What is a balance transfer?

Information verified correct on May 24th, 2017

Everything you need to know about repaying your debt with a balance transfer credit card.

A balance transfer allows you to move your existing credit card debt to a new credit card with a lower or 0% rate of interest. This usually means you can repay your debt faster and save significantly on interest costs. There are many balance transfer offers on the market and the length of the promotional period can vary from 12 to 24 months. Once the promotional offer ends, any remaining balances will start to collect interest at the standard purchase or cash advance rate.

If you're wondering how a balance transfer works, you can use this guide to learn the features and benefits of these credit cards and understand what how you can compare different offers to find the right one for you.

How does a balance transfer work?

Money expert Michelle Hutchison answers the question, 'what is a balance transfer?'

Hi, I’m Michelle Hutchison, money expert at one of Australia’s biggest financial comparison websites, finder.com.au. Today I’m going to talk about balance transfer credit cards.

So what is a balance transfer? It’s essentially when you have a debt from one card, say it’s at seventeen per cent, and you move that debt over to a new card offering a balance transfer rate of say, zero per cent.

Unfortunately these low rates won’t last forever and they generally expire and revert to a much higher rate. One consideration is that you can’t generally transfer that balance to a balance transfer credit card in the same institution. For example, say you have an ANZ credit card with a debt on it, you can’t transfer that debt to another ANZ credit card but you may be able to transfer it to another bank or institution.

You can transfer a debt from credit card, store card, charge card, it’s a really good way of consolidating all your debts into one line of credit.

Balance transfers can be a great way to save loads in interest and pay off your credit card debts, and while you can apply for as many as you like, keep in mind that applying for too many in a short space of time can impact your credit file.

Think of it this way. You move your credit card debt from card A to card B with a special rate of interest on card B.

A balance transfer is a feature for new credit card customers. It allows someone who is applying for a credit card to bring their debt from their old card over to the new card under a promotional rate of interest. This is an attractive option because the balance transfer promotional interest rate is almost always lower than the annual percentage rate of interest (apr) charged on their existing credit card.

A lower rate of interest charged on your credit card balance means you pay less money towards covering the interest repayments, and you can pay down the principal balance quicker.

Key features and benefits of a balance transfer credit card

balance transfer

Now that you know what a balance transfer is, you can discover some of the key features and benefits of these cards below:

  • Promotional period. 0% balance transfer rates are only available for a promotional period which can last from 12 to 24 months depending on the card. The promotional offer starts as soon as your card is activated, not as soon as you make your first repayment. Once this introductory offer ends, a higher revert rate will apply to any remaining debt in the account. This means you should aim to repay your entire debt before the promotional offer ends to avoid interest altogether.
  • Revert rate. When the promotional offer ends, the interest rate will revert to the standard purchase or cash advance rate.
  • Balance transfer fees. When you first conduct a balance transfer, you may be required to pay a one-off balance transfer fee of 1% to 3% of the total amount you're moving to the new card.

Learn more about balance transfer revert rates by provider here

How much can you save on interest with a balance transfer?

Harry has a credit card with an outstanding balance of $5,000 and his bank is charging 17.00% p.a. interest on this balance. He wants to repay his debt faster without the cost of additional interest, so he applies for a credit card with a balance transfer rate of 0% for 12 months. By transferring to a card with an interest-free offer for the first year, Harry can save $850 in interest repayments. This is now $850 that he can put towards paying down his balance rather than putting towards extra interest costs.

Sponsorship - NAB Premium Card - Long Term BT - PE-40917

Long-Term Balance Transfer Credit Card Offer

The NAB Premium Card features a balance transfer promotion with a range of platinum benefits.

  • 0% p.a. on balance transfers for 24 months on a new NAB Premium Card. BT reverts to cash advance rate after promotional period.
  • A one off 3% BT fee applies.
  • Receive a range of complimentary insurance covers including overseas travel insurance and 24/7 NAB Platinum Concierge Service.
  • Request an additional cardholder at no extra cost.

    Compare Balance Transfer Credit Cards

    Rates last updated May 24th, 2017.

    HSBC Platinum Credit Card

    Balance transfer offer has been changed to 0% p.a. for 22 months and is valid until 31 August 2017.

    May 8th, 2017

    Citi Rewards Platinum Credit Card

    Balance transfer offer has been extended until 30 June 2017.

    May 12th, 2017

    American Express Velocity Platinum Card

    Bonus points offer has changed from 50,000 to 100,000 which is valid until 31 July 2017.

    May 16th, 2017

    View latest updates

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    Balance transfer rate (p.a.) Purchase rate (p.a.) Annual fee Interest Saved
    NAB Premium Card
    Enjoy Platinum benefits including complimentary travel insurance, a 24/7 concierge and Visa Front Line Access.
    0% p.a. for 24 months with 3% balance transfer fee 19.74% p.a. $90 p.a. Go to site More info
    St.George Vertigo Platinum
    A low rate Platinum card with up to 55 interest-free days on purchases and access to Visa's Platinum Concierge service.
    0% p.a. for 20 months 12.74% p.a. $99 p.a. Go to site More info
    Citi Rewards Platinum Credit Card
    Earn Citi Reward Points on everyday spend and receive complimentary travel insurance.
    0% p.a. for 24 months with 1.5% balance transfer fee 20.99% p.a. $49 p.a. annual fee for the first year ($149 p.a. thereafter) Go to site More info
    St.George Vertigo Visa
    Save with a low ongoing purchase rate and up to 55 interest-free days.
    0% p.a. for 14 months 13.24% p.a. $0 p.a. annual fee for the first year ($55 p.a. thereafter) Go to site More info
    Virgin Australia Velocity Flyer Card - Exclusive Offer
    Take advantage of 0% p.a. for 18 months on balance transfers without a BT fee. Plus, receive a $129 Virgin Australia Gift Voucher each year.
    0% p.a. for 18 months 20.74% p.a. $64 p.a. annual fee for the first year ($129 p.a. thereafter) Go to site More info
    ANZ Platinum Credit Card - Exclusive Offer
    An exclusive credit card offer through finder.com.au that includes complimentary insurance covers.
    0% p.a. for 12 months 0% p.a. for 3 months (reverts to 19.74% p.a.) $0 p.a. annual fee for the first year ($87 p.a. thereafter) Go to site More info
    HSBC Platinum Credit Card
    Offers an annual fee refund with a yearly minimum spend of $6,000.
    0% p.a. for 22 months with 2% balance transfer fee 19.99% p.a. $99 p.a. Go to site More info
    NAB Low Fee Card
    Receive up to 44 interest-free days on purchases and complimentary Purchase Protection Insurance.
    0% p.a. for 18 months with 3% balance transfer fee 19.74% p.a. $30 p.a. Go to site More info
    HSBC Low Rate Credit Card
    Enjoy the benefits of the home&Away Privilege Program and the ability to pay using Apple Pay.
    0% p.a. for 15 months with 2% balance transfer fee 13.25% p.a. $55 p.a. Go to site More info
    Westpac Low Rate Card - Online Only Balance Transfer Offer
    Offers a low introductory rate on purchases and up to 55 interest-free days.
    0% p.a. for 24 months with 2% balance transfer fee 13.49% p.a. $59 p.a. Go to site More info
    NAB Low Rate Credit Card
    Receive up to 55 days interest-free on purchases and access to Visa Global Customer Assistance Services.
    0% p.a. for 18 months with 3% balance transfer fee 13.99% p.a. $59 p.a. Go to site More info
    American Express Essential®  Credit Card
    Earn 1.00 Membership Rewards point per $1 spent on eligible purchases.
    0% p.a. for 12 months with 1% balance transfer fee 14.99% p.a. $0 p.a. Go to site More info
    Suncorp Clear Options Platinum Credit Card - Exclusive Offer
    Earn Suncorp Rewards Points per $1 spent and enjoy complimentary international travel insurances.
    0% p.a. for 18 months 20.74% p.a. $99 p.a. annual fee for the first year ($169 p.a. thereafter) Go to site More info
    Bank of Melbourne Vertigo Platinum
    Receive a range of complimentary insurances and access to a 24/7 Visa Platinum Concierge.
    0% p.a. for 20 months 12.74% p.a. $99 p.a. Go to site More info
    ANZ Low Rate Platinum
    A platinum card with a competitive low rate and a range of complimentary insurances.
    0% p.a. for 16 months with 2% balance transfer fee 11.49% p.a. $99 p.a. Go to site More info
    ANZ Low Rate
    Take advantage of 0% p.a. for 16 months on balance transfers and a low ongoing interest rate on purchases.
    0% p.a. for 16 months with 2% balance transfer fee 12.49% p.a. $58 p.a. Go to site More info
    BankSA Vertigo Visa
    Save with a low ongoing purchase rate and enjoy up to 55 days interest-free.
    0% p.a. for 14 months 13.24% p.a. $0 p.a. annual fee for the first year ($55 p.a. thereafter) Go to site More info
    Bankwest Breeze Mastercard
    Offers a low ongoing purchase rate and up to 55 days interest-free on purchases.
    0% p.a. for 21 months with 2% balance transfer fee 12.99% p.a. $59 p.a. Go to site More info
    Virgin Money Low Rate Credit Card
    Enjoy a low ongoing purchase rate and the optional protection of CreditShield Edge.
    0% p.a. for 12 months 11.99% p.a. $99 p.a. Go to site More info
    American Express Velocity Platinum Card
    Receive 100,000 bonus Velocity Points on eligible spend within the first 3 months.
    0% p.a. for 12 months with 1% balance transfer fee 20.74% p.a. $375 p.a. Go to site More info
    Bankwest Zero Platinum Mastercard
    Receive complimentary travel insurance & pay no foreign transaction fees.
    2.99% p.a. for 9 months 17.99% p.a. $0 p.a. Go to site More info
    American Express Explorer® Credit Card
    Receive 50,000 Membership Rewards Bonus Points on eligible spend within the first 3 months of card membership.
    0% p.a. for 12 months with 1% balance transfer fee 20.74% p.a. $395 p.a. Go to site More info

    Use the balance transfer calculator and discover how much you can save in interest in 4 easy steps

    Step 1. Enter the total debt/outstanding amount you would like to transfer
    Step 2. Provide the interest rate that you are paying on your existing debt (if you don't have your interest rate on you, the average is around 18-20%)
    Step 3. See the 'Interest Saved' column to find out which credit cards will save you the most money. Click on the 'Interest Saved' title to sort the cards in ascending or descending order of money saved
    Step 4. Compare the credit cards available in the table provided to find the card that suits your needs. If you still want to find out more about a particular credit card, click the ‘More info’ link for a full review on the features and benefits.

    BT calculator steps

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    Frequently asked questions

    Here are some of the questions we get asked about balance transfers, and their answers.

    This is a common question. A lot of people want to know whether they’re eligible for a balance transfer. To put it simply, if you’re eligible for the credit card and you’re accepted for the credit card then you can transfer a balance to that card. There are a couple of exclusions through. See ‘what accounts can I include in a balance transfer’ for a list of things that would make your application for a balance transfer ineligible.
    Most credit card providers will accept a balance transfer from a credit card, store card or charge card. The key thing to remember is that you can’t transfer a balance under the promotional rate of interest between two accounts offered by the same institution. For example, you can’t transfer a balance from a Westpac credit card to another Westpac credit card and get the promotional interest rate, you could however, transfer a balance from an ANZ credit card.

    Some providers will even let you transfer a balance from an overdraft account or a personal loan.

    Another key question, this all depends on your approved credit limit. Each credit card provider has different rules about how much they will allow you to transfer to one of their credit cards, but it’s generally up to a percentage of your approved credit limit.

    For example, if you’re approved for a credit card with a credit limit of $10,000 and the lender allows you to use up to 95% of your credit limit towards a balance transfer, you can transfer up to $9,500 from your old account.

    Minimum and maximum balance transfer limits.

    If you transfer a balance between cards, you do not have to close the account you transferred funds from. If you do want to close the account (to avoid the temptation of spending on the card), just make sure that you do not owe any money on the card, there are no current direct debit agreements with merchants and you can close the account with a phone call to the lender.
    A balance transfer is designed to be seamless on the consumer’s end. To get the balance transfer process going, just activate the credit card after you apply and receive it. Once the card is activated, it usually takes between 3 - 5 business days for the funds to clear in the new account. However lenders do say allow up to two weeks. This is because there may be a delay in the transfer of funds between banks.

    The majority of balance transfer credit cards do not charge an additional handling fee when you transfer a balance, although balance transfer fees do come into the market from time to time.

    A balance transfer fee is expressed a percentage of the amount you wish to transfer. For example, transferring a $1,000 balance with a balance transfer fee of 3% leave you with fee of $30. This is charged to the credit card and can be paid in a lump sum or paid off over the length of the balance transfer promotional period.

    This fee will be clearly stated in the terms of the offer and should factor in to your comparison of balance transfer credit cards.

    You can compare no fee balance transfer credit cards on this page.

    If you transfer a balance to a credit card, if possible, you should avoid any new spending on that credit card.

    If you do spend on the credit card, your account will attract different rates of interest.

    There’s the balance transfer promotional rate of interest (usually the lowest apr).
    If you make a purchase, the purchase rate of interest will apply, and if you carry out a cash transaction (like withdrawing cash from an ATM), the cash advance rate of interest (the highest apr) will apply too.

    So if you have three different rates of interest charged to the one account, and you make a repayment, which apr balance will be paid off first?

    The balance attracting the highest apr will be paid off first, then the balance that attracts the next highest apr and so on. This is why it’s never a good idea to spend on a credit card after you transfer a balance, and you don’t think you can pay back the new charges right away. Any repayments will be applied to the charges that attract the highest apr of interest first, therefore reducing the amount of time the balance transfer balance has to accrue interest at the promotional rate.

    To apply for a balance transfer, go through the process of applying a credit card. This can be done online, over the phone or in person. There’s a section in the application where you’re asked whether or not you want to transfer a balance from another account. Select, or answer, yes, and you’ll then be prompted to enter the account number, the amount you want to transfer and the name of the institution you’re transferring from. If you’re approved for the account, you’re approved for the balance transfer.

    You don’t get any interest free days on purchases when you carry a balance transfer balance on your credit card. If you use the card to make a purchase, interest will be charged from the day of the transaction. This is another good reason not to spend on a credit card that’s carrying a balance transfer balance.

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    2 Responses to What is a balance transfer?

    1. Default Gravatar
      Dani | May 14, 2015

      What are some features you should look for if you want to use a credit card?

      • Staff
        Jonathan | May 14, 2015

        Hi Dani, thanks for your inquiry!

        You may like to refer to this page which will provide a guide on choosing a credit card and the different features you may be looking for.

        Cheers,

        Jonathan

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