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Balance transfer deals to clean up your debt

If the idea of transferring your post-Christmas credit card balance from a credit card with an average interest rate of 16.89% or higher to one with a rate of 0% sounds appealing then here’s what you need to know.

After crunching the numbers on the 175 credit card balance transfer offers available we have identified the most important factors to consider when choosing a balance transfer to help pay down your current credit card debt. These include:

  • Introductory rate – the rate of interest you will be charged in the introductory period.
  • Balance transfer fee – the fee that you will be charged when you perform the balance transfer, which is usually a percentage of the transfer amount and typically ranges from 1-3%.
  • Introductory period – the amount of time that the introductory rate will apply.
  • Revert rate – the rate of interest you will pay on any remaining balance that is transferred to the new card, after the introductory period has expired.
  • Annual fee – the fee payable each year that you hold the new account, which is sometimes waived in the first year.

To work out the cost of the current deals, you need to take into account the above factors and importantly the size of the balance you’re transferring to the new card.

If you have a relatively small balance that you wish to transfer to a card with a lower interest rate, and you would like to pay it off within one year, there are currently 12 cards on the CANSTAR database that will allow you to do this without paying any additional fees or interest. Here are the top five, sorted first by their annual fee and then by their revert rate:


CompanyCardIntro RateBalance Transfer FeeIntro PeriodRevert RateAnnual FeeAnnual Fee First YearMonthly Payment RequiredTotal Repaid
Northern Inland CULow Rate Visa Credit Card0.00%0.00%12 months8.99%$0.00$0.00$250.00$3,000.00
Heritage BankGold Low Rate0.00%0.00%12 months11.80%$0.00$0.00$250.00$3,000.00
Victoria Teachers Mutual BankVisa Classic Credit Card0.00%0.00%12 months12.94%$0.00$0.00$250.00$3,000.00
Police BankVisa Credit Card0.00%0.00%12 months10.76%$30.00$0.00$250.00$3,000.00
Westpac55 Day Classic0.00%0.00%16 months19.84%$30.00$0.00$250.00$3,000.00
Rates and fees as at 20/01/2017. Calculations based on $3,000 balance transfer paid off in equal instalments over 12 months. Source: www.canstar.com.au

 

If you have a larger balance that you need to transfer, say $10,000, but will require a longer timeframe, say three years, to pay the debt off, things such as the revert rate,  annual fees and the introductory period become more important. Here is a list of the top five balance transfers for this scenario, sorted first by the estimated monthly repayments required to clear the debt in three years:


CompanyCardIntro RateBalance Transfer FeeIntro PeriodRevert RateAnnual FeeAnnual Fee First YearMonthly Payment RequiredTotal Repaid
Northern Inland CULow Rate Visa Credit Card0.00%0.00%12 months8.99%$0.00$0.00$295.07$10,622.52
St. George Banking Group*Vertigo Visa0.00%0.00%18 months13.24%$55.00$55.00$296.74$10,682.64
BankwestBreeze MasterCard0.00%2.00%21 months12.99%$59.00$59.00$298.34$10,740.24
St. George Banking Group*Vertigo Platinum0.00%0.00%18 months12.74%$99.00$99.00$299.98$10,799.28
Police BankVisa Credit Card0.00%0.00%12 months10.76%$30.00$0.00$300.15$10,805.40
Rates and fees as at 20/01/2017. Calculations based on $10,000 balance transfer paid off in equal instalments of 36 months. Source: canstar.com.au

*St. George Banking Group includes cards issued by St. George Bank, Bank of Melbourne and BankSA.

 

As you can see, cards that have a low or no annual fee and a low revert rate will be well suited for pretty much any balance transfer, but sometimes, an annual fee and a balance transfer fee can be offset by getting a longer introductory period in which to pay your debt.

To benefit from a balance transfer it’s important to read all the terms and conditions to make sure that you meet all the requirements. Penalties, such as activating the revert rate for failing to make minimum repayments, could arise.

While it may be tempting to jump from one balance transfer to another and only make the minimum repayments before moving to a new card, keep in mind that every application for credit is listed on your credit file for several years and serial applications could hurt your chances of securing additional credit when you need it.

Most importantly, don’t fall into the trap of seeing a balance transfer as a way to extend the amount of credit available to you. Create a payment plan to clear your debt during the introductory period and stick to it!

Belinda Williamson is spokesperson for canstar.com.au.

Written by Belinda Williamson

Belinda Williamson

Belinda Williamson is spokesperson for CANSTAR.

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