If you’ve racked up a considerable amount of debt on your credit card, there’s a moment you’re probably dreading - the opening of your next credit card statement. When you tear it open, three main options will probably come to mind:
We know which option we’d choose! So if option c) of a credit card transfer sounds like the right choice for you, read on, as we reveal everything you need to know about blasting debt with a balance transfer offer:
It’s exactly what the name suggests. You transfer your debt from your existing credit card to a new card with a 0% balance transfer offer attached.
You’ll benefit from not paying interest on that debt for the balance transfer period and the new credit card provider will benefit from having a new customer (AKA you).
It’s a no brainer. When you apply for a balance transfer credit card the new provider will ask you to provide the details of your current lender and the card number. Once approved, the new provider will pay the balance on your old card and it will be rolled over to your new one.
This will depend on how much you’re approved for, as some card providers have caps of 80% of the card limit that can be transferred across. For instance, if you’re looking to transfer $3,000, you may need to get your card approved for a limit of $3,600.
Generally speaking most shorter term balance transfer cards don’t have fees for credit card transfers.
However, longer term balance transfer cards of usually 18-24 months may charge a handling fee of anywhere between 1%-2.5% of the balance being transferred. Want an example? Say you’re transferring $2,500 and the new card has a handling fee of 1%, this means you would need to pay $25 upfront to the provider.
So only go for a balance transfer card with a handling fee, if you know you need a longer timeframe to repay the debt.
Now that we’ve answered some of the frequently asked questions around credit card transfers, it’s time to arm yourself with some savvy tactics to ensure you ditch that debt within the BT period:
First things, first - rip open that statement and assess the damage. Once you know how much you’re up for, it’s time to work out how long it will take to pay off that debt.
Quick scenario time: Jenny spent up big during the Christmas season and now has a balance of $3,000 on her card. After her rent, utility bills and general living expenses are taken out, Jenny can only afford to reasonably repay $500 a month. So this means it will take Jenny around 6 months to repay her debt and as you’ve probably guessed, this means Jenny will need a new credit card with a balance transfer offer of at least 6 months.
Now that you know how long Jenny will need a BT card for, it’s your turn to crunch the numbers - with our credit card debt repayments calculator - to see what timeframe you’ll need.
One of the great things about balance transfer deals is there are usually plenty of them in the market with terms ranging anywhere from 3 months up to a lengthy 24 months. So all you need to do is choose a card that ticks the boxes for you - but where to start?
There are two ways you can kick off your credit card transfer search on Mozo:
Compare deals with our balance transfer comparison tool: We have a dedicated credit card transfer section, which is home to some of the top BT offers currently around, allowing you to quickly compare the cards by their balance transfer rate, annual fee and purchase rate.
Use our Switch & Save Calculator: Select the option “transfer an existing debt”, enter your current credit card details and this tool will quickly show you how much you could save by making the switch to a balance transfer deal.
One of the reasons you may have found yourself in debt, is because you have too much going on to remember to make that pesky credit card payment. The solution? Take 5-10 minutes to set up a direct debit in your bank account, which will automatically pay the credit card provider by the due date.
As we mentioned in tactic 1, make sure you crunch the numbers and set up an ongoing repayment amount that will see you clear the debt within the BT period.
Okay, you don’t have to literally put your plastic in a block of ice in the freezer but this tactic is all about avoiding purchases on the new balance transfer card at all costs. Why, are new purchases a no go? Because any new purchases made on the card will be charged the purchase rate (not the 0% balance transfer rate) and also have to be paid off first. So if Jenny sets up an automatic payment of $500 but splashes out on that new GoPro worth $300, only $200 will go towards paying off her debt.
Credit cards may come with many perks attached like rewards points and free insurances but they also come with just as many catches. One of those gotchas is the cash advance rate, which you’ll be charged if you withdraw cash from an ATM using the card.
You might be thinking, “Yeh we know credit cards come with interest rates attached!” But word of warning, cash advance rates are notorious for being higher than the standard purchase rate and you also don’t have the luxury of interest free days, instead you’ll be charged that cash advance rate from the day you withdraw the cash.
Once you’ve diligently repaid the credit card debt, it’s time to consider whether that plastic still deserves a spot in your wallet. One of the major considerations will be the interest rate the BT card switches to after the balance transfer period comes to an end. Because if you find it reverts to a high purchase rate, or even higher cash advance rate then it’s time to make the switch again to a better deal and cancel that card.
If you manage to pay off your debt within the balance transfer period, this means one thing - you are now a thrifty credit card manager. So keep up this good habit and avoid falling back into your old spending habits by only spending what you can reasonably afford to repay and always paying your balance in full and on time each month.
Ready to kick off your credit card transfer search? Then head on over to our balance transfer hub!