Finding the right fix for your credit card debt
So, you’ve maxed out your credit card and can’t afford the repayments? Grabbing one of those credit card balance transfer deals might seem like just the fix you need.
But before you rush into a credit card transfer deal, be sure you understand all the pros and cons – and what other options you might have.
What’s a credit card balance transfer?
- You’ve probably seen the ads on TV. Credit card providers often promote 0% balance transfer offers to attract new customers.
- If you’re struggling to pay off your existing credit card, and racking up huge amounts of interest every month, this can seem like the answer you need.
- And sure – a balance transfer credit card deal can save you money and help you pay your debt off sooner.
- But be careful. They can also be a gateway to increasing your debt, and add to your financial woes.
Here’s some points to consider before you grab that credit card deal
That introductory 0% interest rate on your transferred balance can seem too good to be true, and you might forget to consider some other important details.
Tricks and traps to be aware of
- They often have higher fees and charges. Compare fees like
- annual fee
- late payment fee
- reward program fee
- cash advance fees
- international transaction fees
- Beware the balance transfer fee. Sure – there might be 0% interest on your transferred balance, but a ‘balance transfer handling fee’ might be charged.
- Check how long you’ll have to pay off your transferred balance. If you haven’t paid it all off when the transfer period ends, a higher interest rate than on your old card could mean there’s a real danger you’re getting further into debt.
- Suss out how high the interest rate will be on any new purchases.
- If you do make purchases on your new card, be aware that interest applies to these.
- Be aware that any repayments you make may be applied against your new purchases before the transferred balance.
- Don’t be tempted if you’re offered a higher credit card limit on your new card. It’s smartest to minimise the amount of potential debt available to you!
- The smartest way to take advantage of a credit card transfer deal is to cut the card up and cancel it as soon as you get it.
- That way, you’ll be just paying off the balance and won’t be tempted to rack up more debt.
If you do your homework and avoid the potential pitfalls outlined above – a credit card balance transfer can be the solution you need to get on top of your debt.
Tips and tricks to get the most out of the deal
- Plan a repayment schedule that ensures you pay off the entire transferred amount within the transfer period.
- Try this handy credit card calculator to see if you’ll be able to pay your balance off in time.
- Know the dates that apply to your deal. Does the balance transfer period start from the date of your application, the date the card is approved or the date the transfer occurs?
- Be sure to close your old credit card account. You don’t want to end up using both cards and doubling your debt!
- Use caution when considering any cash back, discounts or reward schemes that may be on offer. These can offer some great benefits, but be aware that they often attract a fee and they shouldn’t be the main reason you take up a credit card offer.
Other debt management options
Before switching cards try chatting to your current credit card provider to negotiate a more affordable repayment plan.
City Finance understand – we’re here to help!
- No matter what your situation – if you’re unemployed, a student, or on Centrelink benefits, City Finance understand and are here to help.
- If you need a small cash loan to help you through, apply now or pop into your local branch.