What is a balance transfer?

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.

St.George Vertigo Platinum - Online Offer

0% p.a. for 24 months on balance transfers with no BT fee
$0 annual fee for the first year

Offer ends 13 December 2017

Eligibility criteria, terms and conditions, fees and charges apply

St.George Credit Card Online Offer

A platinum card that features a no BT fee balance transfer offer, first year annual fee waiver and a low variable interest rate on purchases.

  • $0 p.a. annual fee for the first year ($99 p.a. thereafter).
  • 12.74% p.a. on purchases
  • Cash advance rate of 21.49% p.a.
  • Up to 55 days interest free
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Compare balance transfer credit cards

Rates last updated November 19th, 2017
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% p.a.

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Name Product Balance transfer rate (p.a.) Purchase rate (p.a.) Annual fee Amount Saved Product Description
St.George Vertigo Platinum - Online Offer
0% p.a. for 24 months
12.74% p.a.
$0 p.a. annual fee for the first year ($99 p.a. thereafter)
Platinum card benefits plus 0% p.a. for 24 months on balance transfers (with no BT fee) and $0 annual fee in the first year. Ends 13 December 2017.
Virgin Australia Velocity Flyer Card - Bonus Points Offer
0% p.a. for 18 months
20.74% p.a.
$64 p.a. annual fee for the first year ($129 p.a. thereafter)
Earn up to 60,000 bonus Velocity Points in the first 3 months on eligible spend and enjoy a discounted annual fee of $64 for the first year.
Westpac Low Rate Card - Online Only Balance Transfer Offer
0% p.a. for 24 months with 2% balance transfer fee
13.49% p.a.
$59 p.a.
Take advantage of 0% p.a. for 24 months on balance transfers with a 2% balance transfer fee when you apply online by 31 January 2018.
Citi Rewards Platinum Credit Card
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)
Receive a long-term BT offer, earn Citi Reward Points and receive complimentary travel insurance.
HSBC Platinum Credit Card
0% p.a. for 22 months with 2% balance transfer fee
19.99% p.a.
$129 p.a.
Earn 1 Reward Point per $1 of eligible spend and receive complimentary travel and purchase protection insurances.
Bankwest Breeze Classic Mastercard
0% p.a. for 13 months with 2% balance transfer fee
0% p.a. for 13 months (reverts to 12.99% p.a.)
$79 p.a.
Receive up to 55 days interest-free on purchases and free worldwide emergency card replacement.
Woolworths Everyday Platinum Credit Card
0% p.a. for 14 months
19.99% p.a.
$0 p.a. annual fee for the first year ($49 p.a. thereafter)
Receive a $50 eGift Card when you apply by 31 January 2018 and make an eligible purchase by 28 February 2018.
St.George Vertigo Visa - Online Offer
0% p.a. for 18 months
13.24% p.a.
$0 p.a. annual fee for the first year ($55 p.a. thereafter)
Take advantage of 0% p.a. for 18 months on balance transfers (with no BT fee). Plus, $0 annual fee in the first year. Ends 13 December 2017.
NAB Premium Card
0% p.a. for 20 months with 2% balance transfer fee
19.74% p.a.
$90 p.a.
Offers 7 complimentary insurance covers, access to a 24/7 concierge service and special offers through Visa Entertainment.
ANZ Platinum Credit Card - Exclusive Offer
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)
Exclusive to finder, receive 0% p.a. interest on purchases for 3 months and 0% p.a. on balance transfers for 12 months with no balance transfer fee.
Bankwest Breeze Platinum Mastercard
0% p.a. for 13 months with 2% balance transfer fee
0% p.a. for 13 months (reverts to 12.99% p.a.)
$99 p.a.
Receive complimentary international travel insurance, extended warranty cover and 0% foreign transaction fees.
BankSA Vertigo Visa
0% p.a. for 18 months with 2% balance transfer fee
13.24% p.a.
$55 p.a.
Get up to 55 days interest-free on purchases and be protected by a 24/7 fraud monitoring service.
Virgin Money Low Rate Credit Card
0% p.a. for 14 months
11.99% p.a.
$49 p.a.
Receive a discounted annual fee, $100 cashback when you meet the spend requirement and up to 44 days interest-free on purchases.
Qantas Premier Platinum
0% p.a. for 15 months
19.99% p.a.
$149 p.a. annual fee for the first year ($299 p.a. thereafter)
Fly further with 75,000 bonus Qantas points, up to 2 Qantas Points per $1 spent and 2 yearly complimentary Qantas Club lounge invitations.
Bank of Melbourne Vertigo Platinum
0% p.a. for 24 months with 2% balance transfer fee
12.74% p.a.
$99 p.a.
Get a range of complimentary insurance covers, access to a 24/7 concierge and up to 55 days interest-free on purchases.
NAB Low Fee Card
0% p.a. for 16 months with 2% balance transfer fee
19.74% p.a.
$30 p.a.
Receive complimentary purchase protection insurance, special offers from Visa Entertainment and up to 44 days interest-free on purchases.
Qantas American Express Ultimate Card
0% p.a. for 12 months with 1% balance transfer fee
20.74% p.a.
$450 p.a.
Take advantage of a high Qantas Points earn rate and two American Express Airport Lounge entries each calendar year.
Citi Signature Credit Card
0% p.a. for 15 months with 1% balance transfer fee
20.99% p.a.
$199 p.a. annual fee for the first year ($395 p.a. thereafter)
Earn from 1 Point per $1 spent on selected purchases and receive a complimentary Priority Pass membership with two airport lounge visits per year.

Compare up to 4 providers

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 '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.

balance transfer calc

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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

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    DaniMay 14, 2015

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

    • Staff
      JonathanMay 14, 2015Staff

      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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