What are Balance Transfer Rates?

A Balance Transfer allows you to move credit card debt (the balance) from one credit card onto another.

The reason why most people make a Balance Transfer is to move debt incurring one level of interest to a place that will incur a lower level of interest.

For that reason, Balance Transfers could be used to by customers to save on interest repayments and help manage their debt.

When you move an existing debt or multiple debts onto a new credit card, the balance transfer rate is the annual percentage interest rate charged on that balance.

Related: Check out the latest balance transfer rates through Virgin Money.

Balance Transfer Rates

Some credit cards may come with a special introductory offer for balance transfers on top of other card features (such as a low purchase interest rate, rewards points or other extras) to attract new customers. Some credit card offers may be geared specifically toward those who want the card to consolidate debts or pay off an old credit card, at a lower interest rate.

0% or Low % Balance Transfer RATES

Some providers may offer 0% (or low %) per annum balance transfer rates when a customer applies for a new credit card. This allows the customer to move an existing credit card balance to a new credit card, without having to worry about incurring interest on the transferred amount for the promotional period (provided the customer pays the minimum monthly payment due each month).

What are Balance Transfer Fees?

Be sure to read the Balance Transfer offer details, as Balance Transfer Fees may also apply to special Balance Transfer interest rate offers. A Balance Transfer Fee is generally a percentage figure, charged on the balance you wish to transfer. For instance, a 2% BT fee means you will pay 2% on top of the total balance being transferred. Balance Transfer fees will be clearly stated in the offer and the terms and conditions.

Balance Transfer offer periods

It is important to remember that the promotional balance transfer rate is temporary only. The duration may vary from a couple of months to a couple of years and will be clearly specified in the offer. After such time, the applicable interest rate will revert back to a higher interest rate, typically, the purchase rate, cash advance rate or another specified figure. This means, if you don’t repay your balance transfer in full at the end of the promotional period, any remaining balance will start incurring the higher level of interest.

Balance Transfer limits

It’s also common condition on new credit cards that the total balance transferred may not exceed a particular percentage of the credit limit – for example, if your credit limit is $5,000, you might have a balance transfer limit of 80%, meaning you would not be able to bring more than $4,000 over to the new card.

It is very important that you read the full terms and conditions attached to any balance transfer offer and/or credit card to make sure you are armed with information to make an informed decision.

How much could you save on interest charges?

The amount you could save on interest charges will depend on a large range of factors including, but not limited to, the balance you wish to transfer, your current interest rate, the interest rate you are moving to, and the duration.

Virgin Money Australia have developed a Balance Transfer Calculator to help people work out how much they could potentially save by transferring their balance.

What to keep in mind when looking at a balance transfer rate

First, take a look at the total amount of debt you want to transfer to the new credit card. Depending on how much it is and how long you plan to take to pay it off will affect your choice of card.

A higher debt might be better on a credit card with a longer-term low interest rate so you have more time to pay it off. A smaller debt may be fine to transfer to a card with a short-term interest rate special (such as six months) if you plan to pay it off quickly before the balance can incur the higher rate of interest.

Also look at any other features the card has to offer – remember, once you have repaid the balance you have transferred, you will still have the credit card to enjoy on a daily basis.

Would you consider getting a credit card to transfer a balance?