Thursday, 08 October 2015
Posted by Rebeccah Elley
Can you believe it’s already midway through October? So it won’t be long until the silly season is upon us and we’ll be forking out cash for everything from Kris Kringle gifts to Christmas lunch.
But if you’ve got debt hanging around on your credit card, the thought of these expenses will probably give you the Christmas cringe.
Thankfully, at this time of year there are plenty of credit cards that come with 0% balance transfer rates attached. In fact, according to Mozo’s database there are currently 148 credit cards offering a balance transfer deal right now, with the longest 0% BT offer available for 24 months through Citibank with its Platinum card (2% handling fee).
So if you’re ready to take on a balance transfer offer and drop your debt for good, here are our top tips for debt blasting success:
An important thing to remember when it comes to balance transfer deals is they won’t last forever and always have an expiry date. That’s why it’s essential to do the maths prior to taking out a BT card, to work out the exact timeframe you’ll need to comfortably repay the balance.
Say you have the average credit card balance in Australia (which according to Money Smart is $4,300) and you can afford a monthly repayment of $300. In this instance, you would need a credit card that comes with a 0% balance transfer period of at least 15 months to repay your debt before it reverts to a higher purchase or cash advance rate.
You can use our debt payment calculator here, to get an idea of the length of time you’ll need the balance transfer offer for.
When you search for a BT deal, your first thought will probably be making sure it comes with a 0% balance transfer rate for a lengthy introductory period. But another thing you should consider is finding a card with a low purchase rate too, so the card is worthy of your wallet when the BT period comes to an end.
Unlike personal loans that require you to pay a repayment amount in full each month, with credit cards all you are required to pay is the minimum payment amount. So If you’ve worked out you need to pay $300 a month to blast the debt within the balance transfer period make sure you stick to that amount. A savvy technique that will ensure you never miss a payment is setting up a direct deposit from your bank account to the credit card provider.
Taking advantage of a zero percent balance transfer offer can be a thrifty way of paying down debt, however there is a major trap that could see your debt spiral further - making new purchases on the card.
Apart from getting you further into debt, any new purchases on a BT credit card will be paid back first and will incur the purchase rate (not the 0% BT rate), which can often be over the 20% mark.
Another major trap, which applies to all credit cards is withdrawing money from an ATM, as the interest free offer won’t apply to cash withdrawals, instead you’ll be charged the much higher cash advance rate.
Once you’ve dumped your credit card debt with the help of a balance transfer deal, make sure you keep on top of your credit card repayments by paying the balance in full each month.
Ready to start your comparison? You can compare balance transfer deals below or search our entire credit card database here.