How do Balance Transfer Cards work?

This infographic seeks to de mistify Balance Transfer Credit Cards by illustrating how they work how they can save you money from reduced interest charges and what you have to do at each stage of the balance transfer process.

The infographic will cover:

  • The process of making a credit card balance transfer
  • Outline how you can make savings on interest charges by making a Balance Transfer (try our balance transfer saving calculator to work out much you could save by making the switch to a 0% Balance Transfer credit card)
  • What you should consider in your Balance Transfer Credit Card comparison to find the best balance transfer card for your circumstances


How do Balance Transfers work?

A balance transfer card is a type of credit card to where you can transfer the balances from your other existing cards, and then gradually pay off the total amount at a lower interest rate. This will give you much needed relief from the ongoing interest charges that add to that debt month after month.


The Balance Transfer process

1. On or before the payment due date, as published on your latest credit card statement, make a payment of at least the minimum payment value requested by credit card provider.

2. As soon after the date of making the payment in 1 above select which balance transfer card meets your needs, taking into account the Balance Transfer Rate, Balance Transfer Period, any fees associated and finally the revert rate which any amount of your transferred balance unpaid at the end of the balance transfer period will be subject to.

3. Make an application for the Credit Card selected in step 2, being careful to provide all the details requested in the application to ease the process and hopefully result in a speedy acceptance.

4. The Credit Card provider may take some time to access your application. If this period overlaps with your current credit card statement cycle make sure you continue to make the minimum payment on this credit card

5. Once your credit card application has been approved you will be sent your new Credit Card, you’ll need to activate this by calling the phone number provided, which is usually featured on a sticker on the credit card.

6. Once you activate your new card the balance transfer request made in your application will be processed by your new Credit Card provider. This generally takes between 3 and 15 business days to be completed.

7. Once the balance transfer has been successfully processed the details of the transaction will appear on your credit card statement.

8. To ensure the balance transfer has cleared the total balance from your old credit card check the statement for your old card to ensure it is showing a zero balance. If the credit card still has a balance on it, possibly due to recent missed or late payment, pay this off immediately.

9. Once you have confirmed all is correct with the Balance Transfer you may then consider closing the old credit card.

10. Meet each of the payments on your new credit card to take full advantage of the Balance Transfer rate by moving toward clearing your debt, whilst you are incurring zero or low interest charges


Benefits of a Balance Transfer Card?

  • Save on interest costs - Balance Transfer Cards often include introductory periods of low or even 0% p.a. interest rates.
  • Pay your debt of faster - With lower interest payments you have more money to pay of your debt.
  • Simply your financial life - One card with one debt to focus on paying off.
  • Improve your credit score - By reducing your debt by paying off your credit card debt you will improve your Credit Utilization rate, and in turn your credit score.


Show me the money - What can I save with a Balance Transfer Card?

Current Card

Outstanding Balance: $2,800

Purchase Rate: 19.5% p.a.


New Card

Balance Transferred: $2,800

Balance Transfer Introductory Rate: 0% p.a.

Balance transfer Introductory Period: 12 months

By paying of the debt of $2,800 within the 12 month Balance Transfer period the saving on interest payments would be approximately $546

Assumptions: No further purchases are made on the balance transfer credit card, the balance transfer fee is $0 and the full amount of the balance transfer is repaid in 12 months.

Calculate the savings you could make by switching to a balance transfer credit card using our Balance Transfer Savings Calculator


Selecting a Balance Transfer Card

  1. Search for 0% Balance Transfer introductory offers
  2. Identify 0% credit cards with long (12 month +) Balance Transfer Periods
  3. Check the Balance Transfer fee - average rates are 1-2% of the balance to be transferred.
  4. Check the card provider you have selected accepts Balance Transfer from your current card provider
  5. Take note of the revert rate which will apply to any remaining debt at the end of the balance transfer period
  6. If you are seeking to transfer a personal loan to a balance transfer credit card, be sure to check if the card provider will accept Personal Loan Transfers.
  7. Check the maximum Balance Transfer value, this will usually be a % of the Credit Limit that the card provider has offered when accepting your card application.


How to make a Balance Transfer work for you

  • Continue to make the minimum payment on your current card until you have confirmation that your application has been accepted.
  • Make each of the monthly payments on your Balance Transfer card and pay off your debt before the Balance Transfer Period ends to maximize your savings.
  • Once you have confirmed all is correct with the Balance Transfer you may then consider closing the old card, to avoid paying any card fees.
  • When selecting a Balance Transfer Card consider the Balance Transfer fee (usually 1-2% of your balance) in your savings calculations.


Balance Transfer Application checklist

  • Only apply for one Balance Transfer Card at any one time
  • Your Credit Score must be good to excellent to be accepted
  • You cannot apply for a Balance Transfer card issued by the provider of your current card
  • Be patient, Balance Transfer applications take a little longer than standard Credit Cards to be assessed.