Balance transfer revert rate: worked example and the payment you need

A balance transfer moves debt from one credit card to another card that charges a low or 0% promotional rate for a set period. When the period ends, whatever is still owing is charged the revert rate, which is typically the new card's cash advance or standard purchase rate and often above 20% a year. The single most useful number is the monthly payment that clears the balance before the promotion ends: the balance plus any transfer fee, divided by the number of months. In the illustrative example below, $8,000 at 0% for 18 months needs about $453 a month, including the fee; paying $300 a month instead leaves $2,760 to revert.

This guide belongs to the rewards card worked examples. Rates, fees and periods are illustrative, not offers.

How a balance transfer works

1. You apply for a new card with a balance transfer offer and nominate the debt to move. Most issuers do not allow transfers between cards from the same banking group.
2. The new issuer pays out the old card (up to a share of your new limit) and adds the amount, and often a one-off transfer fee, to your new card.
3. The transferred balance is charged the promotional rate for the stated period.
4. At the end of the period, the remaining transferred balance is charged the revert rate stated in the terms.

The new card is a full credit card application, assessed under responsible lending rules, including whether you could repay the whole limit over three years; see how limits are assessed.

Worked example: does it save money? (illustrative)

Current card: $8,000 at 20.99%. Offer: 0% for 18 months, 2% transfer fee ($160), revert rate 21.99%.

Saving: about $1,235 over 18 months. The balance transfer calculator reproduces these figures.

To clear the fee too, divide $8,160 by 18: about $453 a month.

What happens if you pay less (illustrative)

Suppose you pay $300 a month during the promotion.

• After 18 months: $8,160 − ($300 × 18) = $2,760 still owing.
• That balance now attracts 21.99%. At $300 a month it takes about 11 more months to clear, adding about $290 in interest.
• If you dropped to a low minimum repayment instead, the remaining $2,760 could take years.

Total cost: $160 fee + about $290 interest = about $450, still cheaper than staying, but only because you kept paying $300. The saving shrinks fast if the payment falls or new spending is added.

The purchase trap on balance transfer cards

On many cards, while a transferred balance is outstanding, new purchases do not get interest-free days: interest is charged on them from the purchase date at the purchase rate. Under section 133BQ of the National Consumer Credit Protection Act 2009, payments go first to the highest-rate part of the last closing balance, so your payments clear purchases shown on the last statement (at about 21%) before the 0% balance, which is good, but you still pay interest on those purchases until they are cleared.

The simplest rule: do not use a balance transfer card for spending. Keep a separate card or debit card for everyday purchases, and do not chase points on the balance transfer card.

Checklist before you transfer

• Length of the promotion and the exact end date. Put it in your calendar.
• Transfer fee, as a percentage of the amount moved.
• Revert rate: cash advance rate or purchase rate.
• Annual fee on the new card, which adds to the cost.
• Minimum transfer and maximum share of the limit.
• Whether the old card closes automatically. Usually not. Close or reduce the old card online once the transfer has gone through, or you may end up with two balances. See reducing limits and cancelling online.
• Credit report impact: one more enquiry and one more account. See credit cards and your credit report.

When a balance transfer is not the right tool

• If you cannot afford the payment needed to clear the debt within the promotion, a lower-rate fixed personal loan with a set end date may suit better.
• If you are already behind on repayments, talk to your current issuer about financial hardship first; under the National Credit Code you can ask for a hardship variation. A free financial counsellor at the National Debt Helpline (1800 007 007) can help.
• If you are tempted to keep spending on the old card, the transfer can leave you with two debts. Close or cut the old limit.

Frequently asked questions

Can I transfer a balance more than once?

You can apply for another offer at the end of a promotion, but each application adds an enquiry, fees reset, and approval is not guaranteed. Relying on repeated transfers is risky.

Does the 0% apply to the transfer fee?

The fee is usually added to the transferred balance or charged separately; check the terms for the rate it attracts.

Does a balance transfer earn points?

Generally no. Rewards programs usually exclude balance transfers from earning.

Is the revert rate the same as the purchase rate?

Not always. Many cards revert to the cash advance rate, which can be higher. Check the Key Facts Sheet and terms.

Sources and where to check

• ASIC Moneysmart — balance transfers and paying off credit card debt
• Federal Register of Legislation — National Consumer Credit Protection Act 2009, section 133BQ (order of payments)
• National Debt Helpline — free financial counselling, 1800 007 007
• Australian Financial Complaints Authority — disputes about balance transfers