Moving your credit card debt to a different bank can be a great way to simplify your finances and reduce your overall borrowing costs.
But before you do, there are a few things you need to know.
Moving credit card debt to a different bank is known as a balance transfer.
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The basics of how it works
Most of the big banks — and many of the smaller ones too — offer at least one balance transfer credit card. They use these credit card offers to attract new customers.
When you use a balance transfer to move debt to another bank, you can usually get a significant interest rate reduction. In fact, 0% interest is so widely available that has become the expected standard rate (because the market is so competitive).
The main difference between balance transfer offers tends to be the length of time you get at 0% interest and the fee for setting up the transfer. The best combination is 0% on balance transfers with no balance transfer fee and a long introductory period.
Make sure it's worth it for you
There are a few things to keep in mind when considering whether or not it's worth moving your credit card debt to a different bank.
- Some cards have a balance transfer fee. If there is one, the balance transfer fee is often around 2% of the amount being moved. Usually you will still save money compared to continuing to pay the ongoing rate for purchases on your existing card, but it's worth noting.
- Will you be applying for any other credit soon? For example, are you looking to consolidate debts onto one card before buying a house? When you apply for any new credit product, the bank will check your credit report. This is important because a declined application can make it more difficult to be approved in future.
Get your credit score
Before you apply, you'll need to know what your credit score is. You can check your score for free on Finty.
- If your credit score is low or you have recent missed payments, you may need to consider alternative options since it's highly likely your application will be declined.
- If you do have good credit, your application is more likely to be approved — especially if you apply for a basic no-frills card with low minimum criteria.
Know where you can move debt to
It's important to know that you can't balance transfer between cards with the same bank and get the introductory rates as advertised on the credit card comparison tables on websites like Finty. For example, if you already have a card with Westpac, you probably won't be eligible for an introductory balance transfer with them.
This is complicated by inter-bank relationships, as you can see in this table.
| Issuer | Balance transfers restricted from |
|---|---|
| American Express | American Express |
| ANZ | ANZ |
| Bank of Melbourne | Bank of Melbourne, BankSA, St.George |
| Bank of Queensland | Bank of Queensland, Citi, Coles, IMB, Suncorp, Qantas Money, Virgin Money (any other Citi-issued card) |
| Bank of Sydney | Bank of Sydney |
| BankSA | Bank of Melbourne, BankSA, St.George |
| Bankwest | Bankwest |
| Bendigo Bank | Bendigo Bank |
| Citi | Bank of Queensland, Citi, Coles, IMB, Suncorp, Qantas Money, Virgin Money (any other Citi-issued card) |
| CommBank | CommBank |
| Coles | Bank of Queensland, Citi, Coles, IMB, Suncorp, Qantas Money, Virgin Money (any other Citi-issued card) |
| IMB | Bank of Queensland, Citi, Coles, IMB, Suncorp, Qantas Money, Virgin Money (any other Citi-issued card) |
| ING | ING |
| Jetstar | Jetstar, Macquarie, Woolworths, any any other Card Services-issued card |
| Latitude Financial Services | Latitude Financial Services |
| Macquarie | Jetstar, Macquarie, Woolworths, any any other Card Services-issued card |
| NAB | NAB |
| Qantas Money | Bank of Queensland, Citi, Coles, IMB, Suncorp, Qantas Money, Virgin Money (any other Citi-issued card) |
| St.George | Bank of Melbourne, BankSA, St.George |
| Suncorp | Bank of Queensland, Citi, Coles, IMB, Suncorp, Qantas Money, Virgin Money (any other Citi-issued card) |
| Virgin Money | Bank of Queensland, Citi, Coles, IMB, Suncorp, Qantas Money, Virgin Money (any other Citi-issued card) |
| Westpac | Westpac |
| Woolworths | Jetstar, Macquarie, Woolworths, any any other Card Services-issued card |
Choose what credit card to apply for
Here's what to look for when choosing what card to apply for.
- Interest-free balance transfer. When you use a balance transfer to move debt to another bank, you can usually get a significant interest rate reduction. Zero interest introductory rates are widely available (because the market is so competitive). The differentiator between offers tends to be the length of time you get at 0% interest and the fee for setting up the transfer. The combination is 0% on balance transfers with no balance transfer fee and a long introductory period.
- Long balance transfer introductory period. The longer the introductory period lasts, the more interest-free time you have to save money and pay down your debt.
- No (or low) balance transfer fee. You can save hundreds of dollars by applying for a card with no balance transfer fee. Cards with longer balance transfer introductory periods often charge a balance transfer fee.
Example
You've accumulated a debt of $5,000 on your Coles credit card and want to balance transfer to Qantas Money because of an attractive introductory offer.
However, you find out that balance transfers between the two banks are not possible because of Coles' relationship with Qantas Money.
You then decide to apply for a balance transfer credit card with ANZ, which also has a competitive offer for new customers.
After submitting your application on ANZ's website, you receive conditional approval. They request further documentation to verify your identity and income. Your application is fully approved a week later.
Your new ANZ card arrives shortly after, and upon activation, the balance transfer begins. Given the time it takes to process balance transfers, your $5,000 debt is transferred to the new card a few days later.
FAQs
What happens if you apply to move debt to a card with the same issuer?
Most banks assess balance transfer requests separately to the credit card application. Therefore, you may be approved for the credit card but your balance transfer request would be declined. You could cancel the application at this stage or proceed without moving your debt. Read more about balance transfers within the same bank.
Can you consolidate debt from more than one card to a new one?
Yes. However, the amount of debt you can move onto a new card will be limited by its credit limit and how much can be used for balance transfers.
