RBA data shows Australians have around $33 billion in credit card debt and the average credit card rate is now eight times above the official cash rate.
So if you’re one of the many Aussies with debt hanging around on a credit card with a high interest rate attached, the new financial year is the perfect time to start afresh and kick that lingering debt to the curb. All it takes is some savvy tactics and a competitive balance transfer deal to see you end 2015 debt free.
Here are four winning strategies for cracking your credit card debt:
1. Work out how long it will take to repay
While paying off your debt should be a major goal over the next 6 months, you don’t want to stretch yourself too much. So take the time to calculate how long you will need a balance transfer card for to repay your debt. For instance, if you have a debt of $4,000 and can afford $300 coming out of your account each month, our debt payments calculator shows you would need to look for a 0% BT card with a period of at least 14 months.
2. Avoid spending on the BT card
Almost half of all credit cards on the market offer a balance transfer, which makes it easier to pay down your debt without a high interest rate hanging over your head. However, we should warn you that balance transfer cards do charge interest – and a fair amount of it varying from 9.99% to 20.99% – if you start to use the card for new purchases.
Another reason you’ll want to avoid spending on a BT card is because all new purchases have to be paid off first. So if you make $600 worth of new purchases on the card and keep up a monthly repayment of $300 it will take you 2 months until you’ve paid off those new items and can start hacking away at that debt again.
3. Check the revert rate
When you start the hunt for a competitive balance transfer deal, it’s a wise idea to look for a credit card that not only has a great balance transfer offer but a low revert rate as well, so that’s it’s worthy of your wallet once you’ve repaid the debt and the BT period has come to an end.
4. Don’t make ATM withdrawals
When you use a credit card to take out cash from an ATM, you will be charged the provider’s cash advance rate, which can often climb over 20%. Plus, if that doesn’t deter you from making ATM withdrawals, interest free periods don’t apply for cash advances.
Top balance transfer deals
Citibank Platinum – 0% balance transfer offer for 24 months then reverts to 21.74%. 20.99% purchase rate and $199 annual fee.
St.George Vertigo – 0% balance transfer offer for 18 months then reverts 21.49%. 0% purchase rate for 3 months then reverts to 13.24%. $55 annual fee.
Westpac Low Rate – 0% balance transfer offer for 16 months then reverts 21.49%. 0% purchase rate for 3 months then reverts to 13.49%. $59 annual fee, $0 for Westpac customers in the first year.
ANZ Low Rate – 0% balance transfer offer for 16 months (2.00% handling fee). 13.49% purchase rate and $58 annual fee.
Woolworths Money Everyday Platinum Credit Card – 0% balance transfer offer for 9 months then reverts to 21.99%. 20.49% purchase rate and $139 annual fee, $99 for the first year.