How Balance Transfers Impact Credit Scores: Dangers & Insights

How Credit Card Balance Transfers Can Damage Your Credit Rating

How can balance transfers affect your credit score negatively?

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

Since the banks and finance providers have been castigated for the way they seemingly indiscriminately awarded credit to people who could ill afford it, the chances of being accepted for loans and credit cards have decreased. Concurrently, there is a greater focus on individual's being aware of how credit works and what their financial behaviors means in terms of a credit score and history.

Why Balance Transfers Are So Readily Available

Concurrently, there is a greater focus on individual's being aware of how credit works and what their financial behaviors means in terms of a credit score and history.

The so called Credit Crunch has engendered a change in behaviours and has led to banks not only thinking about whom they extend credit to but also how they lend it.

It has also meant these card issuers have had to find new ways to increase custom.

Debt Stressed?

If you're struggling to pay your debts and covering living expenses, we're here to help. Through our national panel of Debt Management specialists, we can help customers with $10k or more in debt by consolidating your existing loans, stopping Debt collectors from contacting you and re-negotiating repayments on your terms!

... start your free debt analysis ...

The market has been hit with a whole slew of prepaid credit cards but also balance transfer offers have become a major marketing tool in the battle for new customers.

What is a balance transfer?

Quite simply, a balance transfer is moving the outstanding balance from one credit card to another that has a lower rate of interest. It is a simple way of reducing your monthly repayments on your card balance.

Why are they so attractive right now?

The credit card marketplace is highly competitive and these transfer is a relatively low risk option for the issuers to attract new customers. The need to attract new customers without creating a whole new generation of credit card owners unable to pay their debts has resulted in very attractive credit cards with transfer offers. Most major US issuing banks now have 0 balance credit cards in their portfolio of financial products. With offers extending from zero interest from 3 months right up to 18 months, there appears to be a credit card war raging with each bank trying to introduce the most attractive transfer offers.

Why balance transfer offers are not a get out of jail free card

The mere idea of reducing your monthly out goings by transferring existing credit card balances to a new card or cards where you can obtain an extended interest free period is very enticing. Prima facie, it seems entirely logical and indeed, eminently sensible. There are however, certain considerations that need to be taken into account before simply responding to the click here or apply now button on 0 balance interest credit cards:

You can adversely affect your credit score

Every time you make an application for a new card or apply for new credit of any form (loan, mortgage, cash advance and hire purchase), there is a note made on your credit file and your score is impacted with a reduction.
If you apply for multiple credit cards or respond to a number of balance transfer offers in a short period of time, there is a significant impact on your credit score.

There are fees involved

No credit is for free; even those deals with 0% interest on balances transferred will have an associated fee - after all, these card provider still has to make money from your transaction even if you are paying zero interest. Typically, balance transfer fees can be between 3-5% of the balance transferred meaning that when your interest free period starts it is with a higher amount that you had on your old card.

The APR after the initial offer period is high

One of the major pitfalls you could fall into is to take advantage of a balance transfer offer only to find that after the offer expiry date, the APR is higher than you were paying on your original credit card from where the balance was transferred.

It is imperative that you read the small print and are fully conversant with the interest rate you will be paying after the interest free period.

What not to use balance transfers for

When you are facing debt issues it is easy to succumb to ways of managing your finances that seem entirely logical at the time. There are two main ways of not managing your finances with balance transfer offers:

Do not use it as an excuse simply to get another credit card

If you are transferring a balance the temptation is there to keep the original credit card thereby increasing the availability of the credit at your disposal. This is a definite no-no unless you can absolutely afford the repayments on all of your cards
Do not use balance transfers as a way to avoid paying your debt.

The attraction of balance transfer offers does actually promote a way of carrying the debt; instead of paying off the debt you merely transfer it from one card to another and repeat after each introductory rate expires

In conclusion, are balance transfer offers and 0 balance transfer credit cards a bad thing? No! Not at all, but like every form of credit, they require close scrutiny before application and responsible management thereafter

Published: Sunday, 1st Aug 2021
Author: 148

Truck Loans Articles

Maximizing Your Investment: Strategies for Enhancing Truck Resale Value in Australia

The commercial vehicle market in Australia is a cornerstone of the transportation and logistics industries, with trucks playing an indispensable role. Whether for long-haul deliveries across the vast distances of the continent or for urban distribution, trucks are critical assets for businesses and entrepreneurs alike. This significance makes it essential for commercial vehicle buyers to understand the dynamics of truck resale values in Australia. - read more

The Most Important Factors to Consider When Buying a Truck

Buying a truck is a major investment, whether it's for personal use or business purposes. With the plethora of options available in the Australian market, it's important to consider various factors before making a purchase. Your specific needs, budget, lifestyle, and work requirements should be taken into account before making a decision to ensure the truck you buy fits your needs. - read more

How to Choose the Right Lender for Your Commercial Truck Loan

For many Australian businesses, purchasing a commercial vehicle is a significant investment that often requires financial assistance. Understanding the intricacies of truck financing is crucial, as the right loan can affect your company's bottom line and operational efficiency. With a plethora of lenders offering myriad loan products, choosing the most advantageous deal can be daunting. - read more

How to Get a Truck Loan with Less-Than-Perfect Credit

Securing finance for any significant purchase can be a challenge, especially when it comes to acquiring a truck for business purposes. Coupled with a less-than-perfect credit score, this task can seem daunting for many Australians. The ripple effects of financial constraints can impede business operations, affecting the lifeline of commercial ventures that rely on transportation. - read more

5 Tips on Securing Low-Interest Rates for Your Vehicle Purchase

Embarking on the journey of acquiring a commercial vehicle is a significant decision for any business. Securing a loan with a low-interest rate is not just a matter of luck; it involves meticulous planning and a thorough understanding of the lending landscape. This opening section sets the scene for our deep dive into navigating the commercial vehicle loan process with an eye toward minimizing costs and maximizing value. - read more

Finance News

Impact of Home Guarantee Scheme on Entry-Level Property Prices

24 Apr 2026: Paige Estritori

Recent analysis by property analytics firm Cotality indicates that the federal government's expanded Home Guarantee Scheme, introduced in October 2025, has inadvertently contributed to a surge in prices for entry-level properties. This development raises questions about the scheme's effectiveness in enhancing housing affordability for first-time buyers. - read more

Success of the Help to Buy Scheme in Assisting First-Time Homeowners

24 Apr 2026: Paige Estritori

Since its launch on 5 December 2025, the Australian Government's Help to Buy Scheme has made significant strides in facilitating homeownership for Australians facing financial hurdles. Within two months, the scheme has conditionally or fully approved over 2,356 places, with 278 households already moving into their new homes and more than 2,078 preparing to purchase. - read more

ACT's Commitment to Providing Affordable Homes for First-Time Buyers

24 Apr 2026: Paige Estritori

The Australian Capital Territory (ACT) Government has entered into a partnership with the federal government to deliver approximately 4,900 new homes, including over 1,700 designated exclusively for first-time buyers. This collaboration aims to address housing affordability and support individuals striving to enter the property market. - read more

MotorCycle Holdings Achieves Significant Revenue Growth in Early 2026

23 Apr 2026: Paige Estritori

MotorCycle Holdings Limited, Australia's leading motorcycle retailer, has reported a substantial 21% increase in revenue for the first half of the 2026 fiscal year, reaching $396.4 million. This growth is attributed to both organic expansion and the successful integration of the Peter Stevens/Harley-Heaven acquisition completed in July 2025. - read more

Victoria Moves to Secure Future of MotoGP at Phillip Island

23 Apr 2026: Paige Estritori

The Victorian government has extended a financial proposal to retain the Australian Motorcycle Grand Prix at Phillip Island, as the current contract approaches its expiration. This initiative aims to ensure the continuation of the event, which has been a staple at the Phillip Island circuit since the 1990s, drawing thousands of tourists annually. - read more

Click for more Finance News

Start Here

Get a free truck loan eligibility assessment and compare truck finance and leasing options without accessing your credit file!!

Knowledgebase

Capital Gain:
The profit realized from the sale of a capital asset, such as stock or real estate, where the sale price exceeds the purchase price.