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.
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
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.
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.
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
Compare balance transfer credit cards
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.
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Frequently asked questions
Here are some of the questions we get asked about balance transfers, and their answers.