How do 0% balance transfer credit cards work?
These cards charge no interest on debt you move to the card for an introductory period, which typically lasts from 6 months to 30 months (or more). With no interest charges, you can pay off your debt faster.
But at the end of the interest-free period, any unpaid balance will attract a higher interest rate. This is sometimes known as the "revert" rate. To avoid falling into debt, you should aim to pay off your balance transfer in full before the revert rate applies.
What if you're paying interest on a few credit cards?
If you have debt on more than 1 credit card, you can consolidate them with a balance transfer credit card. That way you'll pay no interest on the combined debt during the introductory period. And you'll only need to manage 1 credit card (and pay 1 annual fee).
Want to look at other ways to pay off a few different debts? Finder's guide to debt consolidation has more details on your options and how it works.
How much can you save with a 0% balance transfer offer?
How much you save depends on the size of your debt, the length of the interest-free offer and whether you can pay it off in full before a higher interest rate kicks in. Keep in mind some balance transfer cards come with transfer fees and annual fees, which also affect how much you can save.
Say you had a $5,000 balance on a credit card with a 19.82% p.a. interest rate and paid $200 off the balance each month. At that rate, it would take 33 months to fully clear the balance and cost around $1,500 in interest.
But if you moved that debt to a card that offered 0% interest on balance transfers for at least 25 months, you could pay off the entire debt without interest charges – assuming there were no other fees or charges on the balance transfer card.
💡Tip: Use Finder's comparison table to see how much you can save based on your current balance and interest rate.
How to compare 0% balance transfers credit cards
With so many different 0% balance transfer credit cards on the market, here are 5 important factors to consider when comparing your options.
1. Length of the balance transfer introductory offer
Compare balance transfer cards by how long the interest-free period lasts. You should look for a card that gives you enough time to repay the entire debt before the revert rate kicks in.
For example, let's say you had a debt of $5,000 and were looking at a card with 0% on balance transfers for 15 months. You'd need to pay around $334 each month to clear the entire amount before you're charged interest. If you didn't think you could afford this, looking for a card with a longer interest-free offer would help spread out and reduce the monthly repayments.
💡 Tip: Use a repayment calculator to see how much you'd need to pay each month to clear your balance.
2. How much you are allowed to transfer
Balance transfer offers typically let you transfer between 70% and 100% of the approved credit limit, but it does depend on the bank or lender.
As an example, if you were approved for a high credit limit of $20,000 and a maximum balance transfer amount worth 80% of the limit, you could transfer up to $16,000. Finder's guide on balance transfer limits for different banks has more details, including limits for the Big Four and other banks.
3. The balances you can transfer
You can typically transfer an Australian credit card balance to a new card with a different bank or brand. Some credit cards also let you balance transfer personal loan debt if its held with a different Australian lender.
But you can't transfer your balance to a new card with the same bank. Sometimes, there are also restrictions between brands that are owned by the same provider. For example, you can't balance transfer between St.George and Bank of Melbourne. But you could balance transfer between Westpac and St.George. Check out Finder's guide on which banks you can balance transfer to for more information.
4. Balance transfer revert rate
If you can't pay off your entire balance by the end of the introductory period, any remaining debt will be charged interest based on the balance transfer revert rate. This is usually a much higher cash advance or purchase interest rate.
It's important to compare this rate and know when it applies, even if you're planning to pay the debt in full before the 0% interest period ends.
5. Compare fees and charges
You won't have to pay any interest during the promotional period, but most balance transfer credit cards come with other costs. These can include:
- An annual fee, which can range between $29 and $400 or more. Some cards also offer a $0 annual fee in the first year or ongoing.
- A balance transfer fee when you first move the debt. This is typically a fee worth between 1% and 3% of the amount you're transferring. Not all cards charge a balance transfer fee, so you can factor it into your comparison. Just keep in mind that some balance transfer offers with this fee can still offer more savings than others – especially if they have a very long 0% interest period.
- Interest on new purchases. Balance transfer cards often charge high purchase interest rates and your repayments will automatically go towards whichever balance attracts the most interest. Plus, many credit cards do not offer interest-free days on purchases when you have a balance transfer.
If you're concentrating on paying down your balance transfer during the interest-free period, check these costs and make sure they won't cancel out your interest savings.
Did you know? Finder research has found 6 million Australians have never switched credit cards, which could cost the average cardholder $153 a year.
When do I have to pay the annual fee on a 0% balance transfer card?
If you get a balance transfer card that has an annual fee, it will usually be charged when you first activate the account, then once a year on the anniversary of that date.
As the annual fee is a new charge, it's not eligible for the introductory 0% p.a. balance transfer interest rate and will attract interest charges at the card's purchase rate until it's paid off. Doing that as soon as possible means you can focus on repaying the whole balance.
A 0% balance transfer credit card can be a useful way to get your debt under control and pay off your card with no interest costs. In fact, Finder research shows 11% of Australians got their last credit card so they could do a balance transfer and pay off debt.
As there are many interest-free balance transfer credit cards on the market, make sure you compare your options before you apply to find the right one for you.Back to top
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