Balance Transfer Credit Cards Explained
How 0% promotional periods work, what traps to avoid, and when a balance transfer actually saves you money.
How a balance transfer works
A balance transfer moves your existing credit card debt from one or more cards to a new card that charges 0% (or very low) interest for a set promotional period. During this window, every dollar you repay chips away at the principal rather than going toward interest.
Example — saving $2,000+ in interest
- Existing debt: $8,000 on a card at 19.99% p.a.
- Annual interest cost at current rate: ~$1,600/year
- Transfer to 0% card (24 months), 2% fee: $160 one-off cost
- Monthly repayment needed to clear in 24 months: ~$333/month
- Interest saved over 24 months: ~$2,500
The saving is real — but only if you clear the balance before the promotional period ends. The revert rate is the critical risk.
The revert rate — the main trap
When the 0% period ends, any remaining balance instantly reverts to the card's standard revert rate. For most balance transfer cards, this is the cash advance rate — typically 20–22% p.a., which is often higher than the card you transferred from.
Common scenario
A borrower transfers $8,000 to a 0% card for 24 months but only pays the minimum each month. At month 25, they still owe $6,000 — now at 21.99% p.a. They've paid hundreds in transfer fees and minimum repayments and end up worse off than before.
Rule: Before applying, calculate the monthly repayment needed to clear the entire balance one month before the promotional period ends. If you can't afford that repayment, a balance transfer may not be the right tool.
Costs to factor in
| Cost | What it is |
|---|---|
| Balance transfer fee | Usually 1–3% of the transferred amount, charged upfront. On $10,000 at 2%, that's $200. |
| Annual fee | Some balance transfer cards have an annual fee ($0–$200). This adds to your total cost. |
| Revert rate | Rate on any remaining balance after the 0% period. Usually the cash advance rate — check before applying. |
| Purchase rate on new spending | New purchases usually accrue interest immediately at the standard purchase rate. Avoid spending on the card. |
Rules for making a balance transfer work
- Calculate the monthly repayment first. Divide the total balance (including transfer fee) by the number of months in the 0% period, minus one. Set this as your minimum payment.
- Don't use the card for new purchases. Keep a separate card for everyday spending. New purchases on a balance transfer card typically accrue interest immediately.
- Cancel the old card after transferring. Having an empty card with a large limit can be a temptation to spend — and adds to your total credit exposure.
- Set a calendar reminder 2 months before the period ends. Either clear the balance by then, or start shopping for a new balance transfer deal before the revert rate kicks in.
- Check the revert rate before applying. Some cards revert to the purchase rate (~19%); others revert to the cash advance rate (~22%). Know which one before you commit.
Balance transfer vs low rate card
A balance transfer card offers 0% for a limited time then reverts to a high rate. A low rate card charges a modest ongoing rate (typically 8–14% p.a.) with no promotional period.
If you have a large debt you're confident you can clear within the promotional window, a balance transfer card is usually better. If you're not sure you can clear the debt in time, a low rate card is safer — the ongoing rate is far lower than the revert rate.
FAQs
What is a balance transfer credit card?
A balance transfer credit card lets you move existing credit card debt to a new card that charges 0% (or very low) interest for a promotional period — typically 6 to 30 months. During this period, every repayment goes directly toward reducing the debt rather than paying interest. At the end of the promotional period, the remaining balance reverts to the card's standard purchase rate.
Is there a fee for a balance transfer?
Usually yes. Most balance transfer cards charge a one-time balance transfer fee of 1–3% of the amount transferred. For example, transferring $10,000 with a 2% fee costs $200 upfront. Some cards charge no transfer fee, but these often have a shorter 0% period. Factor the transfer fee into your calculation of total savings.
What happens at the end of the balance transfer period?
Any remaining balance reverts to the card's standard revert rate — which is typically the cash advance rate, often 20–22% p.a. This is the main risk of balance transfers: if you haven't paid off the balance by the end of the promotional period, the remaining debt immediately starts accruing interest at a high rate. Always plan to clear the balance before the period ends.
Can I use a balance transfer card for new purchases?
Technically yes, but it's usually a bad idea. Most balance transfer cards charge the full purchase rate on new spending. Worse, your repayments may be applied to the 0% balance first, leaving new purchases accruing interest at 20%+ until the transfer balance is fully paid. Treat a balance transfer card as a debt-clearance tool only — use a separate card for everyday spending.
Does a balance transfer affect your credit score?
Applying for a new credit card creates a hard inquiry on your credit file, which can temporarily lower your credit score slightly. However, reducing your overall credit utilisation by paying down debt can improve your score over time. Avoid applying for multiple balance transfer cards at once, as multiple hard inquiries in a short period can have a more significant negative impact.
Related
- Compare balance transfer cards — current 0% offers ranked by period length and fee
- Low interest credit cards — ongoing low rate if you carry a balance
- Best Credit Cards 2026 — rewards, low rate, and no-fee picks
- Compare all credit cards
This page is for general information only. Balance transfer terms, fees, and revert rates vary by card and are subject to change. Confirm current terms with each lender before applying. Consider whether a balance transfer is right for your circumstances.