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A guide to balance transfer cards


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If you’ve been shopping around for a new credit card you might have noticed the term “balance transfer” floating around. A little confused? We don’t blame you - there’s often lots of terms and conditions to watch out for before you sign up for one of these offers. Here’s a breakdown of how balance transfer offers work and how to best use them.

A balance transfer is simply taking the amount you owe on your current card and transferring it to your new credit card. This is helpful because you might be at a point where your current bank would start charging you interest and fees on the amount you owe.

When you opt to transfer the balance of your current card to a new balance transfer card - consider your old card paid off! Of course the amount doesn't disappear, it's just on your new card now. The best part is you now have a 0% interest period to pay off this amount - saving you interest and fees that may have been charged on your old card. So you may end up saving money if you can pay off your debt before the end of the promotional period. You can use our handy balance transfer calculator to find out how much money you could save by switching to a balance transfer offer.

The bank is offering me a balance transfer with 0% interest? Too good to be true? You’re right to be a little suspicious about why banks would offer you such a great deal.

Banks will charge interest if you still have amounts owing after the balance transfer period!

It’s easy to forget that you owe money on a card when you have over 2 years to pay it off. Banks know this and will start charging interest if you forget to pay off your balance.

Convincing people to people to switch banks is hard.

Banks have done the research and figured it is really hard to convince customers to change banks. The research suggests that if they can offer you a product that you really like (like a balance transfer credit card) you’re more likely to switch all your banking to them!

Banks earn money from merchants every time you use your credit card.

Just because you’re savvy and pay your credit card bill on time and in full every month doesn’t mean banks automatically lose money. Every time you use your card the merchant pays a small percentage to the bank for processing the transaction. So even if you never pay interest or fees, it is still worthwhile for banks to have you as a customer.

You have choose the balance transfer option when you are applying for the new card

Banks only offer the 0% balance transfer rate during the application! You can’t ask the offer after being approved. So make sure you have the balance transfer option ticket when you are filling out the application form.

Make sure you make your regular monthly repayments

So you’ve got 0% interest on your balance transfer - now you can just leave it until the end right? Not quite. To be eligible for the balance transfer 0% rate you’ll need to keep up your monthly payments. You must pay the minimum, but there is nothing stopping you from paying more on a regular basis. It is sensible to calculate how many months of 0% interest you have and break it into equal monthly payments - this way you won’t be paying interest after the offer ends.

Closing your old credit card

Wow I have $0 owning on my old credit card - I can get a couple more things right? While it’s tempting to keep both your old card and new card it can be a dangerous recipe if this is how you ended up with a large balance in the first place. Play it safe and close your old card, you won’t have the temptation to spend more.


Ash spends far too much of his free time researching credit card deals (when he's not learning to cook, that is). He's done his time at the Big 4 banks and he's seen the light. Now, he's bringing his experience of growing up in a single parent household and helping to manage the family budget to ClearScore, in a bid to make money work better for everyone.