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A guide to balance transfer credit cards

A guide to everything you need to know and whether they are right for you

12 December 2022Lloyd Smith 8 min read
How To Use Balance Transfer Credit Cards To Get On Top Of Your Finances

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If you have multiple credit cards with debts spinning out of control and you want to repay them without paying atrociously high interest on each, transfer balance credit cards can come to your rescue.

The main idea behind balance transfer credit cards is consolidating your entire debt from multiple cards to a single lower-interest credit card in order to save substantially and make repayments easier.

Here’s everything you need to know about balance transfer cards:

Credit cards that allow their holders to transfer and consolidate debts from multiple cards to a single card are called balance transfer cards.

Consolidating debt into one credit card helps save on interest, especially for those repaying high-interest debts.

These cards offer a promotional annual percentage rate (APR), which is often significantly lower than the interest charged by existing credit cards. The promotional period usually lasts anywhere between six to 21 months.

Sometimes, the interest charged can be as low as zero percent, which means that you can potentially pay off your debt interest-free.

But balance transfer cards are not without limitations. There are costs associated with balance transfer credit cards which you need to consider before you get one. These can include:

  • Balance transfer rate: This is the introductory interest rate at which you need to repay the transferred debt amount. The lower the balance transfer interest rate, the more you can save on interest.

  • Balance transfer fee: It is the one-time cost for making the balance transfer.

  • Transfer limit: Credit card companies may cap the total amount of debt you can transfer to your new balance transfer card. Opting for a card with an extremely low balance transfer limit may not be helpful when you are struggling with a huge outstanding debt.

  • Late payment fees and annual fees: Annual fees are levied for maintaining and using the balance transfer card. You can also get penalised for late payments during the introductory period and you may be liable to pay late payment fees in case repayments are missed.

Advantages and potential drawbacks of getting a balance transfer credit card are:


  • Debt consolidation: If you have a lot of credit card debt, a credit card balance transfer can help you combine them. With a balance transfer card, you no longer have to pay multiple credit card bills, which can result in missed or delayed payments and lead to late fees. Debt consolidation means you make single repayments every month and work on clearing off your debt.

  • Reduced interest payments and other costs: Upon transferring credit card balances to a new card, you can repay at a lower interest rate than your existing cards. You can also save on the annual fees and other maintenance costs of holding several credit cards.

  • Access to perks: Some balance transfer cards also offer add-on benefits like reward points for new purchases or complimentary travel insurance.

  • Improves credit score: Paying off your credit card debt using a balance transfer card can boost your credit score by strengthening your repayment history.


  • Credit score can decrease temporarily: When you apply for a new balance transfer card, hard inquiries are added to your credit report, which can affect your credit score temporarily. But as you clear your debts with time, your bad credit score will significantly improve in the long run.

  • Credit limit: Depending on the card issuer, a credit limit is imposed on every credit card balance transfer. You may not be able to move the entire outstanding debt to the new card.

  • Regular APR can make debt more expensive: If you don’t pay off your entire debt during the introductory period, you might be charged an interest rate higher than what you were paying before.

The first step of how to do a credit card balance transfer involves reviewing your current credit card dues and the interest payable, which is expressed as an annual percentage rate (APR). You can usually find the APR in your monthly statement.

Choosing the appropriate card for initiating the transfer is easier once you have this information handy. As balance transfer is a way to get out of debt faster, you should look for a card that offers favourable payment terms so that you can repay the debt at a lower interest than what you are currently paying.

Once you get approved for a balance transfer card, here’s how you can start paying off the debt. Bear in mind that the exact process of how to do a balance transfer varies depending on the credit card issuer:

Step #1: Initiate the balance transfer request

Contact the new credit card issuer to place a balance transfer request. You can do this online or over the phone. You’ll need to provide the necessary details, such as the account numbers linked to the old card and the amount of the outstanding debt.

Alternatively, the new card issuer may provide you with convenience checks. You can directly repay the existing credit card company by making a check out to them. If you are using a check, make sure to review the terms to find out whether such a transaction will be considered cash advances by the new issuer.

Step #2: Wait for the transfer request to get approved

Upon approval, the new issuer will transfer funds to the existing issuer to pay off the outstanding. Your new account will reflect the old balance you will need to repay. If the new issuer hasn’t waived the balance transfer fees, it will reflect an outstanding balance on the new account.

As processing balance transfer requests take a fair amount of time, sometimes even as long as 21 days, ensure that you make pending payments on the old card till you receive a confirmation from the new credit card company. Otherwise, you may end up paying a hefty penalty for late payment.

Step #3: Start clearing the debt on the new card

Once the balance is added, you’ll need to start making payments according to the terms of the new card issuer. Paying off the balance or at least a large chunk of it when the APR is the lowest can help you save on the interest.

When choosing a balance transfer card, look at the APR and any fees that the issuer may charge you for the card.

Ideally, you’d want a zero percent or minimum introductory APR, no annual fee, and balance transfer fee waived off. Pay attention to the length of the promotional low-APR period -- the promotional period should last long enough for you to repay as much debt as possible.

Review the cardholder’s agreement to specifically check for the penalty for late payments or exceeding the credit limit as all these can add up and make a low APR significantly higher than expected.

A credit card balance transfer allows you to move your debt from your existing credit card to a new one and pay it as per the terms of the balance transfer.

Let’s illustrate with an example: Suppose the outstanding debt on your credit card is $5,000, and you are charged a 10% interest rate. You pay monthly instalments of $300 for ten months plus $907 as interest to repay it.

If you move the debt to an interest-free balance transfer card, you can repay the debt during the introductory period at no interest at all. If you cannot pay the full instalment, you can at least pay the minimum monthly amount required to ensure the promotional APR continues.

The repayment would go towards paying off debt with the highest interest, which is the transferred amount. If there is any outstanding debt after the introductory period is over, you will need to repay that as per the standard interest rate of the balance transfer card.

The key factors to consider for balance transfer credit card comparison:

Balance transfer fee

Do you need to pay any transfer fee (usually a fixed amount or between 3-5% of the transfer amount), for transferring the balance? Ideally, you should go for a card that waives the fee entirely.

Balance transfer rate

What is the balance transfer interest rate that would apply to the amount transferred to your new card, and how long does it last? You should choose one that charges the least to maximise your savings.

Length of the promotional period

How long is the lower or zero interest rate period? This one’s important as a longer period means you have more time to repay through smaller instalments.

Transfer limit and revert rate

How much are you permitted to transfer, and how much interest will you pay on the remaining amount if you transfer more than your limit?

Other penalties and fees

Are there any fees applicable like annual fee or late payment fee? Balance transfer cards offering a longer promotional period may also charge a higher annual fee that can increase the overall costs of opting for a balance transfer.

Keep these in mind to ensure that a credit card balance transfer works well for you:

Check the maximum transfer limit

Not all balance transfer cards allow you to transfer the entire outstanding debt from your current credit cards. Some have a transfer limit to them.

Don’t apply for too many cards at once

Too many credit card applications made in a short span of time for balance transfer credit cards affect your credit score because it leads to too many hard inquiries or credit checks on your credit report.

Moreover, applying for any type of new card impacts your credit history and reduces the average age of credit, which in turn affects your credit score.

Repay the balances on time

Zero-interest/low-interest rate on balance transfer cards is only for a limited period. After that, you need to repay at regular APR.

If you don’t pay off a chunk of the outstanding amount within the promotional period, you might have to pay a significantly higher interest and penalty for late payments.

Limit spending on your new card

Having access to balance transfer credit cards shouldn’t mean a free pass to make more purchases.

In most cases, the applicable interest rate for new purchases is more than the balance transfer APR. Moreover, credit card companies use repayments first to settle the outstanding with higher interest rates. So when you use your balance transfer card as a regular card, your new outstanding debt will be paid off first, but your transferred debt will stay as is.

A credit card balance transfer is a useful way to repay your debts faster. Timely repayments can help you achieve a good credit score.

However, applications for new credit cards are considered hard inquiries, which may reduce your credit rating temporarily. Similarly, defaulting on repayments on the new card can also reduce your credit score.

As such, you should only apply for a new balance transfer credit card when you are serious about clearing off your debts and you are sure you won’t be making new purchases with the new credit card limit.

The best balance transfer credit cards in Australia are available to people with credit score of 670 and above.

Those with less-than-desirable credit scores can still apply for a balance transfer credit card, though they may not get as many great introductory offers like zero balance transfer offers, reward points, high balance transfer limit, and a longer introductory period.

Even though balance transfer offers an excellent solution to manage your finances better, they cannot magically make you debt-free. You need to ensure that you repay the dues on time to stop getting trapped in a never-ending debt cycle.

Before applying for a balance transfer card, carefully review the terms and conditions to avoid any last-minute surprises.

While most credit card issuers usually offer the introductory APR for at least six months, they have the right to cancel it if payments are overdue for more than 60 days. Also, keep in mind that same-issuer balance transfers are usually not permitted.

Having good credit scores can help you snag the best balance transfer card offers. Most credit card providers decide on the period of promotional APR and the interest rate based on the cardholder’s credit score.

With ClearScore, you can get a free credit score report and apply for balance transfer credit cards in just a few clicks.

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Written by Lloyd Smith

General Manager AU

Lloyd spreads the word about how awesome ClearScore is.