How A Balance Transfer Credit Card Can Improve Your Finances

Closeup portrait smiling business woman with credit cards in one hand, cash, dollar bills in other, convenience of electronic money isolated city background. Financial decision, banking system conceptAustralians who are mired in debt and paying high interest rates that make it seem like it will never be paid off can take steps to address that situation by using a balance transfer credit card.

These are cards, designed by the credit card issuers, to be attractive enough for you to decide to transfer your entire credit arrangements over to them. This is done by offering low interest rates – sometimes zero interest – for a specified period.

Clearly if you have high interest debts elsewhere on a loan or credit card and you can use a zero or very low interest credit card to pay off these debts, then you’d be silly not to consider it! The gains may be huge if you get a 0% balance transfer credit card for 6 months, pay off all your high interest debts without incurring any extra interest in that period and start again with a clean slate. The amount you can save on interest may be huge indeed, so it’s clear what you can gain, providing you are disciplined.

What does the credit card company gain? Well, they get another customer who they can make money off in the future. They also make money on those people who transfer the debt over and, for one reason or another, are not disciplined enough to pay off the balance transfer debt within the specified time period. Here’s where you need to be really careful because after the balance transfer period expires, the balance transfer cards revert to the rates of interest as per the small print in the credit card contract that you will need to read BEFORE you apply.

Sometimes, for example, you will get a card advertised by the bank with a 0% interest rate for 6 months, after which the balance transfer amount will be subject to a rate more akin to a cash advance rate ( over 20%) and any new purchases may u=incur a new APR rate too.

It’s very important to examine all the terms and conditions of these cards. The general rule with balance transfer cards is to only apply for one of these if you intend to pay off the full balance within the period stated, or if you are organized enough to transfer the debt again if it looks like you will not be able to achieve this. Otherwise the rates become high and you may end up slipping back into the same cycle of high interest rates that you were trying to escape from in the first place!