Balance transfers from Buy Now Pay Later services

Credit cards and Buy Now Pay Later (BNPL) services like Afterpay and Zip are now occupying much the same territory in the retail purchase system and in the minds of consumers. But what about balance transfers?

It’s not currently possible to transfer a balance from a credit card to a buy now pay later service, mainly because the BNPL balance repayment terms typically aren’t long enough to be attractive, and there’s nothing in it for interest-free BNPL providers unless they can earn a series of late payment fees.

However, the reverse – transferring a balance from a BNPL service to a credit card with a 0% balance transfer offer – is doable, to a limited extent. You might want to transfer a BNPL balance that is about to attract late payment or monthly account fees, because you don’t have enough cash on hand to repay it.

Buy now pay later balance transfers are more complicated

The traditional hunting ground for balance transfer credit card offers is other credit card and store card balances, in an attempt to woo customers away from their existing card and onto a new one.

But there are some groups of credit cards which have always been an exception to this rule – credit cards issued by global banking giant Citi. This includes not only cards directly issued by Citi Australia, but also cards from Virgin Money, Qantas Money and Coles, who all use Citi as their card provider. Cards issued by Citi accept balance transfers from personal loans as well as from other cards.

Additionally, Woolworths credit cards are issued by Macquarie Bank, and at the time of writing, both Macquarie and Woolworths say that they:

“accept BTs of $500 or more from banks, other financial institutions and store cards, to transfer to your Woolworths Money credit card account”

This suggests that there are now six groups of cards that potentially accept BNPL balance transfers – Citi, Virgin Money, Qantas Money, Coles, Woolworths and Macquarie. However, whether BNPL services can be described as a ‘financial institution’ is open to debate, and card providers always reserve the right to exclude specific balances from being transferred.

The best way to test whether your BNPL balance will be accepted as a personal loan or line of credit is to request its transfer when you complete your online application for a balance transfer credit card. If you can’t supply the required information about the BNPL account, or your transfer request is rejected, you are under no obligation to continue with your card application.

Likely features of a transferable BNPL balance

Now that there’s a list of cards it might be possible to transfer a BNPL balance to, it’s time to look at the BNPL services you may be able to transfer a balance from.

If you sign up for a line of credit when you open your BNPL account, and/or you are offered BPAY as a repayment option, it’s likely that you may be able to transfer the account balance to a balance transfer credit card.

• Zip Pay and Zip Money are classified as lines of credit. You can make account payments via a credit card or debit card, BPAY (because Zip has a biller code – 228551) and bank transfer. The BPAY option means that it should be possible to transfer the Zip balance to a balance transfer credit card, because the card issuer can use this method to pay off the Zip balance and add the amount to your credit card balance.
• Afterpay is neither a personal loan nor a line of credit, as explained in its Afterpay Fact Sheet. The only available account payment methods are either a credit card or a debit card. This means that you cannot transfer an Afterpay balance to a balance transfer credit card.
• Humm recently partnered with BPAY, so it may be possible to transfer a Humm balance to a credit card.
• Klarna, Splitit and Openpay do not appear to offer BPAY as a repayment option, so it’s unlikely you can transfer balances from these accounts at this time.

Balance transfers from a BNPL account using a cheque-to-self

Previously, it was possible to take up a few credit card balance transfer offers by getting a cheque made out to you personally, for a specified amount, by the company issuing the balance transfer credit card. This amount was then added to your new card balance and qualified for the promotional low or 0% interest rate. You could use the funds from the cheque to pay off other debts.

However, this ‘cheque-to-self’ option is no longer offered by any Australian credit card, so you can't pay off your BNPL balance this way. But there is another method available.

Use a credit card to pay off your account, then do a balance transfer

Simply use your existing credit card to repay your debt in full to Afterpay, Klarna, Splitit, Openpay or any other BNPL service you can’t transfer a balance from. Then apply for your new balance transfer card with a promotional offer, and request a balance transfer from the old card that you used to clear your BNPL debts. Once your application is approved, you will have consolidated your BNPL debts onto a balance transfer credit card.

A summary of your options

1. It should be possible to transfer a balance from Zip Pay or Zip Money to a balance transfer credit card from Citi, Virgin Money, Qantas Money and Coles.
2. It may be possible to transfer Zip balances to Macquarie and Woolworths balance transfer cards.
3. It may be possible to transfer Humm balances to Citi, Virgin Money, Qantas Money, Coles, Macquarie and Woolworths balance transfer cards.
4. For Afterpay, Klarna, Splitit and Openpay balances, or any BNPL balances, you could use your existing credit card to repay the debt, then immediately apply to transfer the balance to a new balance transfer credit card with a promotional interest rate.

Is it worth it, given the fees involved?

It’s only worth transferring a BNPL balance if you’re going to save more in BNPL fees than you will incur in balance transfer fees.

Case study

Let’s say you have accrued a $2,000 balance in Zip purchases and don’t have enough cash to repay the debt before incurring fees, so your aim is to transfer the balance to a new credit card with a promotional balance transfer offer of 0% interest for 12 months with a 2% balance transfer fee.

The balance transfer fee would cost you $40. If there was an annual fee for the new balance transfer card, it would probably be offset by the cancellation of your old credit card, which might have a similar annual fee. So, the total cost of the transfer would typically be $40, but might be less, or even $0 if the new card had no balance transfer fee.

So, the remaining question is, how much would you save in BNPL fees?

You’d save at least $72 in Zip fees, probably much more. Zip Pay and Zip Money charge a $6 monthly account-keeping fee if you still owe money at the end of the month. If it took you 12 months to repay the balance (the same period as your 0% balance transfer), that’s $72 saved in account-keeping fees alone.

Then there’s a $5 fee for each Zip Pay late payment, and $15 each time for Zip Money. Add to this a $15 dishonour fee if you don’t have enough funds in your nominated payment account. Also remember that, although Zip Pay is interest free, Zip Money is only interest free for the first three months, after which it reverts to an interest rate comparable with that of a typical credit card.

Afterpay does not charge an account-keeping fee, but its late payment fee is $10, plus a further $7 if the scheduled payment has not been received seven days later, on repeat until a cap is reached. Most BNPL services have a fee structure similar to either Zip or Afterpay. Although there are caps in place on the amount you can pay in late fees, over a period of 12 months you would still probably pay well in excess of the typical $40 balance transfer fee on $2,000 transferred.

The bottom line

If you’ve run up a BNPL debt you can’t afford to repay, you’ll probably save money by transferring the debt to a balance transfer credit card with a promotional 0% offer. This will give you time to pay, while paying less in fees (and potentially $0 in fees).

Protect your credit rating

And there’s one other really important consideration – your credit rating. If you are late in repaying your BNPL debt, or in default, you could receive a black mark in your credit report and see your credit score take a dive. It would be a good idea to transfer your debt to give yourself time to pay and preserve your credit rating.