If you’re thinking about making a balance transfer onto a NAB credit card or you’ve just made one, congratulations – you’re on the path to clearing your debt! Here’s some information to help you make the most of your new balance transfer.
First, you need to know that transferring your balance can take a while – usually around two to four weeks. Your old card will still be active until the transfer takes place, then it’s best to close it down. After all, you’re trying to reduce your debt, so there’s no point in keeping the card.
Even if you’ve destroyed the old card, it’s important to keep making payments on it until the transfer takes place, otherwise you could end up paying a fee as well as interest.
Restrictions to the amount you can transfer
The amount you can transfer to your new card is usually a percentage of the card’s credit limit. It can vary between banks so you need to check this. NAB, has a maximum balance transfer of 90%, so if you have a $1,000 credit limit on your new card, you’d be able to transfer a maximum of $900 from another credit card.
You’d still have $100 of credit left on your new card to make purchases or to redirect regular payments you might have set up like a gym membership, but making purchases affects paying off your transferred balance. Read on to find out how.
Did you get a special balance transfer rate?
If you did, this special rate is only going to last for a set period. Make sure you know how long you’ve got before the interest on your balance transfer goes up. That way you can budget your payments to make the most of the lower rate.
Are there interest-free days?
If you’ve transferred a credit card balance to your NAB credit card, it’s important to know that there’s no interest-free period. We calculate interest on your balance transfer at the special rate from the first day you make the transfer (unless your balance transfer rate is 0%).
There are no interest-free days for anything on your credit card – including purchases – until you’ve paid off all of your transferred balance. This means that if you use your credit card to buy something, interest starts from the day you make the purchase. And this interest will be at the purchase interest rate, not at the lower balance transfer rate.
Once you’ve paid
off your balance transfer amount (plus any purchases you
made during the balance transfer period), you’ll get your
interest-free days on purchases in the normal way.
Since shopping costs me interest, where do my payments go?
By making a balance transfer, you’ve set yourself on a path to get out of debt, and paying off the transfer amount within the special low rate period is a good start. But if you’re going to keep spending on your credit card, even though there are no interest-free days, it’s important to know how any payments you make are applied.
There’s a full explanation of the way your payments work in our blog post Where do credit card payments go? The short version is that we put your money towards the amounts on your statement that are being charged highest interest first.
This could give you the flexibility to still use your card for purchases before you pay off your balance transfer (which has the special low interest rate). If you want to spend some money in the short term but you still plan to pay off your balance transfer by the end of the special rate period, this could help you save on interest.
Are you still reducing your balance?
If you’re not paying much off your card and keep spending so your balance keeps getting higher and higher, then you might be better off getting a personal loan to clear up your credit card debt and get rid of cards altogether. You might like to read is debt consolidation right for you?
What happens when the special interest rate expires?
You’ll know how long you’ve got to pay off your balance transfer before the special interest rate expires, so the best thing to do is to get it paid off before that ends. If you don’t, the rate goes up.
Make sure you know how interest is calculated at the end of the balance transfer special rate period. If you’re with NAB you’ll switch to an ordinary purchase interest rate because we think this is fairer. Other banks might use the more expensive cash advance rate, so make sure you read the fine print.
You can see interest rates for all our credit cards in the credit card comparison table.
Did you find this article helpful?
If there’s anything else you’d like to know, leave us a comment below and we’ll reply as soon as we can.