Compare balance transfer credit card offers

If you're an Australian cardholder struggling to pay off credit card debt, and need a little no-interest breathing room to get on top of your payments, a balance transfer card may offer a lifeline.

A balance transfer involves moving a debt from your existing card provider to a new balance transfer credit card. Many balance transfer credit cards charge you zero percent interest on your transferred balance, but only for a limited time. This makes it a popular way to manage debt in Australia.

Whether you're looking to stick with one of the big four banks (CommBank, Westpac, NAB or ANZ), switch to a competitor bank, such as Bankwest, Citi, or Virgin Money, or make the move to online-only banking, there are a range of credit card providers offering balance transfer cards.

A balance transfer credit card works by allowing a cardholder to transfer the debt of one card to another. The new card typically offers a 0% interest rate for a set period to help the cardholder pay off the debt, which will then typically revert to a higher ongoing rate. If you are unable to pay off your balance over the no-interest time frame, your balance will immediately begin accruing interest, potentially growing your debt further. 

Upon approval for your balance transfer card, your current card issuer will begin the process of transferring the agreed upon amount across to the new issuer. This process can take a few days, even weeks, depending on your card issuers. 

You may also be charged a one-off balance transfer fee - typically around 1% to 3% of the total balance being transferred. Not all credit card providers charge a balance transfer fee, so it’s worth comparing your options. 

A balance transfer credit card may also come with a transfer limit, and this is generally affected by your approved credit limit. Upon application, a card issuer will assess your income, credit history, expenses and more to help determine your maximum credit limit. Generally, the amount you can transfer from one credit card to another is 70% to 100% of a balance transfer card’s approved credit limit.

For example, if you had a $4,000 credit card balance and a balance transfer card with a credit limit of $5,000 which allowed you to transfer 80% of your credit limit, you would be able to transfer your full, outstanding balance.

Balance transfers can not only be useful for cardholders who are struggling to manage debt – they can also be great for people wanting fringe benefits for their spending.

The perks and benefits of balance transfer credit cards differ for each card provider. This is why it's worth regularly using a credit card comparison tool to see if your current card stacks up against the competition.

Some of the bells and whistles you may find in a new card could include:

• Rewards programs (typically found with rewards cards) that allow you to earn rewards points per dollar(s) spent on eligible purchases. These may be exchanged for goods and merchandise in a rewards program.
• Frequent flyer programs that earn you frequent flyer points per dollar(s) spent.
• Cash back offers for new applicants.
• Store card affiliated rewards, such as gift cards or discounts for a specific retailer.
• Bonus points on sign up, such as bonus Qantas points.
• Visa, MasterCard or AMEX affiliated rewards.
• Ongoing, low rates.
• No account keeping fees.
• Interest-free days.
• Complimentary insurance, such as travel insurance.
• Retail gift vouchers and more.

There are also some potential costs and risks associated with balance transfer cards.

1. Interest and fees to pay

There are a few potential fees new customers may be charged on your balance transfer card, including some standard card fees and some balance transfer-specific ones.

• Standard purchase rate: This is the interest rate charged on any new purchases made with your balance transfer credit card. While your transferred debt from your existing credit card may not be charged interest for a set period, any new purchases will. This is why it's often recommended you lock away your new card in a drawer, or even put it into the freezer, so you're not tempted to spend.
• Annual fee: Your annual fee is charged to keep your card account open. This could range anywhere from $0 to $1,200, depending on the lender.
• Balance transfer fee: A fee charged by the new card provider on your balance transfer amount when you move the existing debt from your old card over to the new card. The fee is typically charged as a percentage of your balance (e.g. 2%), also known as the balance transfer rate.
• Cash advance rate: If you were to use your balance transfer card to withdraw money, such as at an ATM, you may be charged a cash advance interest rate. These are typically higher than the purchase rate, so be wary of how this cost may impact your budget.

2. Balance transfer period 

The amount of time you have to pay off your existing balance without being charged credit card interest is called the balance transfer period. This balance transfer offer is typically several months, and can climb as high as two years. This will vary depending on the credit card provider’s own terms and conditions.

After a balance transfer credit card's interest free period has expired, the card will revert to its standard purchase rate, which is typically quite high. If you have not paid off your balance in full by the time the balance transfer period ends, the outstanding balance will immediately begin accruing interest at the credit card's standard purchase rate.

3. Effect on your credit rating

Having an outstanding credit card balance that you're unable to meet repayments on could risk hurting your credit score. If you switch to a balance transfer card and are still unable to get on top of your debt, you may hurt your credit rating. 

Further, if you don't review a credit card provider's eligibility criteria before you apply, you may be rejected. Having multiple card applications and rejections on your credit file could also hurt your credit rating. 

There are a range of 0% balance transfer cards from credit card providers on offer in Australia, which differ in a few ways:

• Short or long interest free period: The interest-free offer may range from as short as 6 months through to 12 months, 18 months and even 24 months.
• No fees: The interest-free offer may also come with no ongoing fees, such as annual fees, for a set period of time, typically a year.
• Interest free introductory cards: Sometimes referred to as 0% purchase cards. Instead of just charging 0% interest on your transferred balance, the card provider may offer an interest-free introductory period/promotional period on all purchases for a set period of time.

You may also come across debt consolidation personal loans as an alternative option for paying off your card balance. Lenders offer these loans for similar purposes - to help Aussies pay down their debt. Keep in mind that unlike balance transfer cards, debt consolidation loans charge an ongoing interest rate. They may be suited to those with multiple debts, such as a car loan and credit card debt, as you can consolidate these into one big debt with one lower interest rate.

While the exact process may differ depending on your chosen card provider, you can generally perform a balance transfer by taking the following steps:

1. Compare balance transfer credit cards: The most important step is to first compare your card options to find one that suits your financial situation and budget. Take stock of potential fees, the length of the 0% period and whether you can afford to pay off your debt in that window. Use comparison tables and calculators to help you in this process.
2. Apply for your new balance transfer credit card: Make sure your personal finances are in order and your credit report is in good shape to help lower your risk of being rejected. The application process should only take a few minutes, but your approval may take one to ten days. Receiving your new balance transfer card can take up to two weeks so keep this time frame in mind when applying.  
3. Check your transfer is completed: Once you’ve been approved, the balance transfer should be performed automatically. The provider may contact you to confirm your balance transfer details. When your balance has been transferred to your new card, it should appear on your credit card statement.
4. Close the old card account: While technically not an essential step, closing your old credit card can help you avoid accruing any more debt, whether through new purchases or ongoing fees. You will need to pay off your balance in full before closing the account. Keep this in mind if you could not transfer your full balance to the new card.

Now you can begin the process of paying off your existing credit card debt.

The length of time you will need to pay down your balance transfer will depend on the length of the balance transfer period, along with your budgeting skills and financial situation.

Firstly, take stock of your finances. Look at your income, expenses, assets and any savings you have. If you’re serious about getting on top of your debt, you’ll need to be strict about what expenses you can lessen or cut out and how much of your income and savings you can put towards your debt on an ongoing basis.

For example, if you have a $2,000 credit card debt, and can afford to budget $300 a month towards this debt, it would take around 7 months to pay off this debt in full. If you had to pay interest on this debt too, this time frame could increase. This is where 0% interest balance transfers come in handy.

Next, when you compare balance transfer cards, you will see that each card issuer offers varying periods of time for their 0% interest windows. If you have a smaller debt, you may be able to opt for a shorter balance transfer term, such as under 12 months. However, if you’re struggling with a large credit card debt, you may need to consider if a longer 0% balance transfer term of 2 years or more would better suit your budget. Ultimately, the length of time you need to pay down your debt depends on your personal circumstances.

You may also find that you’re unable to pay off your debt within your balance transfer term. This can have adverse effects on your debt as the standard purchase rate of balance transfer cards is typically quite high, causing your debt to grow further. Try and work within your budget and financial situation when choosing a balance transfer term.

Consider following these simple steps and developing healthy credit card habits once you've transferred your balance to a new product:

• Keep on top of repayments: Do your best to make your monthly repayments on time, and aim to pay more than the required minimum. Read your credit card product disclosure statement to find out the repayment due date. Remember, late payments could mean paying extra interest charges or late payment fees.
• Set a lower credit limit: If you don't need a high credit limit, don't set one. If you struggle to manage your spending, a higher credit limit might lead you to live too far beyond your means.
• Use the interest-free days to repay purchases: Most interest-free periods are only available for a limited time. Ensure you know what purchases you make for each statement period and when they need to be repaid before you need to start paying interest.
• Monitor your spending: Keep a list of your credit card purchases. This could help you track your spending and determine whether you're spending within your budget.
• Check your credit card statement: Compare your list of credit card purchases against your statement to ensure they match. Make a note of any additional fees charged and look at ways of avoiding them next time.
• Close your old credit card account completely: If you transferred your credit card balance with the aim of paying it off, and no longer trust yourself to stay within budget using your old card, make sure you properly close and settle your old account. Cutting up a card doesn’t terminate the account, so speak to your provider to find out how to close it off completely.
• Consider switching to a lower interest rate credit card: Once you've paid off your balance with the new credit card, you may find that card no longer suits your spending habits. Perhaps it charges a high ongoing purchase rate, or comes with costly annual fees. Whatever the reason, you may want to consider switching to a low fee or low-rate credit card. This way, if you fall into bad habits again, you'll have a smaller chance of racking up huge amounts of debt thanks to the low interest rate.