Question: I want to get a balance transfer credit card to transfer a balance of $2000, but I’m suspicious of all the offers of 0% per cent that seem too good to be true. In my experience if something seems to good to be true it usually is. My question is what’s the catch with balance transfer credit cards – Jules, NSW?

Answer: Credit Card issuers motives for offering balance transfer credit cards are pretty straight forward. They offer these seemingly “too good to be true” deals to entice customers away from competitors credit cards in favour of their credit cards. The drive to obtain new customers or customers of their competitors is driven of course by profit.

How do credit card issuers profit from 0% balance transfer credit cards? Credit Card issuers may hope that you will use the credit card for new purchases, incurring interest charges at the standard rates (be careful, sometimes without interest free days) and that you will not repay the entire balance during the introductory period.

Credit cards with balance transfer offers will specify what rate any outstanding amount from the balance transfer will revert to at the end of the balance transfer period, how easy this information is to find is another matter entirely. We call this rate the “after the honeymoon” rate and you will see it on the pages devoted to each credit card on this site. The after the honeymoon rate will usually either be the standard variable rate for purchases or the standard variable rate for cash advances. It is important that you check these details and make a real attempt to repay the balance in full during the term of the introductory offer to avoid these interest rates.

If a 6 month term (with 0% interest) is not realistic you may be better advised to look for a longer term ( like 12 months or 15 months) with a slightly higher interest rate.

Balance Transfer – ANZ Low Rate

If you have a large outstanding balance that you are unlikely to repay in 12 months consider a life of balance transfer credit card. In this case the “introductory” low rate will remain in place until your balance transfer has been paid in full.

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