Compare Balance Transfer Credit Cards - Australia

The balance transfer credit card is perhaps the class of credit card that causes the most confusion. And there’s a massive difference between the various options, meaning choosing one can be difficult. And that’s without even considering all the hype and financial jargon that makes it even harder to figure out which cards could be worthwhile.

That’s why we’ve put together this easy-to-follow guide. It’s jam-packed with information to help you confidently compare balance transfer credit cards and choose one that’s suitable for your needs.

Balance transfer credit cards are a unique offering and may be considered as an alternative to personal loans. They allow card holders to transfer their existing credit card balance to a new credit card. Typically, this new card will offer a lower or 0 per cent introductory interest rate, which could save cardholders money on interest fees, helping them pay off debt quicker.

Before you sign up for another credit card, it’s crucial you understand the ins and outs of a balance transfer. It should give you a better chance of clearing your debt.

When you get a balance transfer credit card, you take everything you owe on an existing credit card and transfer it to the new one. Some people will then cancel the old card to avoid the temptation to keep shopping with it.

In most cases, you can transfer a balance of up to 80 per cent of the new card’s credit limit. However, the allowed amount can sometimes range from 70 per cent to as much as 100 per cent.

As an example, let’s say you apply for a balance transfer credit card that permits transferring up to 80 per cent of the new credit limit. If your current balance is $4000 and you want to transfer it to a card with a better interest rate, the new card issuer would need to give you a limit of at least $5000 for you to be able to put all your debt on the new card.

If you’re transferring multiple debts, you’ll need to be sure the total amount doesn’t exceed your approved credit limit on your new card. Importantly, some balance transfer cards also have a minimum transfer amount that means you may not be eligible if your current balance is small.

Once you’ve transferred your credit card balance to your new card, it will be subject to your new balance transfer interest rate, which should be lower than your old rates or possibly even zero, for a given amount of time. You see, most balance transfer interest rate offers are introductory only, meaning they expire after a given period of time. So if you don’t pay off your debt within that time, you’ll begin being charged a higher interest rate again.

The amount of time you’ll have on the low balance transfer rate will depend on the card you choose and any special offers your chosen bank or lender might have at the time. During that time, it’s common for card issuers to charge a higher interest rate on any new purchases you might make with the card. Cash advances are also likely to attract a higher rate which is known as the cash advance rate If you withdraw cash from an ATM, transfer cash to another account, buy lottery tickets, or make another similar transaction, that’s usually considered a cash advance and is charged at a higher rate.

To get and start using your card, you’ll need to:

• Select a balance transfer card that suits your needs — you might start by comparing a range of balance transfer cards to help find one suitable for you. Once you’ve found an option that ticks your boxes, apply for it on the lender’s application page.
• Complete an application — you’ll need to provide identification, such as your Australian driver’s licence or proof of identity details, personal details including your name, address, phone number and financial details, including your current savings balance and current financial responsibilities. This information will allow the lender to determine if you meet their lending criteria for this new card and help set a credit limit that’s within your means.
• Choose the balance transfer option — during the application process, be sure to indicate you’re applying for a balance transfer deal. The card issuer will ask you to suggest the amount you want to transfer. The issuer will also ask for your current credit card details so they can transfer your current balance to your new card.
• Wait for approval — credit card providers can usually take around two business days to approve your new card. They’ll typically let you know through email.
• Wait for your credit card issuer to transfer the debt to your new card — after approving your credit limit, your new card issuer will transfer your balance from your old card to the new balance transfer card. Make sure you check to see if there is anything you need to do to confirm this transfer.
• Check your mail for your new card — find a safe place to store your new card.
• Close your old credit card — once you’ve received your new card, you’ll be safe to close your existing card if you were not planning on keeping it. If you choose to keep the existing card open, you may still need to pay annual fees.
• Set up automatic payments — to stay on top of your payments, it can help to set up an automatic repayment plan, which may help you pay off the debt before the introductory balance transfer rate expires.

How long does a balance transfer take?

Typically, a balance transfer will take around a week to complete. But some card issuers can take much longer than that. It could be 2-3 weeks before your old balance is transferred onto your new card. It might be a month before you receive your new card in the mail.

What is a balance transfer fee?

Occasionally, you’ll need to pay a balance transfer fee for using one of these credit card deals. It’s a one-time handling fee that you’ll pay upfront. In some cases, it can be between 1 to 3 per cent of the balance transferring to the card. For instance, if you’re charged a 1 per cent fee and your balance is $5000, your transfer fee would be $50.

In many cases, cards with longer balance transfer terms (anywhere from 18 to 24 months) are more likely to have a transfer fee. You’ll need to determine if the fee is worth it for the longer terms.

A balance transfer credit card can stop mounting interest, saving you money in the long run. Without a high interest rate weighing you down, you should be able to repay your debt faster. When you’re using a balance transfer credit card, payments go towards wiping the balance away instead of trying to make up for the high interest rates. Interest charges often keep people from paying their debts because paying off the balance can be somewhat like treading water in a flooding room.

How does that work? Let’s take a look at an example. (If you want to do the same type of calculation with numbers from your actual situation, the Australian government website, Moneysmart, has a credit card calculator tool.)

As an example, let’s say your current credit card balance is $10,000 with a 20 per cent interest rate, no annual fee and a mandatory 2 per cent repayment (or $20 when your balance gets lower). And let’s assume you don’t make any additional purchases.

• If you only make the minimum repayments, it’ll take you more than 61 years to repay your debt and you’ll pay just over $52,000.
• If you pay $600 each month, it’ll take you 20 months to repay your debt and you’ll pay just over $11,500.
• If you get a balance transfer card that charges 0 per cent interest on balance transfers for 18 months (with no balance transfer fee) and pay $600 each month, it’ll take you 17 months to repay your debt and you’ll pay $10,000.

As you can see, a balance transfer credit card can help people save quite a bit of money depending on the circumstances. But they’re not perfect. There are possible disadvantages:

• If you have unexpected expenses and have to make a new purchase on your balance transfer card, you may be charged a far higher interest rate
• If you can’t pay your debt off before the introductory balance transfer rate expires, you may have to pay a higher rate of interest on your remaining debt
• If the card issuer charges a balance transfer fee, it may cancel out some of the savings you would otherwise realise
• Getting a balance transfer card could impact your credit score depending on your situation
• If you’re late making a payment, there may be late payment fees which could be costly.

If you’re wondering which is the best balance transfer card, we’re sorry to tell you there’s no single best. If there were, everyone would apply for that one. The option that’s suitable for you will depend on your circumstances. That’s why we created a simple-to-follow guide that could help you compare balance transfer credit cards.

First, start with the process laid out at our credit card comparison hub, then add in the below questions to help you compare balance transfer cards.

• How much debt do you currently have? Many card issuers will only transfer in amounts up to 80 per cent of the approved credit limit on your new balance transfer card. But some allow more or less. Many have minimum transfer amounts too. And if you have a credit balance (debt) above 30 per cent of the limit on your card, it may reduce your credit score, although timely repayments could increase it again. All this means considering each card’s limit, any transfer minimums and any transfer fees in the context of how much debt you need to transfer.
• Are you likely to need to make further purchases on credit? If so, cards with a lower rate for new purchases may be more appealing.
• How much money can you put aside each month to pay back your debt? This could impact how fast you can pay back your debt, and will help you prioritise the length of the transfer deal to help you to repay the debt before it expires.

Comparing balance transfer credit cards can be tough because much of the information out there is full of jargon or hype. And when you’ve already got a credit card debt causing you anxiety, the last thing you need is to stress about is which card is going to best help you overcome those challenges. But by using our main credit card comparison guide along with the information in this article, you’ll have some tools to help you efficiently compare balance transfer credit cards, so you can choose one that’s suitable for your needs.