Make the most from your credit balance transfer

Published on December 2nd, 2020
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
Our authors

Fact checked

At Savvy, we are committed to providing accurate information. Our content undergoes a rigorous process of fact-checking before it is published. Learn more about our editorial policy.

At Savvy, our mission is to empower you to make informed financial choices. While we maintain stringent editorial standards, this article may include mentions of products offered by our partners. Here’s how we generate income.

In this article

If you have a credit card balance that’s out of control and only getting worse as time passes, a balance transfer to a different credit provider is a leg up – not a cure-all – for wiping the debt out. Many people believe transferring the balance to another card will fix the problem. It doesn’t happen in isolation, but you can make the most of your credit card balance transfer by following a few simple rules.

How much does a balance transfer cost?

Many people assume that balance transfers are free of charge. Some of them are, as a way to entice you over to an new credit card provider. However, many charge a balance transfer fee, which can add to your outstanding balance. Watch out for large fees, as it may make matters worse, making your goal harder to reach. On average, these fees range between 1-3% on the total balance.

Introductory rate perks and pitfalls

The main reason anyone transfers a balance is to take advantage of the introductory interest rate. Some people assume these rates are either:

  • Zero, or;
  • Last forever;
  • A combination of the two!

Unfortunately, a “honeymoon” period of a zero or near-enough balance transfer interest rate will expire eventually. Typically, they expire after 12-18 months. Then, the true interest rate kicks in. This hovers around 17%p.a to 22%p.a.

Let’s say you owe $5,000. If you contribute $280 per month to the balance, you can pay it back within the introductory period of 18 months.

Paying off the debt with a maximum balance transfer rate of about 7.9%p.a., you can pay that same debt within the same amount of time by paying back $299 a month. That way, you save $1,883 in interest compared to paying back the minimum amount.

If you owe $5,000 with an 18%p.a. interest rate and ONLY pay the minimum amount, you would pay off the debt in 33 years, totalling $17,181. If you paid $250 a month, you would incur $878 in interest over two years.

Once you have it…don’t use it!

The above figures are only useful if you STOP destructive spending habits that put you in debt in the first place. You should examine your spending and curb as much unnecessary expenditure as possible. When you transfer your balance, don’t spend more on your card, and remember to cancel your other cards: your bank may still charge you an annual fee.

You should always compare different balance transfer credit cards to see which one is right for you. Still stuck? Ask advice from a financial professional.

Did you find this page helpful?

Thanks for your feedback!

This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.

The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.

In this article

Share this article

Share on facebook
Share on twitter
Share on linkedin
Share on email
Share on pinterest

Smart money saving tips

Subscribe to our newsletter.

By subscribing you agree to our privacy policy

Related articles

We'd love to chat, how can we help?

By clicking "Submit", you agree to be contacted by a Savvy Agency Owner and to receive communications from Savvy which you can unsubscribe from at any time. Read our Privacy Policy.