Australia’s new year debt headache predicted to top $32 billion
Australians are set to be in for a new year credit card shock, with Mozo.com.au predicting that spending during the festive period will bring the average credit card debt to around $4,255.
But all is not lost for those Aussies wanting to get a grip on debt urged Mozo Director Kirsty Lamont, with a switch to a new credit card which offers a generous introductory balance transfer rate a great way to save hundreds.
“For shoppers feeling the effects of a Christmas cost blowout, a balance transfer can be a great way to detox debt with savings of up to $710 on offer by paying off the average post-Christmas debt with the best balance transfer deal compared with a regular credit card,” she said.
Lamont encouraged cardholders to do their research before committing to a new card by comparing features such as interest free periods and annual fees, and establishing good habits like sticking to a repayment schedule and limiting the number of new purchases.
Mozo’s analysis of a number of balance transfer card options found the No Annual Fee Card from St.George/BankSA/Bank of Melbourne to be the best option for debt busters, offering a potential $710 in savings when compared to a regular interest-accruing credit card.
Bankwest’s Breeze Mastercard held the second biggest potential savings opportunity ($628), followed by the Amplify Classic from St.George/BankSA/Bank of Melbourne ($631).
But Lamont suggested cardholders weigh up all the details of a new card before making the switch, as the longest balance transfer offers don’t always provide the best savings.
“The longest balance transfer deal in our database is the Citibank Platinum Card with 0 percent for 24 months but shoppers looking to minimise the pain of paying off Christmas should be wary that longer transfer periods often come with higher annual fees and balance transfer fees, which can run into hundreds of dollars,” she said,
4 tips for balance transfer success:
- Establish a budget and payment plan to ensure you’re able to pay off your debt before the balance transfer period ends. The last thing you’ll want is to be paying a high revert rate of 21.99%.
- Calculate your repayment potential using an online calculator. This way you’ll be able to see how long it will take to pay off your debt, and find an interest free period that suits your needs.
- Avoid making any new purchases on your card as these won’t be covered by the balance transfer rate.
- Be sure to compare all the details of a new card such as annual fees (look for a low cost or no fee option) and balance transfer fees (which can be as much as 3% of your balance transfer) before making a decision.