Get a balance transfer card to reduce your interest payments, save money and get out of debt faster.
Matt had been living large and loving life. Having built up $10,000 on his card Matt paid the minimum repayment of $200 towards lowering his balance. But with 20% p.a. interest card at such a slow pace it was going to take Matt over 8 years to pay it down to $0.00.
Something had to give, mainly, his old card. He compared his options and finally, Matt switched to a 0% interest balance transfer card.
Now he’ll avoid about $2,000 in interest repayments over the course of 24 months. In plain English: that’s $2,000 that can go to paying off Matt’s debt in full, not his credit card interest.
A balance transfer occurs when a bank pays off the outstanding debt on your old credit or store card and transfers it to a new credit card account with them. Typically, banks offer promotional deals with low or 0% interest rates for a period of time to attract new customers. The promotional offer can save a significant amount of money, and many people use it repay their debt faster. See our FAQ below for questions about how balance transfers work, how they affect your credit score, and more.
The most popular balance transfer credit cards with the visitors to this comparison site are the cards that offer the lowest rates on balance transfers, saving people the most money. Typically this means 0% balance transfer rates for 12 months or more. If you’re like most people you’ll appreciate longer periods of time to pay off old card debt and start to move forward again with your personal finances.
Say you currently have a balance of $3,000 – about average for Australia, according to research by the RBA – that is charged an interest rate of 15% per annum. This means you’ll pay approximately 1.25% in interest per month, which works out to be $37.50. If you were to switch to a card with a 0% balance transfer for six months, you would save around $225.
Or, let’s imagine you have a balance of $10,000 and are paying 18% p.a., which works out to an interest bill of $150 per month. Switching to one of the long-term balance transfer deals offering 0% for 22 months would save you around $3,300 in total.
To see how this would affect your debt repayment, you can use one of the calculators below (but remember to account for transfer fees as well as annual fees):
Some balance transfer offers come with a fee attached, payable upfront as a credit establishment or processing fee. If a fee is charged, it is typically 1% or 2% of the amount being transferred. So if you’re transferring a balance of, say, $10,000, and the balance transfer fee is 1%, you’ll pay a $100 fee.
If there is a balance transfer fee charged, our comparison tables will show it and the savings calculation will factor it in. Generally, a balance transfer fee is charged straight away and will appear on your first credit card statement.
When the promotional balance transfer offer expires, the amount that you transferred over will be subject to either the ongoing purchase rate or the cash advance rate. Our comparison tables will show which rate the balance transfer rate reverts to.
Most people take immediate advantage of a balance transfer offer and include the details of their debts in their new card application. However, banks may give you up to three months leeway. Failing to use the promotional offer when applying for a new card means your outstanding balance, which will still be on your old card, will be charged the standard interest rate. Therefore, you would unnecessarily be paying interest instead of saving money.
In addition to offering introductory interest rates on balance transfers only, some credit card providers have offers combining 0% or low interest rates on both balance transfers and purchases on the new card.
Even if you have been with your bank for years, you’ll normally have to transfer your balance to an account with a different bank in order to take advantage of the introductory offer on interest. Most banks in Australia do not permit their customers to transfer a balance from one account held with them to another. This may sound like a lot of hassle, but in reality it isn’t, especially because many banks do not charge a fee for doing this.
Q&As about applying for a balance transfer credit card
You have two choices when switching to a new card. Either you fill in the details of the balance you would like to transfer on the application form, or you wait until the account has been opened and then initiate the process. You’ll sometimes get the same interest rate regardless, but you should be wary about delaying because most banks insist that you start the balance transfer within a set window of time if you want to get the introductory deal. Failing to do so may mean that you’ll have to pay a higher rate of interest on any debt transferred across to your new account.
All banks and credit card issuers look at your personal financials in order to figure out if you should be approved or declined. The bank will want to verify your age to make sure you are over 18 years old, look at your income, check your residency status, and also check your credit rating to calculate your ability to repay your credit card balance on time.
Assuming that your credit card application has been successful, your balance will usually be transferred inside two weeks.
Yes, you can transfer what you owe on your store card (e.g. your David Jones credit card).
Yes, but you and your spouse will both need to be named as joint primary cardholders prior to requesting a balance transfer. Only a few credit card providers allow joint accounts. Among those that do are the St. George/Bank of Melbourne/BankSA group, Heritage Bank and Bendigo Bank.
In short, it depends. If you apply for multiple credit cards within a short period of time, your credit score will be lowered. This is further compounded if some of your applications have been declined and you continue to apply for more offers. It is best to spread out your applications for new accounts as much as you can while keeping your existing accounts in good order by not missing payments or spending too much.
Your credit limit, or the amount of money you are allowed to borrow, does come into play. If you intend to consolidate debt from multiple accounts onto a single card using a promotional offer, you may not be able to transfer the entire outstanding amount because your credit limit is not high enough – and some card providers only allow transfers equal to 70-80% of your new credit limit.
Should this happen to you, you should still transfer as much of your outstanding balance as possible to take advantage of the low interest rate and work towards paying it off. If you manage to pay off some of what you owe on your new card and essentially free up some space on it, you could move some of the amount still owed from your old card to your new card, but most likely at a rate that is higher than the promotional rate. As long as you space out your applications adequately, you could apply for another credit card and move the rest of your outstanding debt to it.
Assuming that you want to apply for a balance transfer credit card and use the low interest rate to pay back your debt faster, you’ll also want to avoid other fees as much as possible. An annual fee is one such charge you would rather avoid. However, if you are planning to move a very large balance at a low rate, the impact of the annual fee is diminished because of the amount of money saved per month on interest alone.
Conversely, if you are moving a relatively small debt, the annual fee may practically wipe out any potential savings. Ideally, you are looking for a really cheap and prolonged balance transfer deal without an annual fee. The potential savings are calculated by our comparison tables and make it easier to see how much you could save.
Many banks charge a one-off handling fee for doing a balance transfer. This balance transfer fee typically ranges between 1% and 2% of the amount you transfer and it is charged upfront when you are approved for the new card. If you transfer $5,000 to a card with a 1% BT fee then you’ll be charged $50 for doing the balance transfer. This is additional to the annual fee, which is a separate charge.
To make it easy to see if it is worth paying the balance transfer fee, our comparison tables have included the balance transfer fee (for cards that charge the fee) in the calculation of your potential savings.
Only a few credit card providers, including Citi, Coles, Qantas Money and Virgin Money, allow personal loan debt as well as credit card debt to be transferred to a balance transfer credit card. Otherwise, your best bet might be to find a cheaper personal loan with lower interest rates to save on interest repayments.
No. It is not possible to do that.
Yes, you can. However, the rules vary from bank to bank (see below). As the balance transfer is typically a promotional rate aimed at attracting new customers, some banks are quite strict in terms of when they make it available. To be safe, include the details of your balance transfer when applying.
Q&As about using a balance transfer credit card
Only if your new card has a combined promotional interest rate on balance transfers and purchases, since you’ll lose the standard monthly interest-free days on the vast majority of credit cards while you have an unpaid balance transfer. You also need to make sure you can afford to pay for what you buy plus make a repayment on the transferred debt.
In general, it’s best to live within your means, pay off your debt first and only buy things with your credit card that you can pay off fully each month.
Beyond the minimum repayment, it’s totally up to what works best for your personal financial circumstances. But be aware that paying off only the minimum each month will translate into a long time paying off your balance.
No. Balance transfer cards are different to fixed schedule personal loans and home loans. There are no early payment penalties for clearing your credit card debt on time or ahead of time.
Legislation introduced in 2012 compels credit card providers to allocate payments in the following order:
Firstly, to amounts requested by the cardholder (e.g. if you have an instalment repayment plan set up).
Secondly, to amounts remaining from the previous month’s closing balance, in order of interest rate applicable, with higher interest amounts being repaid first. In practice this means that repayments will be applied first to any cash advances, then to purchases, then to amounts subject to a lower promotional interest rate, and finally to amounts subject to a zero promotional interest rate (such as a 0% balance transfer).
However, there is an exception to this rule. Banks are now offering cards with a combined 0% interest rate on both balance transfers and purchases. Therefore, you would pay the same 0% rate of interest on any new purchases as you would on the amount of money that was transferred across. Note that the promotional interest rate periods are not always the same for both balance transfers and purchases, i.e. you might get nine months interest free on a balance transfer, but only six months on purchases.
In all cases, the best thing to do is to avoid spending on your card until you are no longer in debt and can afford to pay off your monthly spend in full.
Yes. If you haven’t repaid your transferred balance by the end of the promotional offer period, you are free to do a follow-up balance transfer to another card with a different bank. If you have a bigger debt, you should look for cards with longer balance transfer periods.
Yes – you’ll need to pay the minimum each month. Typically it’s 2% or 2.5% of your balance. But, given the debt-busting potential of a well managed balance transfer, you should try to pay back as much as you can afford each month while the interest rate is low. Once the rate reverts to the higher level, if you still have some debt, you can transfer the balance to yet another card, with a better rate. You can calculate what your minimum repayment would be paying using our minimum repayment calculator.
Yes – your credit card number and expiry dates will change so if you have set up automatic direct debits and monthly bills with companies (e.g. telcos), you’ll need to contact them to change these. There is an automated way to do this. Just think, it’s a small inconvenience compared to the money you’ll save.
That is up to you. Once you’ve been approved for your new credit card and you’ve had confirmation that the balance has been transferred over, unless you plan on keeping your old card to continue spending on it then you should probably cancel the old card(s) and save on any annual fees you may be paying. The new bank will not make you close your old card, nor will it cancel it for you.