Credit Card Finder® Email Feature: Balance Transfers Answered

Everyday the Credit Card Finder® team receives questions and queries regarding the complex credit card scenarios people can get themselves into, or wish to know about.

Recently we received one such email from John who had an array of questions about balance transfers. For the benefit of our readers and those with similar questions, we have provided answers to each question in blue.

Hi there,

I need your advice.

I am thinking of making a $ 10,000.00 purchase on the current credit card I have and then transferring the balance on this card to a 12 month low interest rate (@ 2.99%) card and pay a fixed amount every month to finish off my debt within the stipulated 12 month period. Before doing this, I just need the following questions answered and will greatly appreciate your reply.

1. Let’s say I make the purchase on my current credit card and then transfer the whole balance owing on this card to a new low rate Balance Transfer Card, is it still possible to keep and use my old card? Or will this account be closed once the new bank pays off the current card and will I be compelled to use the new card?

When you perform a balance transfer over to a new card, both credit card accounts remain open for you to use freely. You have no obligation to close your old credit card account, or to only use your new Balance Transfer Card. There are however, a few catches associated with using your old and new cards which will be explored in questions below.

2. I also read that some cards have a catch to it. That is if you make a purchase after the balance transfer, you first have to pay off the balance transferred amount before the new purchases and these new purchases will be charged at a higher % or the regular credit card rate?

Yes, this is standard with Australian balance transfer deals. Let’s take a look at a case study demonstrating question two: Karen transfers $10,000 of credit card debt over to her new Balance Transfer Credit Card with an offer of 0% for 6 months.

During the balance transfer period of 6 months, she repays $10,000 off her balance but also managed to spend $2,000 on the card during the 6 month period.

When you make a repayment on a credit card with a transferred balance on it and a purchase/cash advance balance, what essentially happens is the purchase and cash advance balances remain ‘locked in’ at their standard interest rates until the cheaper balance transfer amount is paid off. The remaining $2000 in new purchases would still have to be paid at the standard variable interest rate.

Some providers take this a step further by automatically charging new purchases at the cash advance rate – which is often significantly higher around ~20% p.a.

If your balance transfer offer expires and you still have a transferred balance which hasn’t been repaid, the remainder will revert to the new Balance Transfer Credit Card‘s purchase rate. Be wary though – some providers may revert it to the cash advance rate, or a fixed higher rate. Always make sure to go over the terms and conditions carefully as with any financial product or introductory offer.

3. What I basically want do is to use this balance transfer offer as a kind of short term personal loan at a cheap interest rate for a year. Thereafter, just get rid of this card. Will this in anyway affect my credit rating or should I be concerned about anything in particular?

There are countless factors which are taken into account to your credit file/credit history. One of them is how many credit accounts you currently have open – some banks may see this as a sign of financial uncertainty and unpredictability on your part. Each bank has their own scoring card when approving new applicants so it’s difficult to generalise about how certain actions will affect your file.

Taking this into account however, tossing your new card should not be an issue, and may even be a benefit as you are limiting the amount of accounts you have open.

4. Can this balance transfer just be a one off transaction and once I pay it off, can I exit without a problem?

Yes, there should be no problems for exiting. Once the balance transfer offer has expired, cancelling or keeping the card you performed the balance transfer on will be the same process as a regular credit card.

5. My main concern is I want to keep my current card and use it as usual as I have been and just make use of a low rate balance transfer card to make my purchase. Do you think either bank will want me to stop using one or the other?

No, your banks will not interfere with your usage of either credit card. If anything, your new provider would be hoping that you spend on your new card in hope of ‘locking in’ your purchases as mentioned in Question 2.

Appreciate your reply.

Thanks,

John

I have a question about credit cards or balance transfers – where can I get it answered?

Credit Card Finder® offers countless resources on credit card topics and balance transfer are no exception. Have a read through these guides and articles to answer your questions:

• What is a Balance Transfer? – What is a balance transfer and how exactly do they work?
• The Guide to Balance Transfers – Links out to a number of our top resources on credit card balance transfers.
• Best Balance Transfer Comparison – Comparison tables of some of Australia’s most competitive balance transfer offers.

I read through but didn’t find the answer I wanted. What now?

If you have a complicated issue which we have not covered, feel free to contact info@creditcardfinder.com.au and we will do our best to get it resolved.

All the Best,

The Credit Card Finder® Team.

Disclaimer: We recommend if you have any specific questions about your situation or credit card to seek advice from a qualified financial planner.

Check out today's featured offers:

Westpac Low Rate	Citibank Clear Platinum	Qantas AMEX Discovery	ANZ Platinum
0% p.a. for 6 months on purchases & balance transfers	2.9% p.a. for 12 months on balance transfers	$0 annual fee Up to 10,000 Bonus QFF Points	0% p.a. for 6 months on purchases & balance transfers

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Popular Credit Card Offers

			Interest Rate (p.a.)	Balance Transfer Rate (p.a.)	Annual fee	Cash Advance Rate (p.a.)
	Westpac Low Rate Card - 0% Offer	A credit card with a low rate offer on both balance transfers and purchases, plus a low annual fee.	0% for 6 months (reverts to 13.49% )	0% for 6 months	$45	21.49%
	Citibank Clear Platinum Card	Competitive interest rate on purchases and balance transfers offer.	11.99%	2.9% for 12 months	$99	21.74%
	St George Vertigo	Take advantage of this great offer from St.George with a low rate on purchases and a low balance transfer offer.	13.24%	0.99% for 12 months	$55	21.49%
	ANZ Platinum Credit Card	An introductory interest rate offer on balance transfers and purchases, plus a $0 first year annual fee.	0% for 6 months (reverts to 19.24% )	0% for 6 months	$0 annual fee for the first year( $87 thereafter)	20.99%