Credit card companies are offering enticing balance transfer deals to help lure debt-ridden customers with long interest free periods.
Citi’s platinum credit card is now the market leader recently increasing the interest free period for balance transfers from 24 to 26 months.
For people who spent up big over the holiday season or used their cards for back-to-school purchases transferring the debt to another credit card with a long interest free period can give you some breathing space.
Look for a card with a low balance transfer and an ongoing annual fee that’s ideally less than $100, if not $0.
American Express’ low rate card has no annual fee and still offers 12 months’ interest free with a revert rate of 11.99%.
If you want more time to pay down your debt, Bankwest’s low rate Breeze Mastercard is offering 24 months interest free with a revert rate of 12.99%, but watch out for the 2% balance transfer fee, on the average credit card debt of $4,073, it will add $81 to your bill.
The golden rule with balance transfer offers is to pay off the debt before the ‘free’ period ends. Some cards revert to alarmingly high interest rates which can go as high as 25.99%.
So, if you don’t clear the card in time you could find yourself in a world of pain.
It’s also worth setting up an automatic repayment plan that sees you chip away at the debt every month.
The temptation for a lot of people is to hold off paying a cent until the end of the honeymoon period, but this can leave you in a worse position than where you began once the revert rate kicks in.
The second rule with balance transfer cards is to cut it up as soon as you get it.
A lot of people don’t realise that if you do a balance transfer, you automatically lose your interest free days for new purchases until you clear the debt, so any additional shopping will attract interest straight away.