Making balance transfers work for you
With their attractive low introductory interest rates, balance transfer offers can be a good opportunity to take control of your credit card debt and get back on track with your money.
However, there are a few things to be aware of if you’re thinking of a balance transfer, so here are some pointers to help you make the most of your new card if you do go ahead.
- See how different offers measure up
- Understand all the interest rates and fees
- Milk the low interest rate while you can
- Resist temptation: cut up your old cards
While at first glance, many balance transfer offers might look the same, they usually offer a different combination of features. The one that may catch your eye first is the special offer interest rate – which can be as low as 0% p.a.
While this can help you save on interest compared to the rate you’re currently paying on your balance, remember that it’s only for a limited time, so make sure you know when the offer period ends. And when it does, the rate will normally increase to a higher rate, so you may want to find out what this is to avoid any nasty surprises.
At the end of the offer period – which can often be anything from 6-24 months – the special introductory interest rate usually changes to a higher rate. This is often, but not always, one of the card’s standard rates such as the variable purchase or cash advance rate. As this rate will be charged on any remaining balance left on your card when the offer ends, don’t be caught out by a rate that’s more than what you’re paying now.
You might also want to keep in mind that the balance transfer rate doesn’t apply to new purchases or cash advances you make with your new credit card – you will pay standard (usually higher) interest rates on those. Another thing to consider is the annual card fee, which can vary a lot from card to card.
Remember to check if there’s a balance transfer fee, which can often be a percentage of the amount you transfer – commonly 1-3%. This would mean that if the balance transfer fee is 2% and you transfer $4,200, you’d pay an $84 fee, which you might want to factor into the equation.
If you do want to get the most out of a balance transfer offer – and the low or 0% p.a. rate – it can make sense to pay off your whole debt within the offer period. After taking control, it can then feel great to stay on top of things by paying your total balance every month. That way, you mightn’t have to pay any interest at all.
Note to self: if you’re tempted to hold onto your old cards ‘just in case’, consider closing your accounts and ditching the cards so you don’t fall back into bad habits. Be aware that banks don’t close your other card accounts even if you transfer your entire balance – you need to do this yourself. Usually, a quick phone call is all it takes. From there, greater control over your credit card could be yours.
Credit criteria, fees and charges apply. Terms and conditions available on request. Switches, upgrades or customers accessing employee benefits are ineligible for balance transfer offers. Our balance transfer offers may be varied or withdrawn at any time and are not available in conjunction with any other promotion.