Credit Card Balance Transfers

Australians have never been deeper in debt. Data released by the Reserve Bank revealed that we apply 11.9% of our income to service debt and that credit card debt specifically hit the $39.6 billion mark in April of this year. The good news is that the March stability review declared this debt serviceable, with wages higher than ever before and unemployment at a 32-year low. The credit card issuers are fiercely competing to secure the business of these wage earning consumers. This puts us in an excellent position to capitalise on their courting offers with 0% credit card balance transfers perhaps the most attractive of all.

What are credit card balance transfers?
Several banks offer a 0% interest rate when you transfer the balance you have on your current credit card to one of their credit cards, making it ideal for credit card debt consolidation. There is normally a timeframe attached to the 0% credit card balance transfers, commonly six months. In practical terms it means that your transferred balance changes into an interest free loan for that period. Some of the institutions that are offering 0% credit card balance transfers include Citibank Credit Cards, HSBC Credit Cards and St. George Credit Cards.

What to look out for in credit card balance transfers?
The honeymoon will not last forever. After the 6-month credit card balance transfers period, normalised interest rates are invoked. Regardless of whether you are considering credit card debt consolidation or simply moving from one card to another, make sure that you know what these post-honeymoon rates for credit card balance transfers are. Some issuers charge cash advance interest rates, which are substantially higher than purchase interest rates. NAB and HSBC credit cards are examples of these. Citibank and St. George Credit Cards, on the other hand, revert to purchase interest rates after the credit card balance transfers honeymoon periods.  An example of a credit card with a 0% balance transfer offer and a low ongoing purchase rate in the St. George Vertigo Credit Card - this has a standard purchase interest rate of just 8.99%.

Honeymoon doesn’t mean that you don’t have to pay anything for the first six months. The minimum monthly payments need to be made on the credit card balance transfers as and when these fall due. Even if you don’t intending missing a payment during the credit card balance transfers timeframe, make sure that you know what the repercussions will be in interest rate terms if you do. Normally a default results in the 0% credit card balance transfers benefits expiring with immediate effect, destroying the advantages you may have gained from credit card debt consolidation or changing issuer.

Exploiting credit card balance transfers for credit card debt consolidation purposes
According to the 'Citibank Payment Evolution Report', which is the result of a credit card survey they conducted in seven countries in the Asia Pacific, Australians hold an average of 2.11 credit cards per person. Considering market dynamics, credit card debt consolidation is an option worth considering.  Credit card debt consolidation involves moving all the balances from your different cards to a single credit card – preferably one offering you 0% credit card balance transfers.

Credit card debt consolidation advantages
• There are actually a couple of good reasons to opt for credit card debt consolidation. For one, having several credit cards could have an adverse rating on your credit score. When the credit score is tallied up, the collective credit limits are brought into consideration, making your debt load appear higher than it actually is. Whilst you may still qualify, your interest rates could be impacted and potentially negate the benefits you stood to gain from credit card debt consolidation in the first place.
• Credit card debt consolidation into one of the 0% credit card balance transfers cards translates into an interest free loan. If you decide to go the credit card debt consolidation route, ensure that the interest rates after the honeymoon period are similar to or lower than the interest rates you are paying your current issuer at the moment.
• Credit management is greatly simplified by credit card debt consolidation.  It’s easier to keep a track of balances, it’s a single payment each month and it’s a single set of statements to contend with when tax time looms.

To avoid hurting your credit score, take the time to shop around when trying to find the card best suited for your credit card debt consolidation needs and only make two or a maximum of three applications in the end. Just remember that 0% credit card balance transfers should be the starting point of your search!

Compare & apply online for credit cards with balance transfer offers now.

For additional information on credit cards or related topics please visit our library of credit card articles.