What is a balance transfer and how does it work?
A balance transfer is a credit card feature that allows new cardholders to save money when they transfer a balance from an existing credit card, to enjoy a lower introductory rate of interest on that balance for a specified period of time.
Balance transfer periods typically vary from six months to two years, with introductory interest rates starting at 0% p.a. Used correctly, the right balance transfer offer could give you the opportunity to pay down more of your balance, while saving on interest.
So, if you were to choose a 12 month 0% balance transfer offer, you could transfer the balance from your existing credit card to pay zero interest on that balance for 12 months. Any balance remaining after that intro period would revert to the card’s purchase rate or cash advance rate.
Balance transfers in a nutshell
A balance transfer offer can be a fantastic money-saving tool. But, it needs to be used wisely. Compare the options on Creditcard.com.au to find the balance transfer that works best for you, then put all your energy into paying off the transferred balance. Not only could you save heaps in interest, you could also be debt-free at the end of intro period. Now wouldn’t that feel good?
Low and 0% Balance Transfer Credit Cards - Frequently Asked Questions
Presented as an introductory offer, balance transfers are designed to entice new cardholders, so there is usually plenty of competition within the market. This means you can compare a number of balance transfer offers to find the right one for you.
But to do that effectively, you need to know what to compare. Here are the most important factors you should consider when comparing balance transfer offers, to help you find the balance transfer that best meets your needs.
Balance Transfer Rate: Not to be confused with the card’s purchase rate or cash advance rate, the balance transfer rate is the introductory interest rate applied to any balances transferred onto the card as part of the balance transfer offer. Try to choose the balance transfer offer with the lowest balance transfer rate, as this should save you the most in interest.
Length of Introductory Period: Each balance transfer offer is offered over a specified period of time. Choosing the longest possible introductory period should give you more opportunity to pay down your transferred balance. Be careful not to be too relaxed with a longer introductory period. Set out a repayment plan from the start, to steadily pay down your balance and make the most of the offer.
Revert Rate: At the end of the introductory period, any transferred balance left unpaid will attract the card’s revert rate. This may be the card’s purchase rate, which is usually lower, or the card’s cash advance rate, which is usually higher. If you think you may have a balance remaining at the end of the intro period, the card’s revert rate is important. The higher the rate, the more you will pay in interest.
Balance Transfer Fee: Many cards now charge a fee on balances transferred. This balance transfer fee is either a fixed amount, or a percentage of the transferred balance. Be sure to calculate the cost of the balance transfer fee before you apply to make sure the offer is still worthwhile.
Balance Transfer Limits: When you transfer a balance, you may be limited in the amount you can transfer. This is usually expressed as a percentage of your approved credit limit. So, if you are approved for a $10,000 credit limit with a balance transfer limit of 90%, you may transfer up to $9,000 as a balance transfer.
Annual Fee: When you transfer a balance, it’s usually to save money. However, the money you are saving on interest may be cancelled out by a high annual fee, especially if you are paying off the balance transfer over a number of years. A card with a lower annual fee may help you to save more in the long run.
When comparing balance transfer offers, take into account any fees you will have to pay. Doing this should make it easier for you to work out how much the offer could save you overall, and whether you could save more by opting for a different offer.
One of the most important fees to look out for is the balance transfer fee. Not all balance transfer cards charge balance transfer fees, so if it’s not obvious, check the fine print to make sure. A balance transfer fee may be charged as a flat rate, but it is more commonly charged as a percentage of the transferred amount.
So, if you were to transfer $5,000 with a balance transfer fee of 2%, your fee would come to $100, and you would have a total of $5,100 to pay back overall. It’s worth mentioning that balance transfer fees may not attract the promotional rate of interest. Check with your provider if you are unsure.
As the number of balances you can transfer onto a new balance transfer card varies, it’s a good idea to read the small print before you apply. If you can’t find a conclusive answer, check with the provider.
You may find some providers allow for the transfer of a number of balances, while other providers only allow one transfer. You may also want to check where you can transfer balances from. Providers typically prohibit transfers from other credit cards within their network, but you should be able to transfer from other providers’ credit cards, and in some cases, from store cards, personal loans and other forms of credit.
You may find you are unable to transfer a balance from one card provider to another, especially if they are within the same financial group.
American Express |
No balance transfers from other American Express accounts. |
ANZ |
No balance transfers from other ANZ accounts. |
Bank of Melbourne |
No balance transfers from BankSA, St.George or Bank of Melbourne credit cards as all of these banks are under the Westpac Banking Corporation. Balance transfers from Westpac are permitted. |
BankSA |
No balance transfers from BankSA, St.George or Bank of Melbourne credit cards as all of these banks are under the Westpac Banking Corporation. Balance transfers from Westpac are permitted. |
Bankwest |
No balance transfers from other Bankwest accounts. While Bankwest is a division of CommBank, you can still request a balance transfer from a CommBank credit card to Bankwest. |
BOQ |
No balance transfers from other BOQ accounts, or from other Citi-issued credit facilities, including Citi, IMB and Suncorp Bank. |
Citi |
No balance transfers from other Citi accounts or Citigroup accounts, including cards from Coles Mastercard, Suncorp Bank, IMB, Qantas Money and Virgin Money. |
Commonwealth Bank |
No balance transfers from other CommBank accounts. Balance transfers between CommBank and Bankwest are permitted. |
Coles |
No balance transfers from other Coles credit cards and other Citigroup credit cards. |
IMB |
No balance transfers from other IMB accounts or Citigroup accounts, including Citi, Suncorp Bank and Virgin Money. |
Jetstar |
No balance transfers from other accounts issued by Jetstar Mastercard, Macquarie or Card Services. |
Latitude Financial Services |
No balance transfers from other Latitude accounts or its associated entities, including Gem Visa, 28 Degrees Platinum Mastercard, GO Mastercard and Latitude Infinity. |
Macquarie Bank |
No balance transfers from other accounts issued by Macquarie Bank. This includes other Macquarie and Card Services accounts. |
Myer |
No balance transfers from Macquarie Bank or Card Services accounts. |
NAB |
No balance transfers from other NAB accounts. |
St.George |
No balance transfers from BankSA, St.George or Bank of Melbourne credit cards as all of these banks are under the Westpac Banking Corporation. Balance transfers from Westpac are permitted. |
Suncorp Bank |
No balance transfers from other Suncorp Bank accounts or Citigroup accounts, including Citi, IMB and Virgin Money. |
Virgin Money |
No balance transfers from other Virgin Money accounts or Citigroup accounts, including Citi, IMB and Suncorp Bank. |
Westpac |
No balance transfers from other Westpac accounts. Balance transfers from BankSA, St.George or Bank of Melbourne credit cards are permitted. |
Woolworths |
No balance transfers from other Woolworths credit cards, Macquarie or Card Services accounts. |
Luckily, your new provider will do most of the legwork when you request a balance transfer. However, you still have an important part to play. Follow these steps to enjoy a hassle-free balance transfer, so you can get on with paying down your debt.
1. Compare
Use CreditCard.com.au to compare your options. Pay close attention to the card’s balance transfer rate and revert rate, how long the introductory period lasts, and whether there is a limit placed on the amount transferred. Be sure to take into account the card’s annual fees, and check whether there is a balance transfer fee.
If you plan on keeping the card in the long term, it’s a good idea to compare other factors, such as the card’s purchase rate, and the various features on offer.
2. Confirm the amount owing
Before you apply, take time to confirm the amount you want to transfer to the new balance transfer card, especially if you are transferring a number of balances. Depending on the card you choose, you may be limited in the amount you can transfer. Transfer limits are usually expressed as a percentage of your approved credit limit, for example, 80% or 90%.
3. Submit your application
When you’re ready to apply, simply click through to the card provider’s website to begin your application. Online applications usually take around 10 minutes to complete, during which, you will be asked to detail your income, assets, debts and other relevant information.
4. Request the balance transfer
The process for requesting a balance transfer can vary. Some providers ask that you provide details of the transfer when you apply for the card, while others allow you to request the transfer after your application has been approved. For those balance transfer requests, you typically have a limited time to apply, either using a paper application or online banking.
5. Confirm the transfer
Once you have been approved for your new card, you will need to activate it, and then confirm the transfer has been made. After you have checked there are no new transactions pending on the old card, you are free to close that account.
Common Mistakes To Avoid
Balance transfer offers are awesome. But only if you choose the right offer, and treat it correctly. If you want to get the most out of your balance transfer offer, here are some common mistakes you should try to avoid.
Mistake #1. Thinking that 0% interest means no payments
Even with a 0% p.a. balance transfer offer, you still need to make repayments on the card. As with any credit card, you will have minimum repayments to make each statement period. If you want to pay off your transferred balance within the introductory period, it’s a good idea to set up a repayment plan, where you pay off as much as you can afford each month.
Mistake #2. Only paying minimum repayments
Only making the minimum repayments on any credit card is not recommended. Your credit card statement will show you how long it would take to pay off your debt making only the minimum repayments. By only paying the minimum, not only will you stay in debt longer – sometimes decades longer – you will also pay much more in interest, even with a balance transfer offer.
Mistake #3. Making new purchases on your card
This applies to both your new card and your old card. When you have a balance transfer offer, you should focus on paying your transferred balance off within the intro period. If you start spending on either card, you have even more to pay off month-to-month.
Worse still, any repayments on your new card automatically go towards paying off the balance with the highest interest first. So if you’re spending on that card, you may only be paying off your new balance while the transferred balance remains.
Mistake #4. Not cancelling your old card
When you transfer a balance from an old card, it can be tempting to spend. After all, you now have a credit card with $0 balance and a full credit limit available to you. As we said before though, this can only create more problems. Avoid the temptation to spend by closing your old card, and focus on paying down your balance transfer.
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