moneyhound

moneyhound

Credit Cards » Article

Credit Card Balance Transfer Offers - Explained

By Lauren Leisk, Yahoo!7 Moneyhound Updated November 24, 2012, 9:00 am

There are pros and cons when it comes to switching debt between credit cards.


Transferring money between credit cards can help kick the debt cycle, or, it could push you further into a credit trap.


Keeping tabs on the good and bad points of credit card balance transfer offers can help you make the best decisions towards getting out of debt.


Let’s start with the positives:


Debt consolidation


A balance transfer credit card offer may be a great way of pooling together all your debts into one lower interest rate loan.


As well as a better deal on interest, you may also find yourself saving on fees and unwanted service charges.


Related: When interest is not so free


Low to zero interest


You may be able to secure a great deal on existing debt for a short period, but don’t use the opportunity to spend more. Rather, use your short-term reprieve to help you get back on top of repayments and out of the debt cycle. Us it as an opportunity to pay down your debt without accumulating any added interest on the amount owing.


Repayment scheduling


The best way to take advantage of credit card balance transfer offers is to set automatic repayment schedules or direct debits to ensure you pay off all or most of the debt by the time the introductory low rate period is over. Calculate how much you need to pay to ensure you get the most from your low rate balance transfer offer and set your target accordingly.


Related: Common credit card myths debunked


Time periods to suit your credit history


If you think it’s going to take you a year to repay your debt, don’t choose a rock-bottom interest rate with a six-month period. Flexibility to match your habits can help you get the most out of your balance transfer credit card offer.


For instance, you could choose between the ANZ Low Rate card offer of 0% p.a. on balance transfers for 9 months, or instead go for the HSBC Credit card offering 0% for 6 months (limited time!).


Transform your credit history


You can use your honeymoon period and lower payments to start getting back on track with your credit history. Some good habits are to pay more than the minimum and pay just as your statement is due, if not before.


Related: How to stay out of credit card debt



But of course there are also a few negatives you will need to try and avoid:


Failing to pay


If you don’t pay down the debt transferred within the period, you could end up owing much more than you expected. Check what the interest rate will revert to (default to) as well as any penalties you may incur rather than focusing on the honeymoon offer only.


Also check to see if default rate is applied to the debt transferred from the initial date of transfer if it's not paid in full by the end of the honeymoon period.


The new spend


Is your new spending attracting a higher interest rate than you expected? Some credit cards may offer attractive rates for rolling over your debt and then sting you with higher interest for new purchases.


Related:Which credit card is best? Help me choose


The lazy danger


You could get yourself into more trouble if you fail to pay off the debt transferred, and then add insult to injury by using the new card for additional purchases too. The banks know you will be enticed with low balance transfer offers and hope to retain you as a long-term customer. So forget about short-term gains and look for the best deal for your overall circumstances.


Moneyhound makes it easy to compare balance transfer credit cards buy showing you all them in an easy to read table format here.


When choosing your credit card limit don't take as much as you can get, be sensible and make sure you don't give yourself the opportunity to spend more than you earn.


Multiple interest rates


If you’re transferring debt from more than one card, different rates may apply for each of those sums. Check the fine print to make sure multiple balance transfers are not attracting different rates. Your low interest rate may only apply to the smallest balance transfer. Luckily, since July 12, 2012, the lowest rate applies to the biggest transfer.


Related: Am I a shopaholic?


Interest-free grey areas


Your new credit card may have no loyalty period when it comes to transfers from other cards. Widely lauded interest-free days may not apply to existing balances and interest could be being charged immediately from the date of purchase.


If you closely compare credit card balance transfer offers before you apply, you can use them to help you get out of debt. So long as you're aware of the dangers, and can trust yourself to pay down the debt as quickly as you can they can save you hundreds of dollars in interest.


Was this article useful? Use the feedback button below or comment and share your tips on our facebook page.

Moneyhound Product Picks this Month:

COMPARE & SAVE

Cheap Credit Cards

COMPARE MORE

Low Rate Home Loans

COMPARE MORE

Personal Loan Offers

COMPARE MORE

Top Savings Accounts

COMPARE MORE

Mobile Phone Deals

COMPARE MORE

Switch Electricity Providers

COMPARE MORE

Newsletter

Get the latest deals that could save you money on your monthly bills

Join the Moneyhound mailing list >>

Most Popular Articles

Help me find a credit card

  • Card payment network

  • Already have a credit card? Find your current credit card here and compare it with others

Help me Save

Use our credit card balance transfer calculator

  • 1. Find your current card

  • 2. Enter your current balance

  • By switching, in 6 mths you could

  • Transfer rate (APR*) used : 0%

    Transfer rate term used : 6 months

*APR and APR term suggestions are based on market competitive products listed on this page. Fees and charges are payable. Read the disclaimer

Moneyhound helps you compare 242 credit cards from 63 trusted issuers

Credit Cards Latest News

MORE Credit Card News

Compare more products and services

Skip navigation
Skip navigation

Disclaimer: Yahoo!7 has partnered with RateCity, WhistleOut and SwitchWise for the provision of pricing information for financial, telecoms and energy products. Yahoo!7 has no direct affiliation with any finance, telecom or energy institutions listed here to promote this content. The content of this website has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should not acquire any financial products before taking into account whether your selected products are appropriate to your personal circumstances, having regard to your own objectives, financial situation and needs. Whilst reasonable efforts are maintained to provide accurate, true and correct information, it is advised that you confirm the terms of any product or contract and consult the product disclosure statement before making a decision to apply to any product issuer.

Yahoo!7 Money Hound Pty Ltd | ACN: 151 232 450 | ABN: 20 151 232 450
Australian Financial Services Licence: 407341 | Australian Credit Licence: 407723 | Credit Ombudsman Service: member M0011954
Financial Services Guide | Privacy Policy | Terms of Service