Can You Transfer Multiple Credit Cards with a Balance Transfer?
Posted June 13th, 2010 and last modified December 29th, 2011As of May 2011, the average Australian has more than $3,300 of credit card debt. This makes us one of the biggest borrowers in the world. This debt is typically spread between 2.2 credit cards, which means most of us carry more than one card at a time. But the trend of keeping just one is catching on, especially with credit card issuers coming to the rescue with various balance transfer offers.
Most issuers will allow you to transfer debts from multiple credit cards. The limit isn’t usually how many credit cards you can transfer from, but the total debt between them. So as long as you don’t exceed the maximum (it varies from bank to bank, but is usually $12,000 or less), you should be able to put multiple debts in one balance transfer card. This is known as debt consolidation.
Why get a balance transfer?
Transfer all your existing credit cards and store credit cards
The Citibank Clear Platinum allows you to transfer the debt on your existing non-Citibank credit cards and store credit cards at a promotional balance transfer rate. Also enjoy a low annual fee and a low interest rate on purchases.
- $99 annual fee
- 11.99% p.a. on purchases
- 2.9% p.a. for 12 months on balance transfers
- Cash Advance Rate of 21.74% p.a.
- 55 days interest free
- Minimum Income Requirement of $35,000 p.a.
There are several advantages to consolidating your credit card debt, the most obvious of which is the low interest rate. Banks usually offer a lower-than-average rate, or even zero interest, for six to twelve months after you get approved. This allows you to pay the debt off faster. If you were paying 15% on a $5,000 debt, transferring it to a 0% card will save you $750.
Answering to only one debtor is an important yet often overlooked benefit of balance transfer cards. As Bankwest (The Bank of Western Australia) explains, one card and one statement are easier to manage than bills from three different banks, and there’s less risk of losing paperwork along the way.
Costs of multiple transfers
Some banks will take care of the transfer for you, but in most cases—especially if you’re transferring multiple cards—you may have to coordinate the transfer yourself. This means contacting each of your old creditors and informing them of the transfer, having them sign the forms, and turning them over to your new issuer. There may also be extra fees for each card you’re transferring from.
Try to set up the transfer so that everything’s ready by the time you get approved. Often, if you get your approval before the transfer is finalized, the six-month or one-year clock starts ticking—even before there’s any debt on your new account. Also, according to The One Income Dollar, a personal finance blog, you may have to keep making minimum payments on your old accounts until the transfer is official. Otherwise, they may charge penalties on the month you expected the transfer to take place, meaning you can still owe them money even after the transfer. It would also look bad on your credit report.
The six-month race
Because the low introductory rate lasts six to twelve months, you only get to pay at 0% for a year at most. When the “honeymoon period” is over, you revert to the regular rate, which often nears or exceeds 20%. If you’re sure you can pay off your transferred debt before that happens, you don’t have to worry about the revert. Taking our $5,000 example, you will have to pay $416.67 per month if you have a 0% rate for one year, or $833.33 it’s a six-month deal. If you are only able to pay back half, the other $2,500 will be subject to, say, a 20% rate, or an extra $500.
Negative payment hierarchy
You may be wondering what banks gain from taking on your old debts for cheap. The trick commonly in use is negative payment hierarchy, or the prioritizing of low-interest debt over high-interest ones. While you’re paying off your old debt at 0%, your new purchases are piling up at the regular rate. At the end of six months, assuming a monthly expenditure of $1,000 and a 20% regular rate, you will owe an extra $1,200 in interest. You can avoid this by simply not charging anything to the card while you’re still paying off your old balance, but some banks have a minimum spending requirement, which means you’re forced to subject a certain amount to the regular rate each month.
The Treasury proposed a set of reforms in July 2010 that would, among other things, change the way credit card issuers present and structure their debt, including balance transfers. The National Australia Bank was among the first to comply by offering a card that paid high-interest debts first, Your Money Magazine reported in September. The new reforms would also keep banks from letting customers take on debt that would leave them in hardship, and require them to be clearer about the costs of borrowing money.
Compare some of the leading 0% balance transfer and 12 month balance transfer offers.
Check out today's featured offers:
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0% p.a. for 6 months on purchases & balance transfers |
2.9% p.a. for 12 months |
$0 annual fee Up to 10,000 Bonus QFF Points |
0% p.a. for 6 months on purchases & balance transfers |
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