Transfer process
You must apply for a credit card account at the new bank if you don't have one there already. You will be assessed against the bank’s credit criteria. Check your debt before you apply to ensure it includes purchases or payments since your last statement. Note that interest accrued during the current month may not show up.
If the bank approves your application, it will pay off your card debt debit at your other bank and create a new debt. It will tell you the credit limit it is prepared to give you. The total of all transferred balances must not exceed that limit. You may be able to transfer store card or personal loan balances, but check first with the new bank about any exclusions.
You may have to close your existing credit card account if having two credit cards will exceed your debt servicing ability. Talk to your card provider. It's your responsibility as the customer to close accounts.
Interest rates on transferred balances
Transferred balances may have special low interest rates, but new purchases and cash advances are usually subject to the bank’s normal rates. Check the card’s terms and conditions to see how interest rates apply. Interest rate deals may be for a set time only. Make sure you know when that period ends and what the subsequent interest rate will be.
Allocation of repayments
Generally, your credit card repayments will be allocated to the balance with the lowest interest rate. If you have a transferred balance at a special low interest rate and you put purchases on that card, your repayments will probably be allocated to the transferred balance rather than to the recent purchases. This means any purchases or cash advances you make after the transfer won't be paid off until you have repaid the transferred balance.
Payment allocations are described in the credit card terms and conditions. Talk to your bank if you are unclear how payments will be applied. You need to continue making minimum monthly repayments and should check out potential penalty fees if you fail to make them
Generally, your credit card repayments will be allocated to the balance with the lowest interest rate.
Transfer misunderstanding led to heated words, eventual settlement
Ali had seen some advertising offering an attractive interest rate for any credit card balance transferred to the bank. She went to the local branch and applied for a balance transfer. The bank approved the application, transferred her existing credit card debt from her card issuer and gave her a new credit card.
CASE 2Onus on customer to read terms and conditions
Jordan saw an advertisement for a special low interest rate for credit card balance transfers. He took up the offer but subsequently complained that the bank's interest rate was much higher than the advertised rate.
CASE 3Advertisement not misleading
Sam saw an advertisement on a bank’s website offering a special low interest rate on credit card balance transfers and complained that the advertising was misleading.
Concerns about lending decisions
We receive complaints about banks both refusing to lend and allowing customers to borrow when the customers say they could never have afforded the repayments.
Lending decisions are usually a matter of commercial judgement for banks, something beyond our powers to investigate. We can, however, investigate administrative errors in the lending application process. This includes complaints about a re…
Early repayment charges
Customers who borrow money at a fixed interest rate for a fixed term enjoy the benefit of knowing exactly what their repayments will be over the period of the loan. They are not affected by any rise or fall in interest rates during that time. In return, banks get a pre-determined return on their money.
But if customers repay their loan early (or make a significant lump sum payment before the end …
Guaranteeing someone's debt
Banks will sometimes lend a customer money only if someone else provides a guarantee. If you agree to be a guarantor for a borrower, the bank can require you to pay the borrower’s debts if he or she defaults on repayments.
Note: The following is intended as a guide only. Seek independent legal advice if you are considering becoming a guarantor. If you are already a guarantor and have any concerns…
Updated March 2024