Balance Transfer Credit Card Guide

Sues balance transfer story

1. Current Balance - Sue has a current current credit card debt of $2,000. Her current credit card is from the "Bank of High Interest" and she is paying 25%p.a on purchases.
2. Balance Transfer - Sue signs up for a balance transfer with a new Suncorp Standard Card. At 2.9% for12 months.
3. What Happens Next - St George pays $2,000 to the "Bank of High Interest".
4. End Solution - The "Bank of High Interest" debt is cleared and Sue now has to pay $2,000 at 2.9%p.a within the 12 month balance transfer period. Sue also pays a new low rate of around 12%p.a on any new purchases she puts on her Suncorp Standard Card.

What happens If I don't pay the total balance within the transfer period?

When signing up for a balance transfer offer do not make to mistake of thinking you are immediately out of the debt trap. During the grace period you need to be vigilant and make sure you stick to your original plan of paying your debt. If you do not pay off your balance transfer in time then most banks and finance institutions will charge you at a cash advance rate, that is normally over the 20% range. For example, if your balance transfer contract was to pay $4,000 within 12 months at 2.9% interest and you only pay off $2000. The other $2000 will more that likely have to be paid back at an interest rate over 20%. Be sure to read the fine print of your credit card contract or contact your credit card provider to get the full details of your balance transfer contract.

What should you do with your old credit cards?

Once you have signed up for your new balance transfer credit card offer the number one question people ask is, what to do with my old credit card? Well depending on your circumstance the answer may vary. If you will not use your old credit card then the answer should be obvious, cancel the card by contacting the credit issuer. However make sure that your credit score will not be effected by performing this action, this information can be gathered by asking the bank or a professional finance advisor. If you use your old credit card for rewards or would like to keep it for sentimental reasons then you can keep it, but be warned, keeping multiple credit cards can lead you into the temptation of accumulating a large credit card debt. Also even if you do not charge any debt to your old credit card be aware that you will still have to pay the annual fee charge on the card.

Types of credit card balance transfers

Credit card balance transfer offers have been forever evolving to give you the best value for your money. Banks and other credit lenders are fighting for your business, there has never been a better time than now to get a balance transfer rate that is right for you. The most common rates and periods for a balance transfer credit card are listed below:

1. 0%p.a. for 6 months balance transfer
2. 2.9%p.a. for 12 months balance transfer
3. 2.99%p.a. for 6 months balance transfer
4. 3.9% for life of the credit card balance transfer
5. 1.9%p.a. for 6 months balance transfer
6. 0%p.a. for 4 months balance transfer
7. 0.99%p.a. for 6 months balance transfer

These are just a few examples of the types of balance transfer credit card rates that are available on the current market. Use our comparison table above by clicking the up and down arrow to view the best balance transfer rates in order.

Pay off your balance transfer right away

In order to get the most out of your balance transfer credit card FIZONE recommends that you pay off the transfer amount before you add anymore charges to the new credit card. There are a few reasons behind this theory the main ones being:

1. If you do not pay off the balance within the transfer period the outstanding balance reverts to a cash advance rate. This means that instead of paying 0% interest you could potentially pay 20% and over, depending on the cash advance rate of your new credit card.
2. Try not to add any new charges to your credit card until you have paid off the balance transfer. If you keep using your new credit card for purchases or cash advances then any amount you pay towards the balance will be deducted from these charges and not the balance transfer.

The evolution of balance transfer credit cards

Balance transfer credit cards are a new innovation created to entice credit card users to change from one credit card company to another, through the use of low or no interest repayments on an outstanding debt for an allocated period of time.

During the beginning of the balance transfer craze there were only a few banks and credit card providers that offered a balance transfer. Due to the immense popularity of the balance transfers, in our modern era you will unlikely see a bank does not have a credit card balance transfer associated with at least one their major cards on offer.

What does the future hold for balance transfers? No one can tell for sure what direction credit card balance transfer deals will head in the future. Currently the banks are in a marketing feud, giving you a wide choice of balance transfer offers to choose from. The future will depend on how the Australian economic situation heads and how far a bank will be willing to go with a balance transfer offer.

JOHN'S BALANCE TRANSFER ADVENTURE

• John owns two credit cards, the first has an outstanding debt of $2000 at 19.99%p.a. and the other, $1500 at 21%p.a
• John applies for, and is accepted to a new balance transfer credit card at 1.9% for 12 months
• The two debts are combined and are transferred to the new credit card offer
• John now has 12 months to pay off the balance. If he does not pay the balance within 12 months the interest on the outstanding balance will be charged at a cash advance rate (On average this is over 20%p.a.)
• John also now enjoys a new lower interest rate on any new purchases he places on the card. But John must be wary when adding new charges to the credit card. When you make a payment on your bill, the new charges will be paid off first before the balance transfer debt

If John pays his transfer off within the transfer grace period he can save himself hundreds of dollars on interest rate repayments. Plus his new credit card comes with a low interest rate of around 12%p.a, with a low annual fee and rewards. It goes to show what a smart Johnny can do if he does his research.

BALANCE TRANSFER WARNING

Balance transfer credit cards can be difficult to understand, therefore Credit Card City has put together a guide that can help you decide whether a balance transfer credit card is right for you. If you have an exceptional amount owing on you credit card debt we recommend that you seek the help of a financial adviser. See more information at financial help or call ASIC's Info line on 1300 300 630.

A balance transfer is an offer, that gives you the opportunity to transfer the outstanding balance on your current credit card, or credit cards, to a new card with a special introductory period with little or no interest rate owing on the outstanding balance. However there is normally a fee associated with a credit balance transfer, be sure the read the full terms and conditions of the providing lender before applying.

If you have any doubt over whether you should apply for a credit card balance transfer offer we recommend that you seek the help of a financial adviser. In order to get the best balance transfer offer for you, it is important to shop around and compare the transfer terms.

BALANCE TRANSFER SUMMARY

If you are paying a high interest rate around the 20% mark, and have a high outstanding balance, then a balance transfer can benefit you. Many banks are giving a special introductory rate of 0% for 6 months, this gives you the opportunity to pay off your previous balance within a 6 month period, saving you money with interest rate repayments. These credit cards also have interest rates of around 11%, giving you a lower interest rate on future charges you may make. The only thing to look out for is that if you do not pay the outstanding amount within the allocated period, the interest rate reverts back to a cash advance rate, that is normally around 20% for most banks.

The best way to get the best balance transfer credit card for you is to shop around, compare and don't rush into any deal. Banks and credit card providers offer a wide range of balance transfer deals every year. These deals can range from 5.99 percent for a year to 0% for 6 months. Shop around and decide for yourself, what is the best offer for me?

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