How does a Balance Transfer Affect your Credit Rating?

Credit rating aside, balance transfers are possibly the most under-utilised techniques in consolidating and ultimately, reducing credit card debt. Although they can help you save loads of money on your interest repayments, the frequently asked question is: How does a balance transfer affect my credit rating?

Best Balance Transfer Card

The St.George Vertigo MasterCard is a great card to improve your credit rating with. It features a great introductory offer on purchases and balance transfers for the first 6 months to help you save. With 55 days interest free you can ensure you always pay your balance off in full each month

• $55 annual fee
• 12.49% p.a. on purchases
• 2.99% p.a. for 6 months on balance transfers
• Cash Advance Rate of 21.24%
• Canstar Cannex 5 Star Rated Card

Click here to read the St George Vertigo terms and conditions

A Determining Factor of your Credit Rating: Debt Percentage

The main issue regarding balance transfers affecting your credit score is the concept of ‘debt percentage’. This is essentially how much you owe on your balance, in relation to your credit limit. If you currently own one credit card with a credit limit of $4000, and your balance is $2000, your debt percentage is 50%. While there are no specific guidelines as to what debt percentage is acceptable, or at which point it starts becoming a detriment.

If you undertake a balance transfer of your $2000 balance to another credit card with a limit of $3000, your debt percentage has become 66%, even though you owe the same amount.

Balance transfers can also work in your favour for your credit score. If you transferred to a card with a limit of $10,000, your debt percentage would be 20%.

Therefore, your credit score is subjective to change either positively, negatively or neutrally, depending on your change in debt percentage.

The advantage of paying off little to nothing on your interest repayments after a balance transfer however, outweighs the effect on your credit card rating. Just keep in mind your debt percentage if you are frequently undertaking balance transfers.

“Can’t I simply apply for more credit cards, or ask for a credit limit increase to improve my credit rating”?

If you need a fast boost of credit rating, this is certainly not a quick fix. Credit score generally takes months if not years to improve, and in the short term, applying for more and more credit may even damage your overall credit.

What are the best balance transfer credit card offers in Australia at the moment?

Depending on whether you’d prefer 0% for 6 month, 2.9% for 12 month, or permanent ‘for life’ balance transfer offers, visit the best Australian balance transfer credit cards section.

• Comparison of Top 10 Credit Card Offers

Editor's Choice: Our Top Credit Cards

Credit Card	Card Details	Interest Rate (p.a.)	Cash Advance Rate (p.a.)	Balance Transfer Rate (p.a.)	Annual fee	Interest free days (up to)
HSBC Credit Card	Editor's Choice: 0% for 6 months Balance Transfer & No Annual Fee Featuring a $0 annual fee for life, and 0% p.a. balance transfer for 6 months, the HSBC Credit Card was voted the Best Transactor Credit Card for 2010.	16.99%	20.75%	0% for 6 months	$0	55
Suncorp Clear Options Standard Visa Card	A great 12 month balance transfer offer, combined with a low annual fee and a good interest rate on purchases.	12.24%	17.99%	1.9% for 12 months	$39	0