Checklist: Credit card balance transfers

Feeling weighed down by credit card debt? Chances are, you’ve heard about zero interest credit card balance transfers and think it might be the answer to getting on top of things. Here’s what you should consider before making the switch.

Do your research and compare

You’ll find lots of 0% balance transfer options available, but you’ll need to do some legwork and read the fine print to figure out which one is best for you. Things to consider include:

• The introductory interest rate. Some balance transfer deals offer a 0% interest rate, but some may have an interest rate that’s still low, such as 5%.
• The introductory period Check the length of the introductory period. It might be anywhere from 6-12 months and it’ll help you work out if you can pay off the balance within the introductory interest rate period. (It’s in your best interests to do this!)
• The card’s revert interest rate. This is the interest rate that kicks in once your introductory interest rate period finishes and it can be substantial, which is why your aim should be to pay your debt off completely during the introductory period.
• The purchase interest rate While you should probably resist making purchases on the card while you’re trying to pay off your credit card debt, you need to know how much interest you might be charged on purchases, and whether you have any interest-free days.
• The limit you can transfer. The balance transfer limit varies between cards – so check how much you’re allowed to actually transfer to the new card. Ideally, you want to consider cards where you are able to transfer your entire debt over, so you’re not stuck paying off two debts.
• Whether there’s a balance transfer fee. Some cards will charge you a fee to transfer your balance, which could be a percentage of the amount you are transferring, whereas other cards may not. If you’re consolidating debts from multiple cards into the one balance transfer check whether fees apply to each separate transfer.
• The other fees you’ll be up for. As well as any balance transfer fees, don’t forget to factor in the card’s annual fee and other fees you might have to pay (like a not making repayments on time, or taking out cash advances, or purchases).
• Any other restrictions. Some balance transfers only allow you to transfer certain types of debt – such as that you’ve racked up on a credit card. You may not be able to transfer debt from other accounts such as a personal loan. Plus, be aware that usually you’ll have to do a balance transfer with a bank that’s different to the one you hold your current credit card with.

The application – what you need

You’ve done your research, chosen a credit card and requested a balance transfer. To be approved, you’ll need to have a good credit rating and meet other criteria. You also need to be a permanent Australian resident.

To speed up the process, gather the following documentation before you apply:

• Proof of ID. You’ll need to produce a driver’s license, passport or Medicare card. You’ll also have to provide your contact details.
• Address details. You may need evidence of your current address (such as a bill with your name on it) and possibly your previous address
• Proof of income. This might be pay slips, job contracts or other relevant documents
• Current expenses. Think rent, mortgage, bills – all your regular financial obligations
• Existing credit. If you have other credit cards, personal loans, a home loan, etc, you will need to provide info about all of these
• Other assets. You may also have to show evidence of savings, investments and other things you own such as property or cars
• Balance transfer details. This is where you fill out the amount you want to transfer and details of the account you’re transferring from.

Once you’re approved and the balance transfer has gone through, talk to your previous bank about closing your old credit card. If you’ve transferred the entire balance to your new card, there’s no reason to keep the old one, especially if you know you’ll be tempted to shop with it! Plus, you’ll avoid paying annual fees and other costs associated with keeping it open.