Balance Transfer Credit Cards – Compare Balance Transfers from Australian Banks

Understand how a balance transfer works to save you money on an existing credit card debt. Learn about the possible pitfalls of such a manoeuvre and how to make sure you take full advantage of balance transfers

A balance transfer in terms of a credit card occurs when a person who has a debt on a credit card provided by X transfers that debt to another credit card provided by Y. This usually happens when Y offers a new credit card with a zero or low introductory rate offer, but it can also happen if the customer already owns a card from Y, and Y decides to make such an offer to existing customers as well.

Balance transfers are actively and aggressively pursued by credit card companies because they are a great way of luring customers away from their current provider. The new credit card provider does this by offering (usually) short-term incentives to the customer in the form of an interest rate cut for a certain period of time on any debts transferred to the new card. That interest rate cut may be right down to zero percent, or a little higher, depending on the length of the offer period and what other features the card may provide.

The Bank of Melbourne Vertigo Credit Card allows you to take control of your finances with a low balance transfer offer. Also enjoy one of the lowest rates on purchases and up to 55 days interest free.

• 13.24% p.a. on purchases
• 0.99% p.a. for 12 months on balance transfers
• $55 annual fee
• 21.49% p.a. on cash advances

View the Bank of Melbourne Vertigo Credit Card terms and conditions here.

Featured Balance Transfer Credit Cards:

		Interest Rate (p.a.)	Balance Transfer Rate (p.a.)	Annual Fee	Cash Advance Rate (p.a.)
Bank of Melbourne Vertigo Credit Card	Enjoy the freedom of a low months balance transfer offer with a low annual fee.	13.24%	0.99% for 12 months	$55	21.49%
St George Vertigo	The low rate card made for those who love to shop with a low rate on purchases, up to 55 days interest free and a low annual fee.	13.24%	0.99% for 12 months	$55	21.49%
NAB Gold Card	Enjoy a low balance transfer offer plus a range of exclusive gold benefits and privileges.	19.74%	1% for 12 months	$90	21.74%
Citibank Clear Platinum Card	A platinum credit card with low rates on purchases and balance transfers..	11.99%	2.9% for 12 months	$99	21.74%
Citibank Rewards Credit Card – Platinum Card	A great low balance transfer offer, plus earn up to 4.25 Citibank Rewards Points for every $1 spend.	20.99%	0.9% for 9 months	$199	21.74%
St George Gold Low Rate Card	An introductory offer on balance transfers and purchases, Plus a low annual fee.	15.99%		$79	20.24%
Virgin High Flyer Credit Card	A low balance transfer offer, plus earn 2.5 velocity points per $1 spent for first 3 months.	20.99%	1.9% for 6 months	$249	20.99%
Bankwest Breeze MasterCard	Take control of your finances with a low balance transfer offer for the first 15 months	10.99%	4.99% for 12 months	$69	21.99%

Pros and cons of balance transfers

For the customer, a balance transfer is a great way to save some money on interest charges. For the new card provider, it secures a new customer and an annual fee (if one applies). But the real benefit for the provider occurs if that customer remains with them beyond the balance transfer period, and racks up some new debt that creates interest charges, and especially if they fail to pay down their transferred balance in time and the revert-to interest rate kicks in.

Where the danger really lies with balance transfers is when the customer makes their balance transfer and then proceeds to use their new card as a regular credit card, putting purchases on it. This is a cardinal sin with balance transfer credit cards because the purchases are subject to the allocation of payments rule which states that the lowest interest debts are always paid off first. That leaves purchases and cash advances sitting behind the balance transfer accruing interest untouched at their higher rates – a situation which continues until the transferred debt has been fully cleared. It’s plain, therefore, that a balance transfer credit card should only be used for that sole purpose whilst any of the debt remains.

Key factors in deciding whether to make a balance transfer

The Regular APR
This is the normal rate of interest for purchases on a credit card, and usually the revert-to rate that takes over on any unpaid part of the transfer at the end of the offer period (the revert-to rate can sometimes be the cash advance rate so read the fine print). The lower this regular purchase rate is, the better for the consumer because they will pay less interest on any unpaid part of the transfer, or on any new purchases that aren’t fully cleared in a month that are made beyond the transfer being fully paid off.

The teaser rate
This is the introductory rate offered by the credit card company to encourage you to take their balance transfer card. Generally, they can be found at 0% for six months, around 2% for twelve months, and 5% to 7% for the lifetime of the debt. There are variations in between these figures, but this will give you a good idea. Much will depend on the card’s other features, such as whether there is an annual fee to pay.

The offer period
You must assess whether the offer period on the balance transfer will allow you to pay off the debt in time, before the revert-to rate kicks in. It may be worth taking twelve months over six months at a slightly higher rate of interest than being left with a large portion to pay off at the regular purchase rate. Whichever offer you choose, remember that you are still liable to pay your minimum amount each month. If you don’t, you can be subject to penalty charges and your introductory offer may even be withdrawn.

The balance transfer tart

This is the popular if risky strategy of taking one balance transfer after another as a means of delaying the final day of reckoning when your debt has to be paid off. The customer takes advantage of the low rate for as long as the offer period lasts, and then shifts the unpaid balance to another balance transfer credit card. This happens if the customer either has no intention of paying down their debt because it’s just too much fun spending money, or because they are genuinely struggling to make inroads into it and need some more breathing space.

The problem with this approach is that it requires a good credit rating to start with, and it can damage your credit rating in the long run, so much so that providers may refuse to offer any new balance transfers. This will then leave you stuck with whatever revert-to rate your last card imposed, which could be quite punishing if this was not a consideration because you thought that you were just going to shift on your debt somewhere else.

Many people turn to balance transfer credit cards as effective way of saving money on existing debts. How do these cards work, and what are the potential pit falls.

One of the most common ways that credit card lenders attract new business, is to advertise low introductory rates for anyone transferring an existing debt from another credit card company.

You will often find that these special promotional rates of interest will float somewhere between the 0% and 5% range, and will tend to run for period of 3 months, up to the full life of the balance.

Using a balance transfer credit card can be a very effective way of controlling debt. It gives you longer to pay your debts, and helps you to avoid higher interest charges for a set period of time.

However if misused, or not used to their full potential, then balance transfer credit cards can end up costing you more than your original debt.

Although the promotional rates look very tempting, once the new lender has you hooked, there can be some very unpleasant surprises if you fail to pay off your balance by the end of the promotional rate period.

How do Balance Transfer Credit Cards Work?

• First you apply for your new card, and once accepted you will pass on the account details for your existing credit card debt.

• Your new lender will then pay your existing credit card balance, and transfer the outstanding amount over to your new card.

• The promotional rate of interest will then apply, but be aware, the lower rate will only apply to the amount transferred.

• If you have a high existing balance on an old credit card then a balance transfer will allow you time to pay off your balance, whilst also giving you a period where no interest is added to your total outstanding balance.

There are some pitfalls with balance transfers. We have given some tips of what to look out for, and how to avoid them. First of all you need to look at the different credit card features, and see which of them are going to matter to you most.

• Promotional balance transfer rate

• Standard interest rate

• Annual fee

• How many interest free days are there?

• Reward schemes

• Late payment penalties

Balance Transfer Pitfalls

1. The repayment catch – This is something that many authorities are attempting to outlaw, but what credit card companies often do is to apply any repayments you make to your credit card to your transferred balance first. Even if it is sitting at a 0% interest rate. What this means is, any purchases you make with your balance transfer credit card, will not be paid for until your full balance transfer amount is paid in full.

What happens is that any money spent on your new credit card will be being charged at a higher rate of interest. Too long like this and any savings you may be making on your balance transfer will be quickly swallowed up, and wiped out.

Katherine Lane, who is Principal Solicitor with the Consumer Credit Legal Centre, says “something must be done, these charges are a trick most often used in interest free deals to set off interest being charged. It is very unfair to customers.”

2. The standard interest trap – Make sure you are fully aware of what the standard rate of interest will be once the promotional interest rate period is over.

Some providers will offer you a very low or even 0% fee for the balance transfer but will then have a very high standard rate of 20% or more.

3. Transfer percentage charge - Generally when you do any sort of balance transfer, there will be a fee applied when you make the transfer. It is normally called a balance transfer handling fee, and the amount charged will vary from provider to provider.

Make sure you read the small print as these fees can range from .5% up to 2% of the total transferred balance.

4. You now have two cards - Now your old balance has been transferred onto the new card, your old credit card will have a much lower or maybe even $0 balance. This could lead to the temptation to spend on this card, which will most likely land you in more debt.
Some people will keep hold of the old credit card in case of emergencies, but the best advice would probably be to consider destroying the old card, and closing that account.

Be Certain

The main thing to do when taking on a balance transfer credit card is to be completely familiar with all the rates, and terms and conditions of the new lender.

Often people will not read the terms, or will just look at the promotional balance transfer rate, and nothing more.

This is a real mistake that can often put you in a position where you are paying more than you paid before you did the balance transfer.

Also remember there is more than one or two providers available to you. The competition for business means many new credit card deals hitting the market all the time, so make sure you look online, in the newspapers, and in the actual branches themselves to make sure you get the best deal possible.

Bear in mind that although your main aim is to save money on interest payments with a balance transfer, remember that credit cards come with more than one feature, and although a card may come with a very attractive promotional interest rate, and even a low standard rate of interest, it may carry a high annual fee.

In Closing

The best advice anyone could give is to think long term. People often make the mistake of looking at the short term benefit of the low interest rate at the start of the deal, without really considering whether they will be able to afford to repay the full balance in time for the close of the promotional period, and what kind of financial personality they have.

If you wish to still be able to spend on the new credit card, but want time to pay it off over the month, then you would need to look for a balance transfer credit card that also had the feature of many interest free days.

This is just an example, and there are many features to look for. Just make sure you know what you are signing up to, as credit card agreements are legally binding, and any missed payments, or defaults will affect your long term credit rating.

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