Frequently asked questions about balance transfersWhen you move your credit card debt from one bank to another, this is known as a balance transfer. Customers usually transfer their balances to an institution that’s offering a significantly lower or zero per cent rate of interest (usually this rate is for a set time period, in most cases 12 to 24 months). You save money because you don’t have to pay interest, and this allows you to pay back your debt faster. The bank’s normal interest rates will apply once the set period for the promotion has elapsed.
How can I get this type of card?You can ask for a balance transfer if you apply for a new credit card in-store or online. There’s usually is a portion of the application devoted to balance transfers. The details of your current credit card debt must be included in the application, and you’ll also need to include how much you’re transferring from which institution. The process usually takes only a few days, and it’s automatic – the banks effect the transfer between themselves. Customers are sometimes required to pay a fee for the balance transfer, and it’s likely that your new card will have an annual fee. You must meet the bank’s requirements in order for your application to be approved.
What is the balance transfer fee?The cards with longer promotional periods tend to have a balance transfer fee attached to them. This one-time fee is a percentage of the amount you’re transferring to your new card. This is usually between one and three per cent. As an example, a 3 per cent transfer fee on a debt of $20,000 would be $600.
Do I save when I transfer my balance?Use our comparison table below to see how much interest you'll save with the various 0% balance transfer cards that are commonly advertised. Just enter the figure for the debt you're transferring with the existing rate of interest and the table will calculate your savings during the promotional period in the column titled "interest saved." The exact amount of your savings will depend on variables such as the length of the promotional offer, the size of your debt, and the amount you decide to repay each month. Some people save hundreds, and even thousands of dollars in interest payments while clearing their debt.
Is it necessary to contact both the old and the new banks before making a balance transfer?The issuer of your new card can have your balance transferred automatically. Simply provide the particulars of your current card when you fill out the application. You must contact your bank if you’d like to close off your old card. You’ll be required to pay maintenance costs and annual fees on your old card if you choose to keep it open.
Why is my new issuer offering such low rates?Why would a credit card issuer charge zero per cent when they can collect 20 per cent or more? Here are some of the reasons:
- It’s hard to convince you to switch. The cost of customer acquisition in Australia can run into the hundreds, because we don’t like switching banks. Providing a discount on interest rates is a cheap way for financial institutions to entice would-be clients. It's really an inexpensive method of marketing.
- You'll ultimately have to pay a higher rate. You’ll wind up paying interest at the regular rate if you don't clear the entire balance at the zero per cent rate. This rate can be as high as 22 per cent. Once that happens, you can pay hundreds and in some cases thousands of dollars in interest to your new issuer.
Can the balance transfer be done with only my existing issuer?No, it’s not possible to do a balance transfer involving only one institution. It’s not even possible to do a balance transfer to another bank within the same group or owned by the same company. For example, Westpac owns both Bank of Melbourne and BankSA, so you won’t be able to do a balance transfer between these two organisations.
What’s the catch?Your transfer has a fixed rate for the promotional period: it won’t go up or down regardless of what’s happening in the market. It will only change when the promotional period is over. You still have to make at least the minimum payment every month, even if your new bank is offering a transfer rate of zero per cent. You should be aware that unless your balance is extremely low, it’s close to impossible to pay off the entire debt before the end of the promotional period if you make only minimum payments. The residual balance will begin attracting interest after the promotion finishes, and your balance will keep growing. The process of bank transfers is safe, and hundreds of thousands of people in Australia avail themselves of the service each year. Our guidelines to avoiding common credit card balance transfer mistakes below will assist you in using your new card more efficiently.
Can I make use of promotions such as interest-free days with a credit card on which I did a balance transfer?Most credit card issuers give users a fixed amount of interest-free days as one of the standard features of the card. However, as the holder of a balance transfer card, interest-free days will only apply to you after you've fully paid off your balance. If you're still paying down the amount you transferred, therefore, you can’t take advantage of the interest-free days that banks offer as a promotion.
Can I ask for a balance transfer after applying for a card?Yes, you can transfer your balance after applying for the card. The exact terms and conditions for doing this are different for each bank. You can look at a few of the processes of the banks below, but your best bet is to call your bank to talk about your options:
- ANZ does not offer the promotional zero per cent balance transfer. You’ll get the balance transfer rates that they offer to current cardholders, and these are typically less competitive so you won’t be able to save as much.
- Bankwest. The date you apply for the balance transfer offer will impact the length of time for which you can enjoy its benefits. For example, if the card offers zero per cent for eighteen months, and you apply for the balance transfer three months after it is approved, you can only benefit from the offer for fifteen months. If you have any questions about Bankwest credit cards, read this.
- Citi. You have up to three months after approval to apply and benefit from the promotional offer. Check our FAQs about Citi Bank for more information.
- NAB. If you’re an NAB cardholder, you can apply for a balance transfer within thirty days of your card being approved. After this, the less competitive standard offer for existing customers will be applied if you try to get a transfer.
- Virgin. You have up to thirty days to apply for a balance transfer with Virgin.
Can balance transfer offers also be used for store cards and personal loans?Some issuers will allow you to transfer debt from store cards and personal loans, but most balance transfer transactions are for credit card debt.
Five steps for conducting a successful balance transferHere are five steps to apply for and get a balance transfer for your credit card debt:
- Look for an offer that meets your requirements. Study our comparison tables to see the different offers and your potential savings.
- Pay attention to the amount you can transfer. The new bank will give you a credit limit, and you can transfer between 80 per cent and 100 per cent of that limit. Therefore, if your limit is $10,000, and the bank allows you to transfer 80 per cent, you can move up to $8,000. Call your current bank for an up-to-date figure for the amount you owe on the account. Annual fees, interest payments, and direct debits can affect this figure, so that’s why it’s so important to contact your issuer before applying for your new card, rather than relying on your last statement. You should also ensure that you choose a bank that will allow you to make the transfer.
- Send in your application. Click the “Go to Site” button once you find a balance transfer offer that’s right for you, and it will direct you to a secure online application. In order to maximise your chances of being approved, take a look at our tips for applying for a balance transfer below.
- Wait for approval. Some institutions take 5-7 days to process your application, while others can do it within 60 seconds. If you don’t hear from your institution after a week, call them to ask if there's a problem.
- Confirm the transfer and close the account held with your old bank. Call your old bank once you have confirmation that your new card is active to ensure that they close your account. This is important if you want to avoid further interest payments and fees. You can now begin to repay your debt.
Comparing balance transfer offers: What you need to knowHow do you pick the right deal from the tons of balance transfer offers available in Australia? Below are the critical features to compare if you’re looking for maximum savings. These features are included when we calculate your total interest savings:
- Promotional period. This period refers to the length of time for which the lower rate applies. This typically ranges between 12 and 24 months, depending on your choice of card. You will pay a significantly higher rate, known as the "revert rate" once you reach the end of the promotional period. Of course, you’ll have more time to pay off your debt with a longer promotional period.
- Interest rate on the balance transfer. This rate will apply to the balance you transfer to your new account. The standard rate for 2017 balance transfer offers is zero per cent for the promotional period, but some banks charge more. Banks usually refer to this as the “introductory offer” or the "promotional rate.”
- Revert rate. The bank will charge interest on your outstanding balance at the higher "revert rate" once you reach the end of the promotional period. This is usually the normal purchase or cash advance rate and the range is between 12 and 20 per cent. You should try to find a card that has a lower revert rate so you’ll pay less interest in the event that you cannot pay off all your debt before end of the promotional period.
- Balance transfer fee. Some banks levy this one-time fee, which is a percentage of the amount you are transferring to your new card. This usually ranges between one and three per cent, and tend to apply to balance transfer transactions with longer promotional periods. It’s best to avoid these fees if possible. Look at the deal carefully to ensure that the balance transfer fee does not cancel out the amount you’ll save on interest if you take the offer.
- Annual fee. For most balance transfer offers, the annual credit card fee is payable in advance. This charge is usually about $100. Some issuers waive the fee for the first year. The issuer will calculate the fee as a purchase, and it will therefore attract the same interest rate as any other purchase you make when you use the card. The annual fee will not cause you to accrue any interest if your card is still under the zero per cent promotion. The amount you save on interest should outweigh the annual fee in order for you to claim maximum benefit from your new card.
- Purchase rate: This rate applies to all new purchases you make with the card. Some issuers have a promotional offer of zero per cent on purchases, but this is typically 12 per cent or more.
- Additional benefits: Issuers may offer extra benefits such as free travel insurance if you book using your card, or reward points when you make purchases. This should not be the basis for choosing one card over the other, though it’s tempting to use these extras as tiebreakers when comparing similar cards.
- Applying too quickly after a rejection. Each time you apply for a balance transfer offer, it is logged in your credit history file; so don't immediately apply to another issuer if your application is rejected. Instead, repay some of your debt and take your time comparing alternative options and ensuring that you meet the criteria before applying to another institution. But you can still improve your chances of gaining approval.
- Poor credit history. In order to get a balance transfer, you must have a good credit history. If your credit history is poor because of defaults on your account, missed payments, or substantial debt load, you should pay down some of your debt and prove that you’re financially fit before applying.
- Different account name. Your new account must bear the same name as the current one. Your application will be rejected if it is in a different name.
- Applying to the wrong bank. You’ll get an immediate rejection if you attempt to transfer your balance to a financial institution owned by the same company as your current bank. For example, you won’t be able to transfer your balance from a St. George or a Bank of Melbourne account to a Bank SA card, since Westpac Group is the parent company for all of these institutions.
Avoid these common mistakes when making a balance transferA zero per cent balance transfer card, when used wisely, will get you out of debt sooner, since it will lessen your interest payments. Your debt load can actually increase if you use the card the wrong way. Avoid these mistakes to safeguard yourself from increasing your balance transfer debt load.
MISTAKE: Not paying attention to the revert rateYou will pay the bank’s revert rate on any outstanding balance once the transfer promotion ends. If possible select a card with a lower revert rate than that of your existing credit card, or strive to pay back the entire debt before the bank starts applying the revert rate.
MISTAKE: Not making monthly paymentsYou still owe on your card, even if the interest rate is zero per cent, and you must still pay a minimum of 3 per cent of the total every month. You can't just do a balance transfer and then forget about making payments.
MISTAKE: Making new purchases with your cardNew debt will hamper your ability to pay down the balance on your card. Don't purchase anything new with your card that you can't pay off in full by the end of the month. In addition, banks are obligated to assign repayments to the debt that accrues the most interest on your account. Therefore, if your balance is accruing zero per cent, but your purchases are charged at the standard interest rate, the bank will allocate your repayments to the purchases instead of your balance transfer. That’s why you should focus on paying down your debt instead of buying more stuff, even if your card has an interest rate of zero per cent on new purchases.
MISTAKE: Not closing off your old cardMany users are tempted to keep their old card "in case of an emergency." If you ran up debt on it in the past, it’s likely you’ll do so again. Close off the card and focus on paying down your balance. Make sure you transfer regular payments. Get the final payout figure from your old bank so you won’t be carrying leftover debt.
MISTAKE: Not taking applicable fees into considerationYou may have to pay a balance transfer fee and annual fees, although you won’t have to pay interest if your promotional rate is zero per cent. Take these fees into consideration when selecting a balance transfer offer. However, you should not reject a card based only on fees. There are great No Annual Fee credit card offers.
MISTAKE: Paying only the minimum each monthYou can’t repay your entire balance in two years if you make only minimum payments every month, and you will have an outstanding balance at the end of the promotion. This balance will begin to attract revert interest and your debt levels will once again start to grow. Your strategy should instead be to work out the precise amount you will need to pay every month in order to clear the debt before the promotion ends. Simply divide your total debt by how many months your balance transfer offer will last for. You should aim to pay this amount each statement period to get rid of the debt before the end of the zero per cent promotion.
The sections below are best explained via questions and answers, so read through them to learn more.
Balance transfer applications
Q: Can I do a balance transfer to any bank?A: The main regulation that will tell you whether you can transfer your balance to any particular financial institution is whether or not your current bank is a subsidiary of the same credit provider. Balance transfers are not permitted between Bank of Melbourne, St. George, and Bank SA, for example, because Westpac is the credit provider.
Q: Can my balance be transferred to my spouse or partner?A: If you and your spouse/partner have a joint credit card account together then yes, you can transfer your balance to him or her. On the other hand, usually you won’t be able to transfer a debt that is in the name of somebody else to a new account held in your name.
Q: Can I do a balance transfer from an account held overseas?A: No, balance transfers are only allowed from credit cards that are issued in Australia.
Q: Can I request another balance transfer deal with the same bank when the current promotion ends?A: No. Current customers are barred from applying for balance transfers with their new bank. On the other hand, if you move your balance to a different bank, you can transfer to the first bank when the promotion ends.
Q: How long does the transfer process take?A: Your old balance will show up in your new account within a week or two, even though it sometimes takes as little as 60 seconds for your new credit card to be approved. It’s important to note that the zero per cent balance transfer offer takes effect once you get approval for your card, and not when the balance is transferred to your account.
How to use balance transfers
Q: Do I get to make interest-free purchases whilst I repay my balance transfer?A: Banks offer interest-free days, but unfortunately, you won’t be able to take advantage of this feature if you have a balance outstanding. Some cards, on the other hand, offer promotional zero per cent deals on both balance transfers and purchases.
Q: What is my repayment amount and how often should I be paying?A: Your payments should be made by the due date specified on your credit card statement each period (typically every month). You should always try to pay more than the required minimum in order to clear your debt more quickly. This is particularly important if you're taking advantage of a zero per cent balance transfer deal, which only applies for a promotional period. You should determine the amount you’d have to pay every month by dividing the amount of your debt by the length of your promotional period (in months) if you want to avoid high interest fees on your debt. You should aim to pay this amount every month in order to pay off your balance before the end of the promotion.
Q: Can I pay off my balance before the end of the promotion?A: Yes, you can pay off your balance as early as you want to. As a matter of fact, it makes sense to pay off your debt as quickly as possible in order to avoid revert rates and further interest costs. There are no disadvantages to paying off your credit card before the due date, unlike mortgages and fixed schedule personal loans.
Q: How does the bank allocate my repayments? Do they go towards cash advances or purchases first, or does my balance transfer have priority?A: Your bank will allocate your repayments to the debt with the highest interest rate first. Repayments will therefore go towards cash advances and purchases first if your card is under a balance transfer promotion offering a low interest rate. For this reason, it’s ideal to refrain from making purchases and taking cash advances whilst paying for a balance transfer in order to clear your debt more quickly.
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