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How do you make a balance transfer?

Vidhu Bajaj avatar
Vidhu Bajaj
- 7 min read
How do you make a balance transfer?

A credit card balance transfer allows you to move your outstanding credit card balance from one card to a new credit card, charging 0% interest for a fixed period of time (also known as a promotional or an introductory period). If you can pay off your transferred balance within this time frame, you’ll be able to get on top of your debt and save money on interest charges.

If you have multiple credit cards, you may consider transferring all of the balances into a single balance transfer card. This could help you streamline your payments, and make budgeting for repayments simpler. Keep in mind, however, that balance transfer credit cards do come with their own risks, and should not be regarded as some kind of magic solution.

Although they can provide much needed breathing room for paying off your debt, they can also land you in more trouble if you are not serious about clearing your dues. 

Steps to make a balance transfer

If you’re considering a balance transfer, you may want to start by checking your credit score. While balance transfer cards could potentially help you pay off your debt, you may not qualify for one if you have a low credit score or poor credit history due to payment defaults. 

Even if you qualify for a balance transfer card, remember that you still need to repay your debts, and preferably within the low or 0% interest promotional period. Any balance remaining on the card at the end of the promotional period will accrue interest at the card’s regular variable rate, which may be higher than what you were originally paying on your debt. Learning about the pros and cons of credit card balance transfers can help you in making an informed decision. 

1. Review your outstanding debts

If you’re looking for a way to get on top of your debts, a balance transfer could be a potential solution. However, not every type of debt can be shifted to a credit card, and there's usually a cap on the maximum amount you can transfer. 

Before you apply for a balance transfer, consider assessing your outstanding debts to evaluate whether a balance transfer can help you in meeting your financial goals. If you have outstanding balances on various credit cards, you might be able to consolidate them onto a balance transfer card. With some balance transfer cards, it’s also possible to transfer a personal loan, allowing you to pay it off faster without incurring interest during the introductory period. 

2. Compare balance transfer credit cards

If you’ve decided to use a balance transfer credit card to streamline your debts, you may compare offers from different credit card issuers to get a competitive deal. Balance transfer credit cards typically offer a 0% interest rate on the transferred debt for a predetermined duration. But the interest you’re charged on new purchases is likely to be higher. Further, it’s also important to check the revert rate, which is the rate of interest you’ll be charged once the introductory low interest rate period ends. 

When comparing balance transfer cards, the duration of the introductory period matters. For instance, if you’re transferring a small debt, a short introductory period of less than 12 months may work for you. However, if you’re trying to pay off a larger debt, you may need a card that gives you more time to clear your dues. 

Check how much time you realistically need to repay your debts and try to find a card that matches your requirement. You can use a balance transfer calculator to help you in this process. 

You should also remember to keep an eye out for any additional fees that may add to your costs. Some credit providers may charge a one-time fee for processing a balance transfer. This fee could go up to 3% of the total transferred debt, which may be a substantial amount depending on how much debt you transfer. Read the Product Disclosure Statement (PDS) carefully to uncover any hidden costs that may impact your overall expenses. 

3. Apply for a balance transfer credit card

Once you’ve compared your options and selected the best credit card for your needs, you can apply for it by completing an application form. This can be done online, over the phone, or in person. 

If your application is conditionally approved, the card issuer may ask you for additional information, such as identification documents, payslips, and bank statements, to verify your application. Once your application is approved, it could take up to two weeks for you to receive your new credit card. 

4. Check whether the balance transfer is complete

Once you’re approved for a credit card, the balance transfer should happen automatically. The card provider may contact you to confirm your balance transfer details. Following the transfer, you should be able to see the transferred balance on your credit card statement. 

In case you are not able to see the transferred balance, contact your card provider to have the issue resolved. Some balance transfer cards may have a deadline for completing the transfer and you don’t want to miss this. Further, you don’t want to lose out on the interest-free period, as your balance will continue accumulating interest at the original rate until it's successfully transferred to the new card. 

5. Consider closing your old card account

Closing your old credit card isn’t essential but it may help you from accumulating more debt, whether through new purchases or ongoing fees. A balance transfer could be a helpful strategy for paying off debts but it’s unlikely to be helpful if you continue spending recklessly on your old card. You’ll also need to be careful about using your balance transfer card for new purchases, as you may end up paying a higher interest rate with no benefit of interest-free days. 

What to keep in mind about balance transfer credit cards

Whether a balance transfer credit card could benefit you depends on several factors, including the size of your debt, the term of the introductory offer on your card, and how you ultimately decide to use the card. 

For instance, some balance transfer cards don’t charge any interest on the debt you transfer but they’ll charge interest on any new purchases you make. The rate at which new purchases are charged is typically higher than the promotional rate. Therefore, if you don’t limit your spending and focus on repaying your balance, you could find yourself in another debt spiral. 

Remember that the whole idea of a balance transfer is to use the introductory period to pay off your transferred debt. One way you could decide whether a balance transfer may be helpful is by dividing your debt by the total number of months in the 0% interest period. 

This may help you determine how much you need to pay monthly to clear your outstanding balance within the introductory period. But it’s worth noting that you may not be able to transfer your entire debt to your new credit card. A balance transfer credit card may come with a transfer limit, which typically depends on your approved credit limit.

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Product database updated 14 Apr, 2024

This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.