Is a balance transfer right for you?

A quick guide to help make a balance transfer credit card work for you

A balance transfer credit card allows you to transfer the debt from your old credit card to a new credit card offer. The new credit card gives you a grace period, where you can pay back the debt, ranging from little to no interest at all.

Jack’s credit card balance transfer story

Current owing on old credit cards – $3,000 at 19.99% p.a and $2000 at 17%p.a

New credit card offer -  0% for 6 months on balance transfers

The resulting transaction – the new credit card company pays the old credit card the outstanding amounts of $3,000 and $2,000

You end up with – a debt of $5000 owing to the new credit card company at 0% for 6 months.

Other perks – if you do your research the new credit card offer can come with a lower interest rate of around 12%p.a on future purchases you make on the card.

What to look out for – be sure to pay off the outstanding debt within the balance transfer time frame.  If you don’t then you will have to pay a cash advance interest rate on the outstanding amount. On average this is over 20% p.a

Choosing the best balance transfer deal for you

There are many balance transfer credit cards going around today, making the task of choosing the best card for you a difficult one. In Australia balance transfers can come with a grace period ranging from 6 to 12 months, some credit cards even offer a period of “life” to pay back the debt. Interest rates on the repayment options typically range from 0%p.a to 4.99%. Compare balance transfer rates and time periods here.