards, each with a balance at zero. Look tempting? To avoid the temptation to spend, it’s a good idea to close all those old card accounts once their balances have been cleared.
What To Avoid
Dealt with correctly, balance transfer offers have the potential to save you serious money as you consolidate to get out of debt faster. However, they also have the potential to lead you further into trouble if you don’t follow the rules. Here are some common mistakes to avoid if you want to make your balance transfer work for you.
Spending On The New Card
New card, time to spend? Nope. Unless you have the funds to pay off your new spending and your transferred balance, it’s best to hold off on using your card until your transferred balance has been paid off. Aside from adding to your debt and making it more difficult to pay it off, new spending also starts accruing interest from the day it’s made.
Spending On The Old Card
After transferring the balance from your old cards, it can be tempting to start spending on them. Again, this is a bad idea as you are adding to the debt that are working on paying off. While keeping older accounts open can be good for your credit score, consider closing the accounts you no longer need to reduce the temptation to spend.
Leaving Repayment To The Last Minute
You have 12 months to pay off your transferred balance. That’s heaps of time, right? No, it’s not. That introductory period, no matter how long it may seem when it starts, will fly by. If you put off making your repayments, thinking you have lots of time left, you are likely to find yourself at the end of the intro period with a big chunk of that transferred balance still left to repay. And then it will revert to the card’s purchase rate or cash advance rate, leaving you in much the same position as you were before you applied for the balance transfer.
FAQs
Q: Does consolidating debt via a credit card affect my credit score?
A: Yes, applying for a new debt consolidation card involves a hard credit enquiry which will cause a small temporary decrease in your credit score. However, making consistent repayments and reducing your debt will typically improve your score over time.
Q: Can I consolidate more than one credit card onto a single balance transfer card?
A: Yes, most Australian card providers allow you to consolidate multiple debts from different banks into one account as long as the total remains within your approved limit. Some will even allow you to consolidate from other loans.
Q: What is the maximum amount I can transfer for debt consolidation?
A: You can generally transfer between 80% and 95% of your newly approved credit limit depending on the specific bank's policies. For example, Westpac allows up to 80% of your credit limit, while ANZ allows up to 95%. You won’t be able to transfer the full 100% of your limit because banks leave a buffer for any fees or future chares.
Q: What happens if I miss a payment on my consolidation credit card?
A: Missing a payment may result in the immediate cancellation of your 0% promotional interest rate and the application of a much higher 'revert rate' to your remaining balance. You might also be charged a late payment fee, and it could negatively impact your credit score.
Q: Is it better to choose a personal loan or a balance transfer card for consolidation?
A: A credit card works well for smaller debts that you can realistically pay off within 12 to 26 months, while a personal loan is often better for larger amounts requiring a longer fixed repayment term. Balance transfers do require self-discipline to ensure the balance is cleared before the interest-free period ends, while personal loans have fixed end dates and repayments.
Q: Should I close my old credit card accounts after consolidating the debt?
A: Yes, closing your old accounts means you won’t use the card to accumulate more debt, and you won’t be paying extra annual fees. Leaving old accounts open also increases your total available credit, which can negatively impact your borrowing capacity for other loans like mortgages.
Wayne
12 July 2023Pauline
13 July 2023