When a Balance Transfer Could Cost You More Money Than You Think
A balance transfer can seriously reduce the amount of interest you pay on your credit card debt. The basis behind it is that you roll your outstanding balances from your high interest charging accounts over to a card charging far less interest.
As your interest bill is reduced, so too are your monthly credit card payments. This can make it much easier for you to budget.
Unfortunately, if you put your interest savings towards other spending, you lose the benefit of doing the balance transfer in the first place. In order to really save money, you need to be diligent about putting your interest savings back towards repaying that debt as quickly as possible.
Featured Balance Transfer Credit Card
The Suncorp Clear Options Standard will help you save with a low balance transfer offer for the first 12 months plus a low ongoing purchase rate. You can also enjoy exclusive Visa Entertainment offers including concerts, sporting events, travel offers and more
- $27 for the first year ($55 thereafter) annual fee
- 12.74% p.a. on purchases
- Cash Advance Rate of 21.99% p.a.
- 0 days interest free
- Minimum income requirement of $20,000p.a
Read the Suncorp Clear Options Standard Visa Card terms and conditions.
Balance Transfer Fees
Before you agree to a balance transfer, always check what fees are being charged for the transaction. You may find that transfer handling fees may be charged as part of the process. These fees are normally added onto your existing balance, which means a little more debt to repay.
Using Your Card for the Wrong Purposes
The interest rate on your balance transfer card might look really attractive, which is usually enough to tempt people into paying for other purchases using the new card. Don’t fall for this, as your purchases aren’t charged at the same rate of interest as your transferred balance amount – it’s usually much higher.
You may also find that your bank will allocate your repayments so that your payments reduce the balance debt first, leaving the purchase amount you spent untouched and still attracting that higher rate of interest.
Missed Payments
Many people believe that a 0% interest rate is the same as zero repayments. This isn’t true. You are still obliged to meet the minimum monthly repayment requirement on your new card each month, or you could find your promotional cheap rate will end and you’re paying a much higher interest rate once again.
Watch the Expiry Date
It’s important to try and repay as much of the outstanding balance as you possibly can before the introductory period expires. When the low rate term ends, your interest rate will revert to the higher standard purchase rate.
If you still owe a large amount on your balance when the low rate ends, you could find yourself back at square one again, with high debt attracting high interest. Rather than let this happen, maybe consider shopping for a balance transfer card with a longer low rate period, such as a life-of-balance offer.
Related posts:
- Suncorp Clear Options Standard Credit Card
- How Only Making the Minimum Repayment Each Month Can Cost You
- Suncorp Clear Options Platinum Credit Card
- Will doing a 0% Balance Transfer Save Me Money in interest repayment?
Posted on Friday, August 27th, 2010 at 11:29 am
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