The 5 biggest balance transfer traps to avoid in 2018

Ceyda Erem   |   09 Jan 2018

redactor/hero-images/242/bt_traps_content.jpg

Choosing to transfer debt onto a balance transfer credit card is often a no-brainer for many Aussies because of the alluring 0% interest rate. But with this handy zero interest offer comes a lot of misconceptions about how it can be used effectively, leading many card holders to fall into dangerous balance transfer traps.

If you are thinking of using a balance transfer credit card to crush debt, here are the five biggest balance transfer traps to avoid.

5 balance transfer credit cards to help crush debt - rates updated daily

  • Australian Military Bank Low Rate Visa Credit Card

    0% p.a. for 12 months and then 11.99% p.a.

    11.99% p.a.

    $49

    A great card for everyday spending, with a compeititve low interest rate and up to 55 interest free days on your purchases. A great choice for savvy spenders in a hurry, apply online for a quick assessment.

    • 0% p.a. for 12 months and then 11.99% p.a.

    • $49

    • 11.99% p.a.

    • 45

    • 19.99% p.a.

    • $4.50

    Details Close

  • Woolworths Everyday Platinum Credit Card

    0% p.a. for 14 months and then 21.99% p.a.

    19.99% p.a.

    $49 $0 in the first year

    Perfect for practical spenders, pay no annual fee in the first year and save up to $50 on your Woolies shop each month. Plus new cardholders can score a $50 Woolies eGift Card when you spend $150 a month for the first 3 months. Too easy!

    • 0% p.a. for 14 months and then 21.99% p.a.

    • $49 $0 in the first year

    • 19.99% p.a.

    • 55

    • 21.99% p.a.

    • 3%, minimum $5

    • Woolworths Money Shopping Card sent every 4 months if enough points have been accrued.

    Details Close

  • Bankwest Breeze Platinum Mastercard

    0% p.a. for 13 months and then 12.99% p.a. (2.00% balance transfer fee)

    0% p.a. for 13 months then 12.99% p.a.

    $99

    Streamline your budget with a low ongoing interest rate, up to 55 interest free days and 0% p.a. on balance transfers for 13 months. Plus, travel with free international travel insurance for you and your family by buying your tickets on your card.

    • 0% p.a. for 13 months and then 12.99% p.a. (2.00% balance transfer fee)

    • $99

    • 0% p.a. for 13 months then 12.99% p.a.

    • 55

    • 21.99% p.a.

    • 2%, Min $4.00

    Details Close

  • 28 Degrees Platinum Mastercard

    4.99% p.a. for 6 months and then 21.99% p.a.

    21.99% p.a.

    $0

    With no annual fee, $0 overseas transaction fees, free WiFi at more than 1 millionhotspots around the globe and the option to pay with any mobile or wearable device - could this be the perfect travelling companion?

    • 4.99% p.a. for 6 months and then 21.99% p.a.

    • $0

    • 21.99% p.a.

    • 55

    • 21.99% p.a.

    • 3%, min $4

    Details Close

  • ANZ Low Rate

    0% p.a. for 15 months and then 21.74% p.a.

    12.49% p.a.

    $58

    With a low interest rate on your purchases and 0.0% p.a. on balance transfers for the first 15 months (T&Cs apply), this card makes for easy everyday spending. Apply online in just five minutes, and receive an answer in 60 seconds.

    • 0% p.a. for 15 months and then 21.74% p.a.

    • $58

    • 12.49% p.a.

    • 55

    • 21.74% p.a.

    • 2%

    Details Close

Only making the minimum repayment 

While you may jump for joy at the minimum amount your are eligible to pay each month, do not give in to this temptation. By only paying the minimum amount, you run the risk of not being able to pay off the debt by the time the interest-free period ends, and winding up paying interest at the higher revert rate.

Moving debt around 

Aha, you think you’ve found the answer to escaping the dreaded revert rate? Does it involve moving from one BT card to another? Not so fast. Yes, you will avoid paying interest on your debt, but jumping from one card to another can hurt your credit score, especially if your application is declined. Plus, this doesn’t fix the problem of your debt - it just delays having to deal with paying off your balance.

Using those rewards points for spending

Remember those misconceptions we mentioned earlier? This is one of them. Your balance transfer card is designed to help you climb out of debt, not make the hole deeper. If you use your card to make purchases, you will have to pay off this spending first, before moving onto other debt. And if you withdraw money using the card, you will have to pay the cash advance rate from the day you make the withdrawal until it’s paid off in full.

Forgetting about your old card 

First of all, it’s important to keep in mind that balance transfers usually take up to 2 weeks to complete, so you’ll still need to continue making repayments on your old card in the meantime. Otherwise, you may face a late payment fee. Another trap to avoid is leaving your old card account open and either paying an annual fee for a card you’re not using, or falling back into the habit of spending on it and starting the debt cycle all over again.

Paying transfer fees 

Balance transfer fees typically range between 1% - 3% of the balance you’re transferring and are usually charged for BT cards with longer interest-free periods, like 18 - 24 months. This can add up over time if you find yourself often moving debt around, or if you’re transferring a hefty balance.

But the good news is, balance transfer fees are avoidable you just need to look for a BT card offer with no transfer fees.

Mozo may receive advertising fees from the financial institutions, issuers of financial or credit products and third party advice providers that are shown on this page. These fees are based on a cost per click, cost per acquisition, or a fixed fee.