What is a balance transfer?

A balance transfer is a financial strategy where you move your credit card balance from one credit card (or more) to another, often to take advantage of a special offer or a lower interest rate.

Perhaps you’ve accrued a credit card debt travelling, had some unexpected expenses, or blown your festive spending budget. It can be easy for your credit card balance to blow out and it might be hard to get it under control again, so a balance transfer may have high appeal.

Read on for more on how balance transfers work and what you might want to check before you apply. 

How do balance transfers work?

Provided you're eligible for a balance transfer, the process involved is quite simple – you need to provide your bank with the details of the cards you're moving the balance from and to, as well as the amount you want to transfer.

Some banks offer a low or 0% p.a. introductory interest rate on balance transfers to new credit cards for a set period of time. Over periods of 12 months or more, you could save money in interest and pay down your debt faster by consolidating your cards.

Remember that this type of promotion is often only available when you apply for a new card, so make sure you request the balance transfer during your application.

With Westpac, you could consolidate up to three non-Westpac Australian credit or store cards with a minimum transfer of $200.

>  Check out Westpac current balance transfer offers

Things to look for in a credit card balance transfer

Take note of features like the balance transfer rate and how long it lasts, the ordinary interest rate and the annual fee. You can then compare both the balance transfer rate and the ordinary interest rates with the current rate you’re paying on your credit card balance to see how much you could save over time.

It’s also important to know how many card balances you can transfer over to the new card and what the limit is on transferred balances. For example, some cards only let you transfer up to 80% of your approved credit limit – if the amount you want to transfer exceeds this, only part of it will be transferred.

Finally, check to see if there’s a balance transfer fee – this is often a percentage of the amount you’re transferring.

How to do a balance transfer?

Here are the typical steps needed to transfer balances with Westpac.

1. Choose the right credit card to suit your needs
2. Gather your application details
3. Include your balance transfer details in your application
4. Apply online
5. Activate your new card

Paying off your balance in time

Paying off your balance within the promotional period is often crucial to maximise the potential benefits of a balance transfer. It’s important to know when the promotional period ends and what the rate will revert to after that. The 0% p.a. promotional rate will revert to the cash advance rate after the offer ends.

Limit spending on your new card

To successfully reduce your debt, it could be helpful to limit spending on your new card. If you avoid new purchases on your balance transfer card, you can focus solely on reducing the transferred balance.

If you really want to take control of your debt, think about paying the outstanding amount of a balance transfer in full before the promotional period ends.

Keeping credit card debt under control by cancelling your old card

It’s important to note that your new card issuer won’t cancel your old cards. If your aim is to pay down your balances, it is important to remember to cancel your old cards once the balance transfer is complete. That way, you won’t continue to use your old card to accrue more debt.

To sum up

Credit card balance transfers could be an effective tool for managing and reducing your credit card debt, so it’s beneficial to understand how it works and the importance of paying your balance in time. Credit card balance transfers could provide relief and can help simplify your finances in the process.