Balance transfer credit cards

The balance transfer interest rate is the introductory interest rate charged on your existing balance when you transfer it to a new credit card. This introductory rate typically lasts between 6–24 months but can last for longer in some cases. So, for example, with a 12 month 0% balance transfer, you would pay 0% interest on your existing credit card debt that is consolidated to the card for 12 months.

In addition to generally having a low or 0% interest rate for a period of time, a balance transfer can also be a good way to consolidate credit card debt. By paying a one-off balance transfer fee, you could move your existing credit card debt from multiple cards onto one. Check how much you can transfer, as some credit cards will only allow you to transfer a certain amount of money and you may not be able to transfer the full amount from your existing credit cards. Some providers may also place a limit on how many cards you can transfer debt from.

However, you need to be aware of the revert rate – the interest rate your card will revert to once the introductory period finishes. You may also be charged interest on any new purchases you make on the card, even during the introductory balance transfer offer period.

If you don’t pay off your transferred debts by the end of the introductory period, then what’s left will be charged interest at the higher revert rate. If you don’t think you can pay it all off in time, consider picking a card with a lower revert rate, or think about whether you may want to choose a card with a low ongoing interest rate, instead of one suited to balance transfers.

If you do opt for a balance transfer credit card, you’re simply transferring your debt from credit card A to credit card B. You may want to consolidate the debt from other credit cards too, if that’s possible.

You’ll need to know the amount you want to transfer and the details of the new credit card account where you want the debt to go. There may be a limit on how much you can transfer, so check first to see if that works for you.

If all is okay then contact your original credit card provider who will then go ahead with your balance transfer once you provide them with all the necessary details of the new credit card. The transfer could take up to a few weeks depending on which provider you’re with.

Before you begin this process, it’s a good idea to make any payments that are due around that time, in order to avoid any late fees.

Once the balance transfer is done, check with your new credit card provider to see all is as you expected. Check any statement to see what amount is listed and any reduced or 0% interest rate and expiry date on the promotional rate.

It’s up to you to cancel your old credit card or cards. If you still have any outstanding balance on your old credit card you will need to keep up with any repayments.

A credit card with a 0% introductory balance transfer offer may not necessarily provide better value than a credit card which charges interest immediately. For example, a credit card that comes with an interest-free period but a high annual fee could actually end up being more expensive over the long-term than a credit card with no interest-free period but no annual fee.

If possible, it could be worth considering a card which combines a 0% balance transfer rate, no upfront or annual fees, and a competitive revert rate. (You can use the table at the top of this page to compare products.)

When taking out a balance transfer, it’s typically a good idea to focus primarily on paying off as much of your debt as possible before making any new purchases with your card.

You may even want to consider paying off and cancelling your previous credit cards if possible, to reduce the temptation to spend and help you repay your other existing debts more quickly.

Failing to repay your debts in time on a balance transfer deal could keep you in a cycle of debt, so make sure you compare your options thoroughly before deciding. You may want to seek advice from a qualified financial adviser to help with your decision making.

If you’re having trouble making credit card repayments, you may also want to contact your credit card provider and speak to them about applying for financial hardship. Free financial counselling is also available from the National Debt Helpline (NDH) on 1800 007 007. Free debt advice and debt negotiation are available from the NDH if you need it.

Canstar compares balance transfers using a unique, sophisticated methodology that considers price and features. We compare products from across the industry, assigning our 5-Star Rating to products offering outstanding value.

Some of the features Canstar compares and you should consider are:

• Does the card offer an interest free or low interest deal?
• Does the card charge an annual fee? Credit cards with a longer interest-free timeframe may charge a higher annual fee, so be wary of overall costs when choosing a balance transfer.
• How long is the transfer period?
• What is the balance transfer revert interest rate? This is the interest rate that the card switches to after the introductory low-rate period.
• What is the balance transfer fee?

You can compare balance transfer cards yourself, based on your own financial and personal requirements, using the comparison selector tool at the top of the page.

Please note that these are a general explanation of the meaning of terms used in relation to balance transfers. Your bank or financial institution may use different terms, and you should read the terms and conditions of your balance transfer credit card carefully to understand all fees, charges and interest rates that may apply. Refer to the Product Disclosure Statement (PDS) of any product you are considering.

Account-keeping fee or ongoing fee: A monthly account-keeping fee that is charged by the lender to help cover the administration cost of maintaining the line of credit. Alternatively, you may be charged an annual fee.

Average daily balance: The balance of your card is determined by adding up all balances during the month and then dividing the total sum by the number of days in a given billing cycle. Most credit card providers calculate the daily balance based on the annual rate.

Balance transfer fee: A fee charged when you make a balance transfer. It may be a flat fee or a percentage of the amount you transfer. Find out the average balance transfer fees here.

Bankruptcy: This is when someone’s debt problems become so serious that they are unable to pay their existing debts and bills. When this happens, they can apply to a court to be declared bankrupt, and any assets or savings they have can be used to pay off their debts.

Credit limit: The maximum amount you can spend with your credit card before having to pay off some of the balance. Learn about how credit limits are determined here.

Credit report or credit history: A report from a credit agency that contains a history of your previous loan and bill payments. Banks, lenders, creditors and financial institutions use this report to determine how likely you are to repay a future debt, and it helps them decide whether or not to lend money to you. Your credit rating and credit report are also used by lenders and insurance providers to set your loan and insurance rates. Find out what is included in your credit report here.

Credit rating: Also known as your credit score. It is a numerical score that represents an assessment of your credit-worthiness, based on your positive and negative borrowing and repayment history. Your credit rating is used by lenders when deciding whether or not to lend to you and what interest rates to charge on your loan. Find out how to check your credit score here.

Default: When a cardholder fails to fulfil their obligation to make the minimum necessary payment on their credit card bill or other loan. Defaults are a serious black mark on your credit report and negatively affect your credit rating.

Interest rate: The rate at which your outstanding balance increases per month if your bill is not paid or not paid in full.

Interest-free days: The number of days you have to pay your bill in full before interest is charged on the balance. It is the period of time between the date of a purchase and when the payment is due. This period usually does not apply to cash advances. Learn more about interest-free days here.

Introductory rate: A promotional interest rate charged when you first sign up for a credit card that is offered to entice new cardholders. These rates are usually very low, but revert to the standard rates after six months or so.

Minimum interest charge: The minimum amount of interest you would be charged if you are charged any interest. For example, if your total interest charge is $0.75 but the bank’s minimum interest charge is $1.00, you will be charged $1.00.

Minimum payment: The number listed on your bill as the minimum your bank requires you to pay off your credit card for that month.

Penalty fees: Fees charged if you violate the terms of your cardholder agreement or other requirements related to your account. For example, your credit card company may charge a penalty fee if you make a late payment or if you exceed your credit limit.

Universal default: When one financial institution treats a lender as if they had defaulted when the lender defaults with a different institution.