Credit card balance transfers

A credit card balance transfer moves high-interest debt to another credit card with a lower interest rate.

What is a credit card balance transfer

A credit card balance transfer moves debt from one or more high-interest cards to a card with a lower rate. They can help you consolidate debt, save on interest and pay down your debt faster. 

Key aspects of a balance transfer

• Lower interest rate – The new interest rate on the balance you transfer may be either 0% or a special low rate.
• Promotional period – The new rate is only for a limited time, usually between 6-24 months. 
• Monthly repayments – You often need to make a minimum monthly repayment by a set date for your promotional rate to continue. 
• Maximum transfer amount – There may be a maximum amount you can transfer to the card. For example, 80% of the available credit on your balance transfer card.
• Transfer fees – You will be charged fees, including a one-off balance transfer fee, calculated as a percentage of the transferred amount. 
• Paying off the balance – If you don't pay off the card in the promotional period, you will be charged a higher interest rate on the balance. This may end up costing you more. 

If you're struggling with your credit card repayments, a balance transfer might not be right for you. There are better options to get your debt under control.

How to get the most out of a balance transfer

Here's what to do to make sure a credit card balance transfer works for you.

Pay off the balance regularly and on time

If you miss a required repayment during the promotional period, you may forfeit the low balance transfer rate. Your new interest rate may be much higher, even higher than your original credit card.

To pay off the card balance in time, your repayments will likely need to be more than the minimum required.

Be realistic about what you can afford to repay.

Limit spending on your new card

If you use your new credit card to buy things straight away, a different interest rate may apply. This interest rate — or 'purchase rate' — is usually much higher than the balance transfer rate.

Also, your repayments may go towards paying off the new purchases, instead of paying off the balance you transferred. This means you don’t get the full benefit of the transfer, and you add to your credit card debt.

Limit your spending so you can focus on paying off the balance faster.

Cancel your old card

If you decide to do a balance transfer, make sure you cancel your old card. That way, you’ll avoid the temptation to create more debt.

Protect your credit score

When you apply for a new credit card or do a balance transfer, it's added to your credit report. If you apply several times in a short period of time, it can harm your credit score.

If you've transferred your balance before, it may be better to try to pay off your credit card than to transfer again.

Check how much you can transfer

Some cards set a maximum amount you can transfer, so you might not be able to transfer the full amount from your current card. If there's still money owing on your current card after the transfer, you'll have to pay interest and fees on that as well. It may not be worth paying interest and fees on two cards.

Compare the costs of balance transfers

Compare rates and fees so you get a balance transfer that will save you money, not cost you more later.

Set a payment reminder

If you go ahead with a credit card balance transfer, try your best to pay it off before the special interest rate ends.

Set a payment reminder in your calendar so you don't forget.