How balance transfers can save you money
Whether you need a holiday, are saving up for a house, or simply want some funds for a rainy day, there’s no reason not to look for savings in everyday life.
Australians currently have a credit card debt of almost $32 billion, according to the MoneySmart debt clock, which works out to be a little over $4,000 per card. Most of that money is currently accruing interest.
That’s where a credit card balance transfer comes in. It’s not your usual savings suggestion, but it is one that could save you plenty.
What is a balance transfer?
Take a look at your credit card, or any ‘card’ that you have used in the past to pay for items, such as store cards or fuel cards. All of these cards have interest rates attached to them, so each month, whatever debt you have accrues a little more debt from the interest. While interest rates on credit cards are perfectly normal, some are definitely higher than others.
A credit card balance transfer is where you take all of that money you owe (including the interest) and move it to a low interest rate credit card.
How can a balance transfer save you money?
A low interest rate credit card can really save you money, as it decreases the amount of interest you’re paying each year.
There are many added benefits of transferring your debt. Some lenders will offer you an introductory balance transfer interest rate of 0 per cent for a fixed period of time. However, you’ll need to be savvy about the switch, as those tempting deals may sometimes then revert to a higher interest rate after the agreed time ends.
That’s why it’s important to consider the following;
- Any fees associated with balance transfers
- Any time periods attached to introductory deals
- Revert rates (what the interest rate changes to after the introductory period)
- Interest rates for new purchases with your new credit card
- Annual credit card fees for old and new cards
Once you’ve weighed up the cost of switching against possible savings – and chatted to a trusted financial advisor – you will be able to confidently decide whether a credit card balance transfer is the right option for you.
If you are having trouble saving or paying off your credit debt here are some tips.