If you’re still dealing with your post-holiday debt hangover and getting stung by high interest rates, you might want to consider a balance transfer to allow yourself an interest free break to catch up. However, before you go any further, let’s take a look at 7 things you should know about balance transfers.


#1 What is a balance transfer?

A balance transfer allows you to take the outstanding balance that you owe on an existing credit card and transfer it over to a new card. The balance is charged at a special interest rate that only lasts for a certain number of months. For example, the St.George Vertigo Card is offering 0% p.a. interest on balances transferred for the first 12 months (purchase rate 13.24% p.a. thereafter).


#2 What are the interest rates?

There are two rates you need to be mindful of:

  • The balance transfer rate – This is the special rate charged on the balance you have transferred. It could be as low as 0% p.a. or it could be a discounted rate such as 5.99% p.a.
  • The revert rate – This is the rate that applies after the special introductory period has finished. It could be the card’s purchase rate or cash advance rate, both of which can be much higher than the special so it’s important that you repay your balance in full before the end of the introductory period.


#3 What are the fees?

Some lenders charge an upfront balance transfer fee that can range from 1-3% of the amount you have transferred. For example, the Bankwest Breeze MasterCard has 0% p.a. for 21 months on balance transfers with a 2% balance transfer fee (purchase rate 12.99% p.a. thereafter). So, if you transferred $5,000, it will cost you a $100 fee.


#4 How much can I transfer?

Some lenders have minimum and maximum amounts that they will allow you to transfer. The maximum is usually expressed as a percentage of your approved credit limit. For example, you have an approved credit limit of $5,000 and you can transfer up to 80% of your limit. That means you can transfer up to $4,000 to the new card.


#5 Can I keep spending on my new card?

A good rule is to try not to use your new card while you are still repaying the balance. If you keep spending, you’ll lose the benefits of having interest free days and any purchases you make will incur interest from day one.


#6 Can I stay with my current credit card provider?

Many lenders have in their terms and conditions a line that says that the balance you are transferring must come from a different credit provider or that the special offer is only available to new customers. So check the fine print before applying!


#7 Will this impact my credit score?

It might. Every time you apply for a credit card, the lender can check your credit file. This credit check shows up as an enquiry on your file (regardless of whether you are approved or declined) and can impact your credit score.


Does a balance transfer sound like what you’re looking for? Head over to Credit Savvy’s credit card comparison service to start comparing some balance transfer offers today.


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  1. Pingback: Can I pay off one credit card with another? | Credit Card FAQs - Credit Savvy

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