6 things you should know about balance transfer credit cards

Ceyda Erem

12 Feb 2020

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For a lot of us, credit card debt just seems to creep up on us. And if you’ve managed to go overboard with your spending within the last year, you might be tossing up ways to put an end to your mounting debt, like applying for a balance transfer credit card.

A balance transfer allows you to take existing debt that’s been built up on a credit card and move it onto a new credit card with a temporary low interest rate - in some case even 0% - allowing you to pay off debt, interest-free. 

Sounds too easy, right? Well just like any financial product, it pays to do your research before signing the dotted line. 

So if you’re just about ready to start shopping around on balance transfer credit cards, we’ve got six things you should know first. 

You can only transfer 80% of the new card’s credit limit 

One thing many Aussies might not be aware of is that you’ll only be able to transfer up to 80% of the card’s credit limit. So if you’ve got $5,000 of unpaid debt on your old card, you’ll only be able to move $4,000 across. In order to transfer the full balance, you’ll need to select a card with a credit limit that’s a bit higher than your debt amount, or request a credit limit increase with the provider. 

There may be a fee to move the balance across 

Generally speaking, credit card providers will move the balance across for you and may charge a fee for doing so, which can typically be between 1% - 3% of the total balance. While 3% might not seem like much, if you’ve racked up $5,000 worth of debt and the balance transfer fee is 3%, that’s $150 extra you’ll need to cough up. 

However, it is possible to pick up a balance transfer card with a 0% transfer fee, in fact, there are 67 balance transfer cards in the Mozo database^ that don’t charge a transfer fee. 

The interest free period will expire eventually 

Once you start shopping around on balance transfer credit cards, you’ll come to find that the 0% interest period does have an expiry date. Balance transfer cards are not a one size fits all and generally have interest free periods that range from 6 - 24 months. It’s important to choose an offer that gives you plenty of time to pay off your debt, because once the interest free period ends, the revert rate will kick in. 

For example, according to our credit card debt repayments calculator, if you’ve got $5,000 worth of debt and can afford to pay $417 in repayments every month, you’ll be able to clear your debt within a year. 

Some cards come with an annual fee 

One thing Aussies may forget to factor into their balance transfer search is the card’s annual fee. While it is possible to find a card with a $0 annual fee, some providers can charge an annual fee that’s as little as $30 or as high as $129. And if you’re needing an interest free period that exceeds a year, the annual fee will be an ongoing cost you’ll have to work into your budget. 

Mozo’s credit card comparison tool can help you find a balance transfer option that not only suits your needs, but also has no annual fees. 

Spending on the card is a big no-no

While it might not be impossible, spending on your card while you have a transferred balance to pay off is definitely not recommended. Remember, the purpose of a balance transfer is to banish debt, not take on more. 

While you’re paying off a transferred balance, there are no interest-free days on regular purchases. That means that once you start spending on the card, you’ll automatically start accruing debt at the regular purchase rate.

It’s also worth mentioning that any new purchases made on the card will need to be paid off first instead of your payment going towards your transferred balance, so in any case, it’s best to keep this card locked away instead of in your wallet. 

Applying for multiple cards at once can hurt your credit score 

While it’s great to have a determined attitude for paying off debt, it’s just as important to have a bit of patience during the application process. Every time you apply for a credit card, it is recorded on your credit history, regardless of whether you are accepted or rejected. That’s why it’s important to take the time to choose a card that’s right for you, instead of applying for multiple with the hope that one will be successful. 

Ready to make debt a thing of the past in 2020? Then make your next stop our balance transfer credit card comparison tool

^At the time of writing 

Compare balance transfer credit cards - rates updated daily

  • Promoted

    Virgin Money Virgin Australia Velocity Flyer Card - Balance Transfer Offer

    0% p.a. for 22 months and then 20.99% p.a.

    20.74% p.a.

    $129

    Get in the air with a $129 Virgin Australia Gift Voucher each year. Earn 3 extra Velocity points per $1 spent on top of the standard earn rate for the first 3 months (capped at 10,000 points per month. 0% p.a. for 22 months on balance transfers.

    • 0% p.a. for 22 months and then 20.99% p.a.

    • $129

    • 20.74% p.a.

    • 55

    • 20.99% p.a.

    • 2.7%, Min $2.70

    • Points are credited to the Velocity Frequent Flyer program.

    Read our Mozo Review to learn more about the Virgin Australia Velocity Flyer Card - Balance Transfer Offer

    Details Close

  • Promoted

    American Express Velocity Escape Card

    0% p.a. for 12 months and then 20.74% p.a. (1.00% balance transfer fee)

    20.74% p.a.

    $0

    Earn up to 1.75 Velocity Points. Have limited stress with the Velocity Escape with no annual fees and receive 0% p.a. on balance transfers for the first 12 months, a one-off credit plan establishment fee of 1% applies. Credit Card Provider of the Year in the Mozo Experts Choice Awards 2019.^ T&C’s apply

    • 0% p.a. for 12 months and then 20.74% p.a. (1.00% balance transfer fee)

    • $0

    • 20.74% p.a.

    • 55

    • Points automatically transferred to your Velocity account

    Read our Mozo Review to learn more about the Velocity Escape Card

    Details Close

  • Promoted

    Bankwest Breeze Platinum Mastercard

    0% p.a. for 26 months and then 12.99% p.a. (2.00% balance transfer fee)

    12.99% p.a.

    $99 $49 in the first year

    0% p.a. on balance transfers for 26 months (2% BT fee applies). Streamline your budget with a low ongoing interest rate of 12.99% p.a. Plus, enjoy complimentary overseas travel insurance as well. T&Cs Apply

    • 0% p.a. for 26 months and then 12.99% p.a. (2.00% balance transfer fee)

    • $99 $49 in the first year

    • 12.99% p.a.

    • 55

    • 21.99% p.a.

    • 2%, Min $4.00

    Read our Mozo Review to learn more about the Breeze Platinum Mastercard

    Details Close

  • Promoted

    American Express Qantas Discovery Card

    0% p.a. for 12 months and then 20.74% p.a. (1.00% balance transfer fee)

    20.74% p.a.

    $0

    Receive up to 1.75 Qantas Points for every $1 spent on Card purchases (T&Cs apply). No annual fee for the life of the card. Credit Card Provider of the Year in the Mozo Experts Choice Awards 2019.^ T&C’s apply

    • 0% p.a. for 12 months and then 20.74% p.a. (1.00% balance transfer fee)

    • $0

    • 20.74% p.a.

    • 44

    • Points are automatically credited to the Qantas Frequent Flyer programme.

    Read our Mozo Review to learn more about the Qantas Discovery Card

    Details Close

  • Promoted

    Virgin Money Virgin Australia Velocity Flyer Card - Purchase Rate and Balance Transfer Offer

    0% p.a. for 6 months and then 20.99% p.a.

    0% p.a. for 14 months then 20.74% p.a.

    $129 $64 in the first year

    Receive a $129 Virgin Australia gift voucher each year. 0.0% p.a. on purchases for up to 14 months. $64 annual fee in the first year ($129 after).

    • 0% p.a. for 6 months and then 20.99% p.a.

    • $129 $64 in the first year

    • 0% p.a. for 14 months then 20.74% p.a.

    • 55

    • 20.99% p.a.

    • 2.7%, Min $2.70

    • Points are credited to the Velocity Frequent Flyer program.

    Details Close

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