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 6 to 36 months. Once the introductory period ends, any remaining balances will start to collect interest at the standard purchase or cash advance rate.
You can use this guide to find out how balance transfers work, compare the features and benefits as well as understand how to compare different offers to find the right one for you.
What is a balance transfer credit card?
You can use a balance transfer to move your credit card debt onto a new card from a different lender. If you have several debts, you could also use a balance transfer to consolidate them under one account. Balance transfer credit cards usually offer a 0% interest rate for a promotional period, which can help you save money as you pay off the debt. At the end of the introductory period you'll be charged a higher interest rate on any debt you have remaining from the transfer.
Key features and benefits of a balance transfer credit card
Introductory period. 0% balance transfer rates are only available for an introductory period which can last from 6 to 24 months (or sometimes longer) depending on the card. The promotional offer starts as soon as your card is activated, not as soon as you make your first repayment.
Revert rate. When the introductory period ends, the interest rate will revert to the standard purchase or cash advance rate. Considering the revert rate, it's best to repay your balance in full before the interest applies. Check out our guide for more information about balance transfer revert rates.
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.
Is a money transfer the same as a balance transfer?
No. A balance transfer is when you transfer the debt from your old card to a new one. A money transfer is sending money between two different accounts.
How much can you save on interest with a balance transfer?
You can use finder's balance transfer credit card calculator to discover how much you could save based on your current card's interest rate and the size of your debt. For example, let's say you have an outstanding balance of $5,000 that is collecting interest at 17.00% p.a. If you applied for a card with 0% for 12 months with no balance transfer fee or annual fee, you could save $850 in interest if you pay off the entire debt before the revert rate applies. That's $850 you could use to pay off your debt faster.
Compare balance transfer credit cards
Updated December 8th, 2019
How to use the balance transfer calculator to see how much money you could save
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 at the top of your head, the average is around 18-20%) Step 3. See the 'Amount Saved' column to find out which credit cards will save you the most money. The calculator automatically factors in any balance transfer fees and annual fees associated with each card. Click on the 'Amount 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.
Frequently asked questions
Before you apply for a balance transfer credit card, you can look at the eligibility requirements to determine your chances of approval. This eligibility criteria may include a minimum income requirement and good credit history. There are also eligibility requirements pertaining to the balance transfer as well. For example, you may only be able to transfer debts from another institution up to a percentage of the approved credit limit (for example, up to 80% of the credit limit).
Most credit card providers will accept a balance transfer from a credit card, store card or charge card issued in Australia. However, some issuers also accept balance transfers from personal loans.
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 introductory interest rate, you could however, transfer a balance from an ANZ credit card.
If you transfer a balance between cards, you do not have to close the account you transferred funds from. However, remember that you'll have to pay any maintenance fees (such as the annual fee) if you leave it open.
If you do want to close the account (to avoid the temptation of spending on the card or to avoid maintenance fees), you will need to contact your old bank to close the account. Just make sure that you do not owe any money on the card and transfer any automatic debit agreements or reward points before you close the card.
It usually takes 10-15 minutes to complete a balance transfer application. If you're approved, it usually takes between 5 to 10 business days for the funds to move to your new account.
Your bank is required to allocate your payments to the debt that is collecting the highest interest. If you only have the balance transfer debt on your card, your repayments will automatically go to paying it off. However, if you've used your card to make purchases and it has a standard purchase rate of say 19.00%, your repayments will automatically go to paying off your outstanding purchase debt first. If you want to take full advantage of a 0% balance transfer period, this is why you should avoid using your card for purchases.
You usually request a balance transfer while you're applying for a new credit card. There should be a section in the application that asks whether or not you want to transfer a balance from another account. You'll then be prompted to enter your existing card's account number, the amount you want to transfer and the name of the institution you're transferring from. Make sure you meet the eligibility requirements and have the necessary information handy before you submit your application.
If you want to take advantage of a promotional 0% balance transfer offer, you usually need to request the transfer during the application. However, you can sometimes request a balance transfer after you've already submitted your application. The conditions of this vary between card issuers.
Yes, you're required to pay the minimum repayment each month. This is usually 3% to 10% of your balance each statement period.
However, if you want to clear your entire debt before the 0% introductory offer ends, it's wise to pay more than the minimum repayment each month. For example, if you have a $5,000 debt and a minimum repayment of 2%, you'd only have to pay $100 in the first statement period to meet the repayment. However, if you wanted to pay off your entire debt during the 0% for 18 months balance transfer period, you'd need to pay around $277 each month to clear the debt before the revert rate applies.
Sally McMullen is Finder's credit cards and frequent flyer editor by day and a music maven by night. Her byline can be spotted on Yahoo Finance, Dynamic Business, Financy and Mamamia as well as Music Feeds and Rolling Stone.
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