Is it time for a balance transfer card?
Getting a handle on your credit card spending can be challenging at times. Did you know that us Aussies collectively spent about $30 billion1 on our credit cards in December? If you haven’t paid off your credit card balance in full, that’s a whole lot of interest!
So, what can you do to get your finances back on track? A balance transfer could be an option if you’re paying a high interest rate on your credit card. Let’s take a look at some of the basics below.
What is a balance transfer credit card?
A balance transfer credit card allows you to take the balance you owe on your existing card and transfer it over to a new card at a special interest rate. This special balance transfer rate only lasts for a specific period of time. For example, the Westpac Low Rate Card is offering 0% p.a. for 26 months on balance transfers requested at card application. There’s a 2% balance transfer fee and the rate reverts to the variable cash advance rate (currently 19.49% p.a.) after 26 months.
You mentioned a balance transfer fee. What is that?
Some lenders charge an upfront fee when you transfer the balance. They can range from 1-3% of the amount you have transferred so make sure you read the terms and conditions!
Can I transfer as much as I want?
Not always. Some lenders have a minimum and/or maximum transfer amount. Let’s look at the Westpac Low Rate Card again. Westpac requires you to transfer a minimum of $200 and the maximum is 80% of your approved available credit limit. If your approved credit limit is $10,000, that means you can transfer between $200 and $8,000.
What else should I know?
While this is not an exhaustive list, here are a few things you should know before applying:
- Most balance transfer specials are only available to new customers, so the balance you are transferring must come from a different credit provider
- A good rule of thumb is to try not to use your new card while you’re still paying off the balance. While you still have an outstanding balance, you lose the benefits of having interest free days, so any new purchases incur interest from day one
- Each time you apply for a credit card, the lender can do a credit check on you. This will show up as an enquiry on your file and can impact your credit score. Make sure you do your research beforehand so you don’t make too many applications
If you’re ready to start researching balance transfer cards, check out the Credit Savvy comparison site. As we always say, only apply for credit if and when you really need it!
Credit card offers are current as at 2 May 2018