Credit card debt can be a significant financial burden for many Australians, especially those ‘revolvers’ who carry an ongoing card balance from month to month.
One option that helps you save on credit card interest is a “balance transfer”.
A balance transfer involves switching the outstanding balance from one credit card to another with a lower interest rate, such as the Defence Bank Foundation Credit Card, which offers a low introductory rate on balance transfers, retail purchases and cash advances, for the first six months.
While balance transfers can be a valuable tool for managing credit card debt, there are also terms and conditions to consider when choosing the right card for you.
Benefits of balance transfers.
Lower interest rates.
One of the primary benefits of a balance transfer is that it can help lower the interest rate on your credit card debt.
This lower rate can make it easier to pay off your debt faster and reduce the total amount you pay over time. With a Defence Bank Foundation Credit Card, save with a six-month intro rate which then reverts to a low ongoing rate.
Many credit card companies offer introductory offers for balance transfers for a certain period.
These low or no-rate periods can provide significant savings on interest charges and may help you pay off your debt more quickly. However, there can be sizeable annual fees. By way of comparison, the Defence Bank Foundation Credit Card comes with a low annual fee, making it a money-saving choice for consumers.
If you have multiple credit card debts, consolidating them into a single balance transfer credit card can simplify your monthly payments and make it easier to keep track of your debt.
Understand the conditions attached to a balance transfer.
Fees and charges.
While many balance transfer credit cards offer low or no interest rates, they may also charge balance transfer fees. These fees can range from 1-3% of the transferred balance, which can add up quickly. The good news is that the Defence Bank Foundation Credit Card does not charge a balance transfer fee.
High-interest rates after the introductory period.
Once the initial period is over, the interest rate on a balance transfer credit card may increase significantly, which can negate any savings you gained during the promotional period.
Cardholders can benefit from a rate that starts low and stays low with the Defence Bank Foundation Credit Card.
Credit score impact.
Applying for a new credit card and transferring a balance regularly can impact your credit score.
This can be particularly important if you plan to apply for a loan or mortgage soon. Moreover, some balance transfer cards have minimum credit score requirements, which may limit those with poor credit from switching.
Adding to your debt.
If you can’t pay more than the monthly minimum payment, transferring balances to a new credit card may only defer your existing debt for a six or twelve-month period and make it harder to pay off in the long run.
In a nutshell, balance transfers can be a helpful tool for credit card customers, especially 'revolvers', looking to manage their debt or those who have been slugged with a significant and unexpected expense.
But to ensure a balance transfer doesn’t land you in more debt, be sure to understand the terms and conditions, including the introductory offer, interest rates, fees, and credit score impact, before signing on the dotted line.
Find out more.
Important note: This information is of a general nature and is not intended to be relied on by you as advice in any particular matter. You should contact us at Defence Bank to discuss how this information may apply to your circumstances.