Is your credit card debt getting out of hand? You’re not alone – more than one in six Australians are struggling with their own credit card debt, according to ASIC.

While living paycheck to paycheck, saving so frugally you live like a hermit or straight up fleeing the country and living in the Andes might seem appealing, you don’t have to do any of those things. Not if you properly utilise a credit card with a balance transfer to clear your debts.

What is a balance transfer?

A balance transfer is the process of transferring existing credit card debts from one card to another, usually with a different provider. Balance transfer cards come with much lower interest rates – often as low as 0% – for a limited period of time, known as the honeymoon or promotional period.

The promotional period with the low interest rate can last for varying amounts of time. Some are as quick as three months, while there are now cards offering balance transfers for as long as 26 months. The rationale behind using balance transfer cards is to repay your credit card debt without having an intimidating interest rate looming over your  head. If you had a 0% interest balance transfer for 24 months, then that’s two years you’ve got to pay off that debt interest-free! 

Example: Lorne balance transfers his debts

Lorne Mower has over $3,000 worth of credit card debt built up, and he’s struggling to pay it off. His current card has an interest rate of 17%, and at his current rate of repayments ($150 a month), it’ll take him two years to pay off this debt and will accrue nearly $500 extra in interest charges.

He can’t quite afford to pay off more than this yet, but he finds a balance transfer card that’s offering 0% interest for 24 months – the length of time it’ll take him to pay off his debts. He opens this card and fully pays his debt off within the promotional period. Therefore, he pays not a single cent in interest.

How long do balance transfers last?

As of November 2018, balance transfers can last for as little as three months to as long as 26 months. But a more common length of time is around 12-14 months, with a maximum of 24 months seemingly being the norm for ‘long’ balance transfers.

The length of the balance transfer you need will depend on how much debt you have and how long you think it will take you to pay it all off – there are consequences to not doing so which we’ll get to later.

How to do a balance transfer?

If you’ve decided that you want to do a balance transfer, it’s actually a pretty straightforward process, but you do need to take a bit of time and care to make sure you get the best one for you.

  1. Evaluate your situation: whip out a pen and paper, an excel spreadsheet or even just your smart friend to work out how much you currently how and how much you can afford to pay each month.
  2. Compare balance transfer deals: look into the length interest rates, fees charged and credit limits on the different cards available and see which one suits you (the credit limit is important because you might not be able to transfer your whole debt if the credit limit is too low).
  3. Apply: go online and submit an application detailing your current debts, how much you want to transfer and everything else about your current credit card.
  4. Activate your card: this needs to be done before the balance transfer can be processed.
  5. Close your old card: this isn’t always necessary, but it can make sure you don’t keep spending on it or get charged fees.

Before getting a balance transfer though, it can pay to be aware of the potential pitfalls of using one.

Traps of a balance transfer

Balance transfers can actually lose you money in the long-term if you’re not careful. You can read our article here (link) to learn more about balance transfer traps.

The cost of a balance transfer

Even though you might see a 0% balance transfer offer, you can still be charged a balance transfer fee, which is usually between 1-3% of the balance. If you were to transfer $5,000 and your card had a 2% balance transfer fee, that’s $100 charged to your account right off the bat. Balance transfer cards might still come with an annual fee too, but you can find cards that charge $0 for both.

The revert rate

Again, that 0% offer might seem tempting, but it’s only for a limited period of time. After that, it swaps to what is known as the revert rate, which can be as high as 24%! If you don’t fully pay off your debts on the balance transfer by the end of the promotional period, then you’ll be charged the revert interest rate on any remaining amount left.

Don’t make purchases with it

Balance transfers have zero interest-free days. None, nada. Any purchases made on the card will be charged interest on the card’s standard interest rate immediately. Balance transfers are meant to eliminate debt, not create more!

According to ASIC, one in three balance transfer uses actually increases their debts by 10% or more.

Are balance transfers the answer to debt problems?

Balance transfers can be an effective way of dealing with short-term debts, assuming you pay it all off fully within the time period and don’t make any purchases with that card.

But they’re only really a short-term solution- long-term, you need to look at how you got into so much debt, and what you can do to prevent it from happening again. It might be that you have an unsuitable credit card for your spend level or have an interest rate that’s too high. Or maybe you just spend much more than you should. If that’s the case, let old habits die hard!

Whatever the reason, provides practical tips and tricks to minimise your credit card spend and boost your savings instead. You can access these tips by reading our articles on balance transfers and other types of credit cards.

Frequently Asked Questions

Different lenders will have different debt limits you can transfer. However it is common to be able to transfer a maximum of 70% to 100% of your approved credit limit, depending on the card.

Always read the terms and conditions of the promotional periods and balance transfers before you transfer your debt.

Balance transfers have the potential to hurt your credit score if not done responsibly. Why? Because to perform a balance transfer, you need to apply for a new credit card, and all credit applications tend to lower your credit score, particularly when there’s a multiple applications in a short space of time.

To avoid hurting your credit score, restrict yourself from frequently using balance transfers for debt recycling - one or two balance transfers every now and then might be okay - and ensure you make your repayments on time.

It is difficult to get approved for a traditional balance transfer credit card with a weak credit score. Issuers of balance transfer credit cards typically require a “good” to “excellent” credit score to qualify. Here’s how credit scores are typically graded between Australia’s three major credit reporting firms:






800 - 1,000

800 - 1,000

833 - 1,200

Very good

700 -799

700 - 799

726 - 832


500 - 699

625 - 699

622 - 725


300 - 499

550 - 624

510 - 621


1 - 299

0 - 549

0 - 509

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