Credit Card Balance Transfers or Honeymoon Periods

Balance Transfers – they can help you

Most banks and other lending institutions will let you transfer your outstanding balance when you sign up with them. For example, the table below explains Peter's situation and how he benefits from the balance transfer rate:

This is a sweetener the banks provide to get you in. And it is a great way to help you get out of debt. In our example, Peter was paying 17% interest on the amount he owed and the new offer from Bank B is a rate of 6.99%. But you have to be careful as the interest rate will revert to the normal rate after 6 months.

Some tricks to be aware of – the fine print!

• It is important to read all the information in a credit card contract. Some lenders can include broad clauses that let them bump up the interest rate whenever they want. Or, you may have a minimum spend each month to fulfil, and penalties could apply if you don’t keep up the spend rate.


• Just because the institution offers a ‘rock bottom’ interest rate, it doesn’t mean you are eligible for that amount. Depending on your personal situation, previous credit history and other factors, you may have to pay a higher interest rate after all.


• You could be paying the normal interest rate on new purchases thinking that the introductory rate applies. The low fee typically only applies to the balance transfer, NOT new purchases.

Zero Balance Transfers

One offer that is becoming more common is a 0% Transfer Rate. This means there is no interest payable on the amount owing for a specified period. Put simply, Peter would pay the $1200 off and no interest would apply. These cards often have limit options such as no rewards program - but they are a great way to get an outstanding balance paid off quickly.

Some lenders will also let you consolidate all your loans into the one new credit card account. So, instead of juggling three or four repayments, you can ask for a balance transfer and roll your debts into one to take advantage of the special low rate that a balance transfer gives you. This will depend on your credit limit though, so it’s not safe to assume you can transfer a $50 000 debt for example.

You are also subject to the normal minimum repayment rate during the special introductory period. For more information on some of the terms lenders use, click here.

• Transfer the balance of your existing credit card to Virgin Credit Card and pay 0% p.a. for 6 months