Discover how you can consolidate your debt and save money with a low-interest balance transfer offer.
Are you carrying high-interest credit card debt? If so, a balance transfer could be a wise way to repay your debt without the cost of high interest during the promotional period.
As many providers offer balance transfer promotions, it's important to know what to look for to find the offer that is going to be of most value to you. Let's look at what a balance transfer offer is, how you can compare your options and some simple steps to getting the most out of your balance transfer offer.
How do balance transfer offers work?
A balance transfer allows you to transfer credit card debt collecting high interest to a new credit card with a low interest rate for a promotional period. These low rates can start at 0% or sit around the 5%-7% mark.
This low rate will only be in place for a promotional period, which can last between 6 and 24 months, depending on the card. The promotional period usually begins as soon as your card is approved, so you'll want to start making repayments as soon as possible to take full advantage of the low rate. Once this introductory offer ends, your remaining balance will start collecting the revert rate, which is usually the much higher standard purchase or cash advance rate. The goal is to repay your entire balance before the revert rate kicks in.
What exactly can I do with my balance transfer card?
With balance transfer cards, the name of the game is debt consolidation. Here are some other things you can do with your balance transfer card:
- You can transfer as many balances as you’d like to your card, as long as you pay applicable fees and stay within your credit limit.
- Some people move their debt from one balance transfer card to another, continually taking advantage of low-interest-rate promotions.
- You may be able to transfer someone else’s debt to your card (if, say, you need to help out a struggling friend or relative).
There’s more to balance transfers than meets the eye. Try to learn about all of your card's balance transfer options — you might be able to do some cool things you hadn’t thought of before.
Compare your options
When considering a balance transfer, it's important to compare the cards that are on the market. Ask yourself how long you think it would take to pay off the transferred debt. Use the table below to compare current low balance transfer offers. Keep an eye out for the promotional rate and the length of the promotional period. Generally, the lower the rate and the longer the period, the more you'll be able to pay off.
Balance transfer credit cards comparison
How to choose a balance transfer offer
There are many balance transfer offers to choose from, but there are a few important features you can compare to find the right one for you.
- The introductory rate. At the moment, most balance transfer offers have a 0% interest rate, but this can sometimes vary to other low rates. This is how much you'll have to pay on interest as well as the balance you already owe, so this is very important to consider right off the bat.
- The promotional period. Balance transfer offers generally last between 6 and 24 months. This is how long the promotional low rate will stay in place, so you'll want to consider this to ensure you can repay your entire balance before the end of the introductory period.
- Revert rate. What will the balance transfer interest rate revert to at the end of the promotional period? Your remaining balance will usually start collecting the standard interest or cash advance rate, which usually sits around the 20% mark. It's important to compare this rate to understand what you'll be paying and how your interest could grow if you're unable to repay the whole amount during the promotional period.
- Offer expiry date. Some balance transfer offers are only available for a given period, so you'll need to apply before a set date if you want to take advantage of the offer. Make sure to read the terms and conditions as soon as you see the offer to avoid missing out.
- Minimum repayment. Even if you're paying 0% interest on balance transfers, you'll still need to make minimum repayments each month. The minimum amount will vary from card to card, but you should always try to pay as much as you can. You won't be able to repay your balance by the end of the promotional period if you only make the minimum repayments, so follow a budget and pay as much as you can afford each month.
- Other costs. You'll also have to make the standard payments that come with a credit card, such as the annual fee, so make sure the savings you make with the card outweigh the fees. While you should avoid using your balance transfer credit card for purchases while you're repaying the transferred debt, consider the purchase rate in case you need to use the card for an emergency or if you plan to use it after you've repaid your debt. Some cards also charge a one-off balance transfer fee of 1-3% of your total balance when you conduct the transfer. See the relevant product disclosure statement (PDS) to confirm the costs and fees that come with your card.
Conducting a balance transfer is a straightforward process, but it's important to compare your options and understand the fees, costs and terms and conditions of the offer to take full advantage of the promotion.
What to avoid with balance transfer cards
Balance transfer cards can be incredibly helpful as long as you know what you’re doing with them. Avoid these pitfalls, and it’s smooth sailing for you:
Not making the minimum payments
Some people think that “0% APR” means they don’t have to make any payments on their balances. The 0% APR means your balance won’t accumulate interest within the promotional period. You’ll still need to make at least the minimum payment each month (though we recommend paying more than that to make sure you can repay the debt during the intro period).
Overlooking the revert rate
Once the promotional interest rate ends, your remaining balance (if you still have one) will be hit with a much higher interest rate. Regarding revert rates, strongly consider two options:
- Pay off your balance fully before the revert rate strikes.
- Apply for a card with a lower revert rate than your old card’s interest rate. This way, even if you don’t repay your balance by the end of the promotional APR period, your debt will grow at a slower rate.
Getting hit with APR penalties for late payments
This is one of those stipulations that is buried in the fine print: You can lose that great 0% intro APR if you pay late even once. To avoid this, apply for a card that doesn’t charge a penalty rate for late payments or set up automatic payments so you’ll never pay late.
Using the card for purchases
Because you’re primarily using your balance transfer card to repay debts, it is recommended that you not purchase anything with the card and add more to your balance. Many cards also charge interest on your purchases, and this can start accumulating, which defeats the purpose of taking out a balance transfer credit card. If you need to make an emergency purchase, consider using another card with a low APR.
Paying high interest rates on cash advances
Most cards won’t give you the same attractive 0% interest rate on cash advances. In fact, the APR on cash advances can actually be very high. Before taking out a cash advance, check out your card’s terms and conditions carefully.
Being assessed late fees on old cards
It can take a while for a balance transfer to be completed — usually within 7 to 10 days. To avoid being assessed late fees on your old card, continue to make timely payments until the balance has been successfully transferred to your new card.