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Without the right management, debt can become uncontrollable. Making payments on your debt, even on low-interest credit cards, is important not just for peace of mind but also your credit score.

The Australian Securities & Investments Commission’s debt clock, which keeps track of how much credit card debt we have accrued as a country, notes that the average cardholder is carrying about $4,300 of debt on their card. The average cardholder pays about $750 in interest per year if their interest rate is between 15 to 20 per cent.

When debt and interest payments get out of hand, or you simply want to consolidate your payments into one lump sum, there are solutions available – including balance transfers on a new credit card.

Research from Roy Morgan has shown that while debit cards are on the rise, credit cards are still more popular in Australia. They can offer easy access to spending as well as a sound way to manage debt, but comparison and planning is key. Use RateCity’s credit card comparison tool to determine if a credit card balance transfer can work for your budget and spending habits.

What is a credit card balance transfer?

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A credit card balance transfer is a form of debt consolidation. It involves transferring the debt from one credit card – and perhaps several other loans as well – onto a new credit card. As a general rule, the new credit card should have a lower interest rate.

To entice customers, some lenders offer a honeymoon period during which they either charge no interest or a reduced rate of interest. However, once the honeymoon period is over, the interest rate will revert to the normal level.

How do I apply for a credit card balance transfer?

You can apply for a credit card balance transfer by approaching a lender directly or by going through a comparison website such as RateCity.

Can I include personal loans in a credit card balance transfer?

Some lenders will allow you to include debt from personal loans – and also other sources – when you complete a credit card balance transfer.

What debts can’t be included in credit card balance transfers?

Credit card balance transfer rules vary from lender to lender. One common rule, though, is not to allow any debts that would exceed the credit limit on your new card. Another common rule is not to allow debts from outside Australia.

What are the pros and cons of credit card balance transfers?

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If done properly, a credit card balance transfer will improve your financial situation. One way this can be achieved is to switch to a credit card that charges a lower interest rate, comes with lower fees and charges, and offers superior rewards. You can also benefit if your new credit card offers a honeymoon period with no interest or a reduced rate of interest. A credit card balance transfer might also allow you to consolidate several debts into just one debt, thereby making your debt easier to manage.

Sometimes, though, people make mistakes with credit card balance transfers and therefore worsen their financial position.

Honeymoon periods can be a source of trouble, for two reasons. First, some people might not take advantage of the honeymoon period to pay off debt. Second, some people might accidentally sign up for a credit card whose post-honeymoon interest rate is actually higher than their previous credit card’s interest rate. On a similar note, the new credit card might have higher fees and charges than the old credit card.

Another mistake is not to cancel old credit cards; this can be harmful because you might be charged extra fees and you might be unable to resist the temptation to accumulate additional debt. That leads on to another common mistake – continuing the same spending habits that caused the debt problem in the first place.

How can I make credit card balance transfers work for me?

There are four main rules to follow if you want to improve your financial position with a credit card balance transfer.

First, read the fine print carefully, to make sure that your new credit card will have a lower interest rate than your current credit card once any honeymoon period is over.

Second, take advantage of any honeymoon period to pay down as much of your debt as possible.

Third, make sure you bring a new attitude to your new credit card, because if you maintain your spending habits, you might dig another debt hole for yourself.

Fourth, make sure you cancel your old credit cards, so you aren’t tempted to accumulate additional debt and so you don’t get charged any additional fees.

Can I still get credit card rewards points?

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This differs from lender to lender. Some lenders will refuse to provide rewards points during the balance transfer period, while others will be happy to do so.

Are there fees for credit card balance transfers?

This differs from lender to lender, but fees usually apply. Most lenders will charge you a percentage of the amount being transferred.

Can anyone do a credit card balance transfer?

If a particular credit card offers balance transfers, and if you qualify for that credit card, then you can do a balance transfer.

What do I need to do a credit card balance transfer?

First, you need to complete the standard application process for your new credit card. Second, you need to provide your new credit card company with the details of your original account, so the balance can be transferred. A clever third step would be to then cancel your old credit card, so you aren’t tempted to accumulate additional debt and so you don’t get charged any additional fees.

How hard is it to do a credit card balance transfer?

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Completing a credit card balance transfer is a common and straightforward procedure.

How long does it take to do a credit card balance transfer?

Credit card balance transfers usually take two to four weeks to complete.

Why do credit card companies allow balance transfers?

Credit card companies use balance transfers as a way to attract new customers.

Who regulates credit cards?

Credit card providers must abide by the National Credit Act, which is regulated by the Australian Securities & Investments Commission (ASIC). Banks are also regulated by the Australian Prudential Regulation Authority (APRA).

What is debt consolidation?

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Debt consolidation is a strategy that involves using the proceeds of a new loan to pay off several existing loans. Borrowers can lower their repayments if the new loan has a lower interest rate than the old loans. Another advantage is that borrowers now have fewer loans to manage.

Can you provide a case study of a credit card balance transfer?

Let’s take a hypothetical consumer named Peter, who is 22 and who has recently entered the workforce.

Peter has accumulated $10,000 of debt on his credit card, which charges an interest rate of 15 per cent. He can’t see any way to eliminate this debt because he struggles to make the minimum repayment each month. That means he’s basically just paying interest without reducing the principal.

One day, Peter hears that Bank X is offering a special deal to attract new customers. If you sign up for a Bank X credit card and complete a balance transfer, Bank X will give you an 18-month honeymoon period during which it charges no interest.

Wisely, Peter does his research before taking up this offer. First, he investigates what the ‘normal’ interest rate, or ‘revert rate’, will be once the honeymoon period ends. It turns out to be 12.5 per cent, which is lower than his current rate.

Second, he compares annual fees. This is another win, because Bank X charges $49, while his current credit card provider charges $59.

Third, he does his sums with the balance transfer fee, which is 1.5 per cent. Peter wants to transfer $10,000 to the new credit card, which means he would be charged $150.

After crunching the numbers, Peter realises that it makes sense to switch to Bank X. Sure, he will have to pay the balance transfer fee – but this will be more than cancelled out by the 18-month interest-free honeymoon and the lower revert rate.

Peter submits his application. Two weeks later, his application is approved and the balance transfer is completed.

Peter realises that he needs to change his habits if he wants to get out of debt. So he does three things. First, he cancels his original credit card, so he isn’t tempted to accumulate additional debt (and so he doesn’t get charged any additional fees). Second, he makes a promise to himself to reduce his spending. Third, he makes a plan to pay off his credit card debt during the 18-month interest-free period.

To achieve that last goal, Peter will have to repay $128 per week. It won’t be easy, but he recognises that this gives him his best chance to escape his credit card debt nightmare and move on to a better financial future.

Frequently asked questions

What is a balance transfer credit card?

A balance transfer credit card lets you transfer your debt balance from one credit card to another. A balance transfer credit card generally has a 0 per cent interest rate for a set period of time. When you roll your debt balance over to a new credit card, you’ll be able to take advantage of the interest-free period to pay your credit card debt off faster without accruing additional interest charges. If your application is approved, the provider will pay out your old credit card and transfer your debt balance over to the new card. 

Current Annual Fees

These are the current annual fees on your existing credit card.

How to pay a credit card from another bank

Paying or transferring debt from one lender to the other is called a balance transfer. This involves transferring part or all of the debt from a credit card with one lender to a credit card with another. As part of the process, your new lender will pay out the old lender, so that you now owe the same amount of money but to a new institution.

Many credit card providers offer an interest-free period on balance transfers to help new applicants better handle their debt. During this period, cardholders are not required to pay interest on the debt they brought over from the other card. This can be a great opportunity for consumers to pay off credit card debt with no interest. There are often fees associated with balance transfers; normally, these are a percentage of the amount transferred.

So make sure you read the terms and conditions of the card before transferring any debt across.

How do you use credit cards?

A credit card can be an easy way to make purchases online, in person or over the phone. When used properly, a credit card can even help you manage your cash flow. But before applying for a credit card, it’s good to know how they work. A credit card is essentially a personal line of credit which lets you buy things and pay for them later. As a card holder, you’ll be given a credit limit and (potentially) charged interest on the money the bank lends you. At the end of each billing period, the bank will send you a statement which shows your outstanding balance and the minimum amount you need to pay back. If you don’t pay back the full balance amount, the bank will begin charging you interest.

What should I do if my ANZ credit card has expired?

Your ANZ credit card is considered expired only after the last day of the month and year marked on your card. For instance, if your card’s expiry date reads 03/22, it is valid until 31 March 2022 and expires on 1 April 2022. Typically, you should have received a new credit card by that date, and you won’t have to request a new card. 

Once you get the new card, you should remember to switch any automatic payments you have - such as a utility or mobile phone bill - from your expired credit card to your new credit card. Equally, if you are using CardPay Direct to repay your ANZ credit card debt, you may need to update the credit card account details for that service as well. 

In case the new card doesn’t arrive by the expiry date of your current credit card, you can call ANZ on 13 22 73 to find out the reason and if you need to request an expedited card. Please note that if you were planning to close your credit card account or request a credit card upgrade, you may need to call ANZ at least before the 25th of the month your current credit card expires in, as that’s when they may send you the new credit card.

Can I transfer money from my American Express credit card to my bank account?

If you’re an American Express credit card customer, you may not be able to transfer money from your credit card to your bank account. However, you may be eligible for cash advances, which involves withdrawing money through an ATM. 

To qualify for a cash advance, you’ll likely have to enrol for American Express Membership Rewards. Consider checking your online credit card account to see if you can withdraw a cash advance and, if so, the fees and charges you’ll incur for this transaction. 

You should remember that cash advances are different from balance transfers, which were available with some American Express credit cards earlier. Balance transfers allow customers to consolidate debt from high-interest credit cards to a credit card offering a lower interest rate. If you only recently applied for an American Express credit card, balance transfers may not be available irrespective of the card you own. 

How do you cancel a credit card?

It’s important to cancel your old cards to avoid any additional fees. Unless you’re doing a balance transfer, you’ll need to pay the outstanding balance before you cancel your credit card. If you’ve opted for a card with reward points, make sure you redeem or transfer the points before you close your account. To avoid any bounced payments and save yourself an admin headache, redirect all your direct debits to a new card or account. Once you’ve done all the preparation, call your bank or credit card provider to get the cancellation underway. Once you receive a confirmation letter, destroy your card and make sure the numbers aren’t legible.

Should I get a credit card?

Once you've compared credit card interest rates and deals and found the right card for you, the actual process of getting a credit card is quite straightforward. You can apply for a credit card online, over the phone or in person at a bank branch. 

How easy is it to get a credit card?

For most Australians, there are no great barriers to applying for and getting approved for a credit card. Here are some points that a lender will consider when assessing your credit card application.

Credit score: A bad credit score is not the be all and end all of your application, but it may stop you being approved for a higher credit limit. If your credit score is less than perfect, apply for the credit limit that you need, rather than the one you want.

Annual income: Most credit cards have minimum annual income requirements. Make sure you’re applying for a card where you meet the minimum.

Age & residency: You need to be at least 18 years old to apply for a credit card in Australia, and most require that you are an Australian citizen or permanent resident. However, there are some credit cards available to temporary residents.

What should you do when you lose your credit card?

Losing your credit card is a serious situation, and could land you in financial trouble. Here is a simple guide detailing what to do when you lose your credit card.

Lock you card – Contact your provider and inform them about your lost credit card. From here lock, block or cancel your card.

Keep track of transactions – Look out for unauthorised credit card transactions. Most banks protect against fraudulent transactions.

Address recurring charges – If your card is linked to recurring charges (gym membership, rent, utilities), contact those businesses.

Check credit rate – To ensure you’re not the victim of identity theft, check your credit rating a month or two after you lose your credit card.

What should you do if your credit card is compromised?

Credit card fraud is a serious problem. If your credit card is compromised and you’re wondering what to do, here are a few precautionary steps to take.

Contact you credit provider – Get in touch will your credit card provider. If you feel your card has been compromised, you should be able to lock or block it.

Monitor your accounts – Keep an eye on your credit card accounts. Any unauthorised transactions could be a sign your credit card has been compromised.

Check your credit rating – It’s also important to check your credit rating, to ensure you’re not a victim of identity theft or some other financial mischief.

How is credit card interest charged?

Your credit card will be charged interest when you don’t pay off the balance on your credit card. Your card provider or bank charges you the individual interest rate that is associated with your card, which is usually between 10 and 20 per cent. 

The interest will be added onto your bill each month or billing period if you don’t pay off the balance, unless you are in an interest-free period.

You will be charged interest on anything that hasn’t been paid for inside the interest-free period. Usually you will receive a notice on your bill or statement saying you will be charged interest so you have some form of notice before you’re charged.

How do you apply for a credit card?

You can apply for a credit card online, over the phone or in person at the bank. Once you’ve compared the current credit card offers, the application process is quick and easy. Before you get your application started, you’ll need to gather your personal information like proof of ID, payslips and bank statements, proof of employment and details of your income, assets and liabilities. To be eligible for a credit card, you’ll need to be an Australian citizen over 18 and earn a minimum of $15,000 each year. Once you’ve applied for a credit card, you should get a response fairly instantly. If your credit card application has been approved, you should receive a welcome pack with your new credit card within 10-15 days.

How to get rid of credit card debt

  1. Calculate your debt. Credit card calculators make it easy to determine the repayments required to chip away at your debt in the shortest timeframe possible for your budget.
  2. Repayment plans. Take some time to formulate a credit repayment plan. Consider increasing your income, scaling back your lifestyle or refinancing.
  3. Talk to your credit provider. If you’re still struggling with your debt, give your credit provider a call. You may be able to come to a new arrangement.

How to calculate credit card interest

Credit card interest can quickly turn a manageable balance into unmovable debt. So being able to understand how interest rates translate into dollars is an important skill to acquire.

The common mistake people make is focusing on the credit card’s annual percentage rate (APR), which often sits between 15 and 20 per cent. While the APR does provide a rough idea of how much interest you’ll pay, it’s not entirely accurate.

This is because you actually accrue interest on your balance daily, not annually. So, you need to work out your daily periodic rate (DPR). To do this, divide your card’s APR by the number of days in a year (e.g. 16.9 per cent divided by 365, or 0.05 per cent). You can then apply this figure to the daily balance on your credit card.

How do you use a credit card?

Credit cards are a quick and convenient way to pay for items in store, online or over the phone. You can use a credit card as a cashless way to pay for goods or services, both locally and overseas. You can also use a credit card to make a cash advance, which gives you the flexibility to withdraw cash from your credit card account. Because a credit card uses the bank’s funds instead of your own, you will be charged interest on the money you spend – unless you pay off the entire debt within the interest-free period. If you pay the minimum monthly repayment, you will be charged interest. There are many different credit card options on the market, all offering different interest rates and reward options.

Can a pensioner get a credit card?

It is possible to get a credit card as a pensioner. There are some factors to keep in mind, including:

  • Annual income. Look for credit cards with minimum annual income requirements you can meet. 
  • Annual fees. If high fees are a concern for you, opt for a card with a low or $0 annual fee. 
  • Interest rate. Make sure you won’t have any nasty surprises on your credit card bill. Compare cards with a low interest rates to minimise risk.

How to get a credit card for the first time

A credit card can be a useful financial tool, provided you understand the risks and can meet repayment obligations.

If you’re a credit card first-timer, review your options. Think about what kind of credit card would suit your lifestyle, and compare providers by fees, perks and repayments.

Once you’ve selected a card, it’s time to apply. Credit card applications can generally be completed in store, online or over the phone.

When you apply for a credit card for the first time, you must meet age, residency and income requirements. As proof, you must also provide documentation such as bank account statements.

How to pay a credit card

There are a few ways to pay a credit card bill. These include:

  • BPAY - allows you to safely make credit card payments online.
  • Direct debits - set up an automatic payment from your bank account to pay your credit card bill each month. You can choose how much you want to pay of your credit card bill when you set up the auto payments.
  • In a branch.
  • Via your credit card provider's app.

Does ING increase credit card limits?

You may want to increase your credit card limit for many reasons, such as having access to more spending money. However, if you are using the Orange One credit card issued by ING, you may not be able to do so. 

ING customers can choose a credit limit of their preference when applying for the Orange One credit card. Depending on your financial situation, this limit can be anywhere between $1,000 and $30,000. If you qualify for a Rewards Platinum card, the minimum credit card limit will likely be $6,000. 

Ideally, you should set your credit card limit knowing how much you can afford to repay each month and keep your expenses lower than this level. With most credit cards, you should have the option of requesting a credit card limit increase at a later time, although you will need to qualify for any increase. With an ING credit card, limit increases are out of the question (at the time this was published), which means you may want to apply for a higher credit card limit from the beginning. Remember that you have the option of decreasing your ING credit card limit at a later time.