How to deal with balance transfer credit card problems

Information verified correct on October 24th, 2016
credit card problem

If you’ve ever made a mistake or had an issue with a balance transfer, read this to learn the easiest way to deal with it.

Balance transfers can be a great way to save money on credit card debt or other debts. You could save hundreds or thousands of dollars in interest charges by taking advantage of the lower promotional interest rate. Balance transfers aren’t entirely risk free though, so there are a few traps that you’ll need to avoid.

The most common mistakes that are made with balance transfers can happen at any time throughout the process, whether it is when you’re first applying or when you’re paying off the balance in full.

Mistakes are a part of life, but they shouldn’t control how you deal with debts. We’ve identified some of the more common mistakes cardholders fall into and strategies you can use should you ever run into any of them.

Problem: Applying for a card with the same issuer

Balance transfer offers come with a wide range of terms and conditions, so you’ll need to meet some eligibility requirements to receive approval. Tucked away in all the fine print is a clause that says something along the lines of this: “offer is not available for balances transferred from existing credit card accounts with this issuer”.

Basically, you have to be a new customer for the credit card issuer to approve your balance transfer at the promotional interest rate. For example, an NAB customer could not get an NAB balance transfer credit card.

Underwriting issuers

The other factor to remember when applying for a balance transfer credit card is that some companies offer cards that are actually underwritten by other financial institutions. Citibank, for example, is the credit provider for Virgin Money, which mean Citi technically issues all Virgin credit cards.

As a result, existing Citi customers aren’t eligible for balance transfer offers to Virgin Money cards, and vice versa.

The tricky part is that if you do apply for a new credit card with the same issuer, you could be approved for the card – and even the balance transfer in some cases – but not the promotional rates. So there’s potential to end up with more credit cards and no lower interest rate.

The best way to avoid this is to check which banks you can transfer between before applying.

What to do about it

If you accidentally apply for a balance transfer with your existing card issuer, the outcome and solution will depend on which stage of the application you’ve realised the issue. Some of the potential scenarios and strategies include:

  • During the application process.
    If you have just applied for the new credit card, or have just received conditional approval but have NOT submitted supporting documentation, call up the credit card company and cancel the application. Let them know that your existing debt is with the same issuer, and that you have just realised this means you won’t be eligible for the balance transfer offer.
  • If the card application is approved.
    If your credit card and balance transfer is approved, call up the new credit card company and tell them your concerns. Sometimes applications are processed quickly and they won’t identify the problem until they try to transfer the balance. In other cases, you may get approved for the card but not the balance transfer. Calling up to talk to someone stops the problem from getting more complicated, and protects you from any unnecessary charges.
  • If the card application is declined.
    This is most probably because it is issued by the same provider. You can still apply for a different balance transfer card, but just remember that all your applications will be listed on your credit file, and applying for too many in a short amount of time could reduce your credit score.
  • If you actually want to transfer a balance to a card with your existing issuer.
    Some credit card issuers offer balance transfers specifically for existing customers, which gives you a legitimate option if you want to stay with your issuer but choose a different card. NAB, for example, recommends existing cardholders contact them directly for more information on balance transfer options to other NAB cards, while Citibank says existing cardholders that are signed up for “my offers” can “take advantage of exclusive offers you may be eligible for including balance transfers”. So if you want a balance transfer deal with your current credit card issuer, look into these options or contact them directly to see what’s possible for your circumstances.

Compare balance transfer credit cards

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Problem: Only getting approval for part of the balance transfer

This issue has to do with credit limits, so let’s start there. When you apply for a balance transfer, issuers usually only allow you to transfer a certain percentage of the credit limit you are approved for on a new card. This often sits between 70% and 95% of the total credit amount. (Note: This is the maximum you can transfer, but you can also transfer a lower amount if you have less debt).

For example, if you wanted to transfer a balance of $5,000, you would need a new credit limit that’s at least 10-35% higher (approximately $5,500 to $6,500).

If you’re approved for a credit limit that doesn’t leave room for this percentage, the issuer may offer a partial balance transfer. In the scenario above, for example, if you were approved for a $5,000 credit limit, the new issuer might transfer $4,500 (90%) of your debt over and leave you with a $500 balance on your old card.

The problem here is that you will end up with two debts – one on the old card and one on the new card. While the new card might have a 0% interest rate, there’s still a risk that you’ll end up paying interest on at least one of the cards – if not both.

What to do about it

If you end up approved for a balance transfer card with a limit that’s too low to allow you to transfer the entire balance, you have two main options:

    • Cancel the application once the new issuer sends you details of the suggested account terms.
    • Pay off the remaining debt on the old card as soon as possible so you can focus on dealing with the rest of it at the lower promotional rate offered on the new card.

*Remember: you should receive information on the new credit card once it is approved, giving you a chance to review the terms and conditions before accepting or declining the new card.

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Problem: Paying more fees than expected

Picture this: you find a great balance transfer card, get approved for it and then have the debt moved over to the new account. Then you get a statement and see a balance that’s hundreds of dollars higher than your old one. What’s going on?

Sometimes balance transfers come with additional costs that we forget about or don’t even realise exist until they show up on our statements, in particular these two:

  • Balance transfer fees. Some credit card companies charge a one-off processing fee for your balance transfer. This fee is usually a percentage of the total transferred, ranging from 2% to 4% depending on the credit card. To put this into perspective, let’s say you’re looking at a card with a 2.5% balance transfer fee. If you wanted to transfer $5,000, you’d pay $125 extra. If you had a $10,000 debt that fee would rise to $250, and so on.
  • Annual fees. If the new credit card has an annual fee, it could be charged when the account is first opened. Meanwhile, if you cancel your old card, you could also be charged one final annual fee, depending on the account terms and conditions. With these fees ranging from $30 to $300 or more, dealing with the extra cost could be very expensive.

Not only do these charges mean you’ll have more debt and a bigger balance to pay off your new credit card, but if the new charges are on the new card, they won’t be eligible for the promotional balance transfer rate. Instead, they’ll be considered “new transactions”, and you will be charged the purchase rate for them (rather than the promotional balance transfer rate).

What to do about it

  • Unfortunately, once you notice these charges it will be too late to avoid them completely. It might be a good idea to go over the terms and conditions of the account, just to be sure that they do mention these fees (if not, you might be able to dispute them).If there’s no cause for dispute, then the best thing to do is prioritise paying these charges off as quickly as possible – even if it means adjusting your budget a little in the process. At least then you can avoid or at least reduce the amount of interest that you pay for them and then get back to paying down your existing debt.
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Problem: Forgetting to make payments

This mistake often comes up with 0% balance transfer offers, which can sound like a great way to not pay debt for months. It’s important to remember that even if there is no interest applied to the balance, you will still have to pay at least the minimum required for each statement period. Otherwise, you could end up dealing with late payment fees and other penalties.

Payments to your old card

Applying for a balance transfer is only the beginning of the process when it comes to moving debt from one card to another. From there, you have to get approval and then wait for the new issuer to process the transfer, which typically takes up to 21 working days.

In the meantime, the balance on your old card will accrue interest as usual and you will still need to make any payments that are due so that you don’t end up with late payment fees or other penalties. A lot of people don’t realise that this is the case with balance transfers, and the result is overlooked or forgotten payments that increase overall debt levels.

What to do about it

  • If you forget to make a payment on your old or new account, contact the relevant credit card issuer straight away. Explain that you have missed a payment and let them know when you plan on making it (or make it straight away and tell them).

Problem: Keeping your old credit card open

When you get a balance transfer credit card, it is your responsibility to decide what you do with the old credit card. That means if you want to cancel it, you will have to go through that process independent of the balance transfer.

If you don’t cancel the old credit card, there could be a temptation to use it to make purchases (and get a bigger balance). It could also attract new interest charges and annual fees, and will also mean you have more statements and payments to deal with every month.

What to do about it

You can cancel the old credit card account at any time with the following steps.

  • Make sure there is no balance on the old card, otherwise it won’t be cancelled.
  • Contact your old credit card company or go to their website and get an account cancellation form.
  • Fill out the form and submit it (or go through the process over the phone).
  • Cancel any direct debits from the account (or transfer them to a different account).
  • Check the details of the cancellation so you know how long it could take to process.
  • heck the account balance again – sometimes credit card companies will charge the annual fee when an account is closed, and it could remain active until you pay that.
  • Request written confirmation from your old credit card company when the process is complete.
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Problem: Making new purchases on a balance transfer card

Any new purchases you make on a balance transfer credit card will be charged interest at the purchase rate, not the promotional balance transfer rate. You won’t be able to take advantage of any interest free days offers, such as “up to 55 days interest free”, which only applies when you don’t have an existing balance.

As banks are forced to repay the balance that’s accruing the highest interest first, your purchases that collect the standard interest rate will be paid off before your transferred balance. Given the low or 0% balance transfer offer is only in place for a set number of months, it’s important to waste that time paying off purchases so you can repay your balance before the offer ends.

In some cases, balance transfer cards may also have a lower introductory purchase rate for the first few months. While this means you pay no interest or a lower rate at first, you will still have a higher balance and could end up with debt when both the purchase and balance transfer introductory rates revert to higher standard rates.

Put simply: making new purchases when you have a balance transfer card is a major risk for paying off your debt and should be avoided at all costs, regardless of the card.

What to do about it

  • If you have used your new card for purchases, make paying off these charges a priority. It’s ideal if you can transfer the money as soon as the purchases are made, so you can get back to paying off the original debt you transferred. At the very least you should aim to increase your monthly repayment amount to factor in this new debt.

Carrying a balance when the introductory rate reverts

Whether the introductory interest rate on a balance transfer card lasts for four months or fourteen, eventually it will revert to the higher, standard rate applied to balances on the card. The difference between these rates could be as much as 21.99%, so if you’re still carrying a balance you will definitely notice the change on your monthly statements.

The interest charges that are applied when rates revert will mean that it takes longer for you to pay down the rest of the debt and cost you more money. So you should always try to clear your balance before the introductory period ends, otherwise you could end up growing your balance again.

What to do about it

  • If you’re one of the many people who end up with a remaining balance when the introductory rate reverts, the priority should be to pay of the debt as quickly as possible. This could mean adjusting your budget and making bigger monthly payments, or using savings or other lump sums of money to clear the balance.
  • Another option is to make weekly payments as soon as you get your salary – even though credit card interest is charged monthly, it’s actually calculated daily, so if you make more frequent payments you can reduce the overall amount of interest that you pay.
  • Balance transfers come with so much fine print that there is often confusion or a lack of awareness about exactly how they work – which can lead to lots of costly mistakes. Now you know how to deal with these kinds of issues, you can get past them and learn from them so that you avoid them altogether in the future.
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6 Responses to How to deal with balance transfer credit card problems

  1. Default Gravatar
    Lorraine | August 19, 2012

    What other options are there besides balance transfers to handle credit card debt if you can’t pay it off? Would it be a personal loan if you are unable to do a mortgage top up?

    • Staff
      Jacob | December 14, 2012

      Hi Lorraine. Thanks for your question. We spoke to NAB about this very topic. Here’s a snippet from our conversation.

  2. Default Gravatar
    Shantell | August 18, 2011

    I am looking at getting a balance transfer for my 2 store cards (overall limits $11,800.) I have 2x interest free purchases on those cards that I DO NOT want to balance transfer. Im not sure how to go about this.

    • Staff
      Jacob | March 28, 2013

      Hi Shantell. You can transfer the balance from multiple store cards; however, I don;t believe it’s possible to select certain transactions to transfer. Perhaps speak to the bank about this. Sorry for the delay in the response.

  3. Default Gravatar
    Van | July 28, 2011

    Hello, why do these articles not suggest the workaround solution on balance transfer traps: Once the low interest rate period on balance transfer is up, transfer the balance BACK over to your old card, and get a whole new period of low interest rates. Is there any information on this method, and how often it can be done?

Credit Cards Comparison

Rates last updated October 24th, 2016
Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
Enjoy a 0% p.a. balance transfer offer for 18 months and also earn 2 bonus Velocity Points in the first 3 months on everyday spend.
20.74% p.a. 0% p.a. for 18 months $64 p.a. annual fee for the first year ($129 p.a. thereafter) Go to site More info
ME Bank frank Credit Card
Enjoy a low and consistent interest rate on purchases and cash advances, combined with no annual fee.
11.99% p.a. $0 p.a. Go to site More info
HSBC Platinum Credit Card
Receive a full annual fee refund and save $149 if you meet the $6,000 spend requirement. Enjoy a balance transfer offer and platinum card benefits such as complimentary insurances and concierge services.
19.99% p.a. 0% p.a. for 15 months $149 p.a. Go to site More info
NAB Low Rate Credit Card
The NAB Low Rate Card offers 0% p.a. on purchases and balance transfers for 15 months. This card also comes with a low annual fee.
0% p.a. for 15 months (reverts to 13.99% p.a.) 0% p.a. for 15 months with a one off 3% balance transfer fee $59 p.a. Go to site More info

* The credit card offers compared on this page are chosen from a range of credit cards has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing cards.

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