When I was considering making a balance transfer, I looked into what it involved and discovered there are a range of things I can balance transfer onto a new credit card, not just credit card debt.
This guide explains the ins and outs of what can and can't be balance transferred to a credit card.
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- Balance transfers are mostly associated with credit card debt, but it's possible to transfer various debts to a credit card.
- Depending on the card, balance transfers from personal loans and Buy Now Pay Later accounts may be accepted.
- Some debts, like overseas credit card debt or personal overdrafts, can't be balance transferred to any credit card.
How balance transfers work
A balance transfer is when you move your debt to a new credit card, which usually has an introductory 0% interest rate (generally lasting from anywhere from 6 months to 36 months).
The issuer of your new card will pay off your old debt and transfer the balance onto their card.
You might be wondering why a bank would do this. The simple answer is the banks use balance transfers to attract new customers and make money if you spend on the card or have a balance after the introductory offer expires.
You will have to make minimum monthly repayments and you may have to pay a balance transfer fee of 1% to 2% of the amount you are transferring.
It’s a good idea to pay off as much as you can on your new card while the introductory balance transfer rate applies, because once the introductory balance transfer period ends it will revert to a higher interest rate.
It’s also worth remembering the 0% rate won’t apply to purchases made using your balance transfer card.
You can find more detail in our helpful guide to what a credit card balance transfer is.
What you can transfer
Many people think that balance transfers are for credit cards only, but that is not the case.
It is possible to transfer debts from credit cards, loans, even buy now pay later accounts.
Credit card debt
Most balance transfers involve transferring your credit card debt to a new credit card.
This gives you the chance to pay off most or all of the debt before the 0% period ends.
With interest rates on credit cards ranging from about 12% to more than 20%, this can make a lot of sense. You can potentially save hundreds or even thousands with a credit card balance transfer.
However, there is a caveat.
- You can't balance transfer within the same bank at the introductory rate.
- If a bank does facilitate balance transfers for existing customers, it's typically at a rate that's much less competitive than what new customers get.
Personal loan debt
Another thing you can transfer to a balance transfer credit card is your personal loan debt.
With interest rates on personal loans generally ranging from about 6% to about 13%, they tend to be lower than interest rates on credit cards but you can clearly still save plenty with a balance transfer.
However, it’s worth remembering that only a few banks and financial institutions will allow you to move your personal loan debt onto a balance transfer card. Most only allow balance transfers from credit cards.
Buy now pay later debt
BNPL is effectively the same as lay-by, where you pay off an item in instalments.
The difference between BNPL and lay-by is that you get your item straight away, instead of having to wait until you have paid it off until you receive it.
BNPL purchases are interest free - if you pay them off in time. However if you don’t, you can be hit with some hefty interest charges or late fees that can add up over time.
It is possible to transfer your BNPL balance to a balance transfer credit card, but as with personal loans, not every financial institution will allow it.
The ones that do include Citibank, Coles, Qantas Money, and Virgin Money as well as Macquarie and Woolworths.
In order to do a balance transfer from your BNPL account, you will have to look out for one that offers BPAY as a repayment option.
It’s also worth considering if any balance transfer fees (often around 2-3%), or annual fees on the card, will outweigh the savings you might make by making a balance transfer.
If you are using a credit card for your business and the debts are adding up, you could consider a balance transfer.
There are all sorts of reasons why you might want to balance transfer business credit card debt, including cash flow issues, consolidating existing debts and startup expenses.
Another thing you might want to consider is making a balance transfer to improve your credit score.
If you are making timely repayments to your balance transfer card and can pay off that debt, it will reflect well on your credit rating.
Having another card will also improve your debt to credit ratio, which can also improve your credit score.
Business balance transfer credit card offers are less common than personal cards, but they do exist. Westpac, for example, offer such a product. Do note that the promotional interest rate for a business balance transfer credit card is not as low as those on personal credit cards.
What you can’t transfer
Some balances just can’t be transferred to a balance transfer credit card, including the following.
If you have emigrated to Australia and would like to balance transfer debt from your overseas credit card, this will not be possible.
In our 10+ years of experience dealing with credit cards in Australia, none of the banks have allowed international balance transfers.
We have been unable to find a bank that permits the balance transfer from a personal overdraft to a credit card.