Can I transfer money from one credit card to another credit card?

Yes, you can transfer your money, and your debt, from your current credit card to another card.

This move is known as a balance transfer and many people choose to do one because it can help them to clear their credit card debts off faster.

Here’s how a transfer works

Making a balance transfer means you’re moving your existing credit card balance—the debt —to a new card that has a lower or even zero per cent interest rate for a period of time.

Removing some, or all, of the interest from your credit card repayments means that every dollar you pay each month goes to the principal balance, not on interest.

There are many balance transfer cards on the market, most with introductory periods of anything from six to 36 months. This low or no interest period gives you time to reduce your principal balance to a manageable level, or even clear it completely.

It’s important to bring your balance down as much as possible, because once the introductory period ends the interest rate on your new card will revert to its “usual” level, most likely around 17 or 18 per cent. If you have any debt remaining, it’ll be subject to this new rate.

More about how to choose a card for a balance transfer

It’s important to find out more about balance transfers and how they work so that you can compare offers to find the right one for you.

Looking for a balance transfer card

More often than not, you’ll do a credit card transfer to an entirely different provider. If you do find a great deal with your existing bank or card provider then you should take it up.

It’s also possible to consolidate several different cards and debts into one “umbrella” or debt consolidation personal loan or card. If you’re finding it tough to cope with a number of different credit card payments each month, then having just one to think about makes life a lot easier. It’s doubly easier if you’re paying much less interest, too.

The things you need to look for in a balance transfer card

When you’re looking for a good balance transfer deal, there are a few things that should stand out to you—both good and bad.

Check out the introductory period

The introductory period on a balance transfer card is the period of time that the low rate, or zero rate of interest lasts for. Most periods are between six and 24 months, although you can find a few cards that offer 30 to 36 months.

The promotional period starts on the day your card is activated, not on the day you first use it, so if you have a large balance to pay down, you should start as soon as possible.

Look at the revert rate

Once your introductory period ends, the interest rate on your new card will return (or revert) to its standard purchase or cash advance rate. Sometimes, if your introductory period is long enough, you know you’ll have paid everything off. If this is the case, then an equal or even higher interest rate that you’re paying now is not too bad.

On the other hand, if you think that you’ll have some debt left at the end and you’ll be paying it off at a higher rate, then look for another card if possible. If the revert rate is a shade lower than your current cards, then you’re onto a winner; just don’t go mad on it.

Calculate your balance transfer fee

You may have to pay a balance transfer fee. Most balance transfer fees are between one and three per cent of the balance that you’re moving, so factor this into your calculations.

Is a balance transfer the same as a money transfer or a fund transfer?

No, they’re not the same thing. A balance transfer involves you moving the debt from your older card to a new one. A fund transfer, or money transfer, is shifting actual, positive money from one card, or account, to another.

How much can you save on your monthly payments with a balance transfer?

This amount will vary according to how much your existing balance is, how much your new interest rate is (or isn’t, if you get a zero per cent deal) and how much you pay off your principal each month. You need a credit card calculator for this to work out the maths.

Example – Jane discovers balance transfer

Jane had $4,000 owing on a credit card at 17.99 per cent. She is paying it off at $150 a month, which, with that interest rate, will take her 28 months and cost $845 in interest.

So Jane decided to take control and swapped her debt to a new card with a balance transfer deal offering her a 20–month interest free period. Jane upped her repayments to $200 per month to try and get the debt paid off within the 20-month introductory period.

No Jane is paying more each month but is saving the $845 in interest she is no longer being charged.

It’s easy to calculate your credit card savings

Play around with a credit card repayments calculator to find your ideal combination of new interest rates (or no interest) and the amount that you’d be able to clear each month for the introductory period.

Don’t forget to factor in any balance transfer fees as two per cent on a $4,000 balance is $80, which is around half of your planned monthly payments.

If you find a zero-per cent interest card that suits you fine, your efforts shouldn’t stop there.

Your monthly payment might be more effective or more comfortable, but you can always bump it up a bit, even if it’s just by a couple of dollars each month. This is especially important if you’re going to have a (hopefully small) balance left when your rate reverts.

You can research and compare the top balance transfer credit cards or low rate credit cards currently on offer from Australia’s major banks, credit unions and other credit card issuers at InfoChoice.

The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. If you or someone you know is in financial stress, contact the National Debt Helpline on 1800 007 007.

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