Defined Terms and Documents    

Balance Transfer Interest Free Period Offers or Balance Transfer Offers means (as summarised in Predatory Marketing) the most highly differentiated Credit Card Product that includes an enticement/lure to attract Credit Cardholders with high Outstanding Indebtedness over more than one Credit Card to seemingly gain respite from paying Usurious Unsecured Interest Rates by transferring their Indebtedness to a different Credit Card Issuer which offers a 'Teaser Interest Rate' (sometimes 0%) for an 'Introductory Period' (from 3 months to 24 months) either with no one-off 'transfer fee' or a B.T. Amount fee up to say 3%.

History of Balance Transfers (by the disreputable CreditCards.com website) chronicles that Balance Transfer Interest-Free Period Offers first raised their ugly head in the USA in 1992 and entered the UK Credit Card market by the mid 1990s.  Casual empiricism suggests that Balance Transfer Offers entered the Australian Credit Card Products by the mid- '90s.

Hidden discretely in Balance Transfer Offers (until 1 July 2012) was an 'Order of Payments' Allocation Practice in the fine print of the terms and conditions that specified which balance(s) the Credit Card Issuer of a Balance Transfer Credit Card would apply payments by the Credit Cardholder to firstly.  In nearly all cases payments by the 'Acceptor' of a Balance Transfer Credit Card were applied to the lowest interest rate balances first, namely the monies in the Zero Balance Transfer for 24 months and the highest interest rate, namely the recent payment for recent Purchases, last.  Any payments by the Credit Cardholder were applied firstly to the Balance Transfer amount under a 'Teaser Interest Rate', whereupon any Purchases or Cash Advances were deemed unpaid and incurred interest at the specified interest rates from the date of each Purchase or Cash Advance.  Hence, if you had a Balance Transfer amount, and you used the Balance Transfer Credit Card, you did not enjoy an Interest Free Period (referred to as a Grace Period in the USA) and you supposed 24 months Zero Interest Rate on your Balance Transfer Amount was eroded. 

Below is an extract from the Woolworths Everyday Money MasterCard Credit Card pre 1 July 2012:

(2) The interest rate of 5.99% will apply for the first 6 months of your balance transfers from non HSBC/Woolworths credit or store cards. After this period, any balance outstanding from the balance your transfer will accrue interest at the Cash Advance Interest Rate applicable at the time (currently 21.34%p.a).  HSBC may allocate payments we receive from you to pay the total amount owing in any order we see fit, including applying any or all payments made to your Woolworths credit card account, to reduce the balance(s) transferred first and then any subsequent purchases.

Mr Clitheroe — formerly of Nine’s Money show, the host of the Talking Money radio show and chairman of the Federal Government’s Financial Literacy Board — took aim at zero per cent balance transfer deals.  “They are a debt trap,” Mr Clitheroe said. "Those who take out the deals were spending more than they earned and the banks knew it."

The Guardian article "Interest-free credit card trap snaring unwitting borrowers" - 25 March 2012 notes, 'inter alia' that:.

"Brian Cole, of Capital One in the UK, the bank that first introduced zero-interest balance transfers to Britain in the 90s, says: "There's a lot of practice in the [banking] marketplace that is shameful, and credit card companies are not immune. [Balance transfer] customers think they're going to progress in getting out of debt, and get some relief from interest payments. But make a mistake and you will end up making money for your credit card company."

Anyone who believes they are offered to reduce the interest burden on Credit Cardholders is untruthful. 

Commonwealth Bank has maintained for many years that Balance Transfer Offers should be banned:

"CBA's head of retail banking services, Matt Comyn, claimed it had never offered zero rates on balance transfers because it could become a "debt trap" for customers.

            "We view that such arrangements are not the right thing to offer our customers," he said"

 

Commonwealth Bank said zero per cent balance transfers should be banned and mandatory minimum repayments of interest and principal should be imposed for card holders of up to 2.5 per cent.

NAB question CBA's motives

However, NAB – which has the smallest credit card market share of the major banks at 10.5 per cent – told the same hearing 0 per cent balance transfers helped competition and questioned the motives of CBA as the dominant credit card issuer with about a quarter of the market.

Mr Comyn denied the bank's enthusiasm for banning zero per cent balance transfers was more about reducing the ability of competitors to take its customers. He said CBA competed on other features, including technological innovation such as giving customers the ability to block overseas transactions."

Below are three Google threads for webpages that have since been amended to remove reference to the number of different types of Balance Transfer Credit Cards, but the number of alleged Balance Transfer Credit Cards, namely 113 and 106 different cards still appear in the below threads.

Alas some Credit Card Issuers devised new methods to exploit Australian Credit Cardholders s with poor Financial Literacy as exampled in Labyrinth of ‘Concealed Spiders’:

(A)       Example 3 highlights that some Credit Card Issuers of Balance Transfer Credit Cards have since introduced, but not overtly publicised to prospective new customers, that an Interest Free Period will not apply on Purchases until after the Balance Transfer amount is repaid in full and the Credit Cardholder has repaid its Total Amount Owing, including its Balance Transfer amount.

(B)       Example 4 highlights that on some of the Balance Transfer Interest-Free Period Offers, should the Credit Cardholder make a Purchase/s and not repay their Balance Transfer amount and any Purchase/s by the Payment Due Date, s/he will not only be charged interest on the aggregate of their Purchases and the Balance Transfer amount, but also forego their Interest Free Period for the subsequent two months.

(C)       Some Credit Card Issuers of Balance Transfer Credit Cards provide a Calculator for prospective new customers to determine how much interest they could save during the 'Teaser Interest Rate' (sometimes 0%) for an 'Introductory Period' (from 3 months to 24 months).  Hidden in the fine print is  An assumptions that this calculator makes is that  "You don’t make any purchases on your card until the promotional period ends or the balance transfer is paid in full."  See Calculate how much interest you could save!

Re Example 1 in Labyrinth of ‘Concealed Spiders’, below is an extract from the St George Bank Vertigo Platinum Card webpage:

However, it may be gleaned from the Writer's on-line 'Chat' with Stavroula at St George Bank on 13 Jan '15 that St George offers an Interest Free Period of 3 months on Purchases, in addition to an Interest Free Period on the Balance Transfer amount to approved customers.  However, after that initial 3 months, St George charges interest @ 12.74% p.a. on Purchases for 3 months after any Balance Transfer amount is repaid. 

Stavroula:  After 3 months, if your closing balance is paid in full you can take advantage of the up to 55 day interest free period by consecutively paying your closing balance in full by the statement due date for the next 2 statements at least.

By maintaining a discipline of not making Purchases or not making any Cash Advances altogether, a Credit Cardholder can ensure it maintains the full benefits of the original Balance Transfer Interest-Free Period.  However, few Credit Cardholders which switch their Outstanding Indebtedness from their Credit Card to a (new) Balance Transfer Interest Free Period Credit Card are unaware of the perils of making a Purchase/s. Some others that are aware exhibit requisite discipline, more likely when assisted by a 'Financial Counsellor', that works for one of 44 Australian charities which Australian Governments fund approx. $11 million annually.

Because transferring to new credit cards often results in lowered rates, one could seek to repeatedly make use of this process to save quite a lot of money over the years. The idea is to switch to a new low Balance Transfer Credit Card the moment the previous Balance Transfer 'Teaser Interest Rate' has expired.  However, a caveat as the Credit Card contract might include a clause preventing the Credit Cardholder from transferring the balance a second time within a certain period of time.

To deter Credit Cardholders switching to another Credit Card Issuers' Balance Transfer Interest-Free Period Credit Card, some Credit Card Issuers' of Balance Transfer Interest-Free Period charged a Balance Transfer Fee.  Citibank is offering 0% p.a. for 24 months on balance transfers.  A 3% Balance Transfer Fee applies.  Hence, if the Balance Transfer amount is $2,000, the Balance Transfer Fee is $60.

Most Credit Card Issuers do not charge any interest for up to 24 months on the Balance Transfer amount because the -

(a)         RBA's Cash Rate to buy large 'parcels' of cash is only 1.5%; and

(b)         Cash Advance interest rates often around 22%. are Usurious Personal Loan Interest Rates    -

              *         once the 'Introductory Period' has expired; or

              *         more likely once monthly repayments have wiped out the 'Balance Transfer Amount' - as explained in the second para above.

The highest Cash Advance interest rate is 29.49% from G.E. Money's "Go MasterCard"

The National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill was passed on 4 July 2011 and was enacted as at 1 July 2012, whereupon Credit Card Issuers were no longer able to apply the afore-mentioned 'Order of Payments' Allocation Practice, but must now apply a Credit Cardholder's payment/s to the highest interest rate debt, namely the most expensive part of a Credit Cardholder's Credit Card  Outstanding Indebtedness. 

Above is a Print Screen of page 3 of Westpac's document 'Changes to your credit card payments' which shows that -
*   prior to 1 July 2012, payments were applied to the lowest interest rate first; and
*   from 1 July 2012, payments were applied to the highest interest rate first.

Balance Transfer Credit Cards - finder.com.au  - 11 Sept 2017