Frequently Asked Questions about Balance Transfer Credit Cards
What is a Balance Transfer?
A balance transfer credit card allows you to transfer the balance of your existing credit card or cards to the new card and pay an introductory interest rate or sometimes no interest on the transferred amount for a certain period of time.
Why would I need a Balance Transfer?
Transferring your existing balance from your current credit card or cards on to a balance transfer credit card usually allows you to pay less interest than you are currently paying. The lower rate for the introductory period means you have time to pay off more (or ideally all) of the old credit card debt.
How do I choose the right Balance Transfer for me?
0% Balance Transfer Credit Cards
You will pay no interest on balances transferred from existing credit cards for a given length of time. If you have a large amount to transfer from your current credit cards, then choosing a 0% balance transfer credit card with a long pay-back period will maximise the amount you save in interest. This will allow you a chance to pay back the amount you owe quicker by saving paying an interest rate on it.
Low Balance Transfer Credit Cards
You will pay no interest on balances transferred from existing credit cards for a given length of time. If you have a large amount to transfer from your current credit cards, then choosing a 0% balance transfer credit card with a long pay-back period will maximise the amount you save in interest. This will allow you a chance to pay back the amount you owe quicker by saving paying an interest rate on it.
Length of Time Given to Pay Off Transferred Balance
You will pay no interest on balances transferred from existing credit cards for a given length of time. If you have a large amount to transfer from your current credit cards, then choosing a 0% balance transfer credit card with a long pay-back period will maximise the amount you save in interest. This will allow you a chance to pay back the amount you owe quicker by saving paying an interest rate on it.
With Rewards
You will pay no interest on balances transferred from existing credit cards for a given length of time. If you have a large amount to transfer from your current credit cards, then choosing a 0% balance transfer credit card with a long pay-back period will maximise the amount you save in interest. This will allow you a chance to pay back the amount you owe quicker by saving paying an interest rate on it.
Annual Fees
You will pay no interest on balances transferred from existing credit cards for a given length of time. If you have a large amount to transfer from your current credit cards, then choosing a 0% balance transfer credit card with a long pay-back period will maximise the amount you save in interest. This will allow you a chance to pay back the amount you owe quicker by saving paying an interest rate on it.
A High Credit Limit
You will pay no interest on balances transferred from existing credit cards for a given length of time. If you have a large amount to transfer from your current credit cards, then choosing a 0% balance transfer credit card with a long pay-back period will maximise the amount you save in interest. This will allow you a chance to pay back the amount you owe quicker by saving paying an interest rate on it.
Will I need to switch banks?
If you want to take advantage of the low or no interest periods of a balance transfer credit card, then you will usually need to switch banks to do so. Banks generally don't allow their existing customers to transfer balances onto new balance transfer credit cards if the customer already has a credit card with them. There is usually no fee to switch and the application process is hassle-free, so switching should give you minimal fuss.
Will I need to pay a fee to switch to a Balance Transfer?
In Australia, it's unusual to be charged a fee to switch to a balance transfer credit card, but it's always best to check the terms and conditions with the provider before you sign up.
Do I need to pay an annual fee?
Most will come with an annual fee. Credit card comparison sites will allow you compare the features of available balance transfer credit cards. Compare the features of each credit card to see which one is best for you, but bear in mind that higher annual fees are a small price to pay when you think of how much interest you may save on balance transfers.
What happens to the debt on my existing credit cards?
When you sign up for a balance transfer credit card, you will be asked to give details of any credit card balances you would like transferred onto the new card. If you are approved, the balance from your existing credit cards will be brought over to the new card under the promotional interest rate. This transfer usually takes place within two weeks of the new credit card account being opened.
Do all Balance Transfers need to be made before the account is opened?
You will be required to give details of any balance transfers from existing credit cards when you fill in your credit card application. Usually, balance transfers can be made after the account has been opened, but only for a specific length of time. Be sure to check this time limit, and be aware, some credit cards only allow transfers to take place with the promotional interest rate before the account is opened.
Can I transfer the balance on store cards?
Store card balances can be transferred in the same way as other credit cards when opening a balance transfer credit card.
Does my credit limit matter?
As it does with any card, your credit limit will depend on a number of factors, including the state of your current credit rating. If you have a large amount you wish to transfer from existing cards, then you may want as high a credit limit as possible.
Can I just pay the minimum monthly payment?
While paying off the minimum monthly repayment is an option, the purpose of choosing a credit card with low interest rates is to allow you to pay off as much debt as possible, as quickly as possible. Just paying the minimum each month is never a good idea on any credit card, as the interest charged is added to the balance owed each month meaning the balance grows each month. Choose a balance transfer credit card that suits you, and pay off as much as you can within the low interest period.
Can I still buy stuff with my Balance Transfer Credit Card?
Although a balance transfer credit card works in much the same way as other credit cards, it's not recommended to use this card to make purchases until you have paid off all transferred balances. By transferring existing credit card balances onto a balance transfer credit card, you are being given a certain period of time where you will pay low or no interest on your debt. Use this time wisely by paying off as much off your debt as possible.
Using your card to make purchases or to take out cash while you have unpaid balance transfers on the account is not a good idea. The new purchases will be charged at the standard purchase interest rate and generally dont have any interest free days while you carry a balance. If this stops you paying your transferred balance you are wasting your balance transfer saving opportunity.
What Happens if I haven't paid off the transferred balance at the end of the period?
Try to pay off as much of the transferred balance as you can within the given time period. Any transferred balance left unpaid at the end of the pay-back period will revert to the purchase or cash rate on that card. Always check this rate in the terms and conditions before completing the application.
Can you switch more than once?
As long as your credit rating allows your application to be approved, you can switch balance transfer credit cards more than once. When you reach the end of the balance transfer period on one credit card, it is possible to transfer the outstanding debt to a new balance transfer credit card. However, be aware that this may impact negatively on your credit score as it shows creditors you are not efficient at managing your debt.
Is a balance transfer credit card suitable for you?
YES
I have an outstanding balance on another card or cards
YES
I'm currently getting charged high interest on my balance.
YES
I want to cut down interest charges and get my balance paid off
