Balance transfer credit card means that you repay one card’s debt with another card. To put it more simply, if you have a debt of $1000/- on card A, and the interest rate is 18%, you opt for card B and get the $1000/- debt transferred to card B, which is charging you a lower rate of interest. By doing so, you save the money on interest. In Australia, a number of balance transfer offers are available for 6 months, 12 months, and permanent ‘for life’.
You are allowed to transfer your old debt at a lower interest. You have to choose the duration in which you will repay the debt. The lower rate will be applicable only till the stipulated time. Make sure that you repay your old debt in the stipulated time; else you will end up paying higher interest.
The golden rules to be remembered with Balance Transfer credit cards are:
- Repay the debt as early as possible. In case you are unable to pay one installment, the bank may change the lower interest rate to the normal rate and you will have to pay more interest.
- Never use the balance transfer card for purchasing or withdrawing money. Although the balance transfer card allows you to repay the old debt at a lower interest, a higher rate may be applicable for the new debt. When you repay, all the money will go towards cheaper debt, and the new debt with higher interest keeps on accumulating. Ultimately, instead of saving money on interest, you end up paying more. In case, you need a card for shopping, opt for a new card which charges you a lower rate of interest.
In Australia, the balance transfer cards do not attract any transfer fee, unless specified other wise. Thus, if care and caution is used in dealing with the Balance Transfer Credit Card, you will be able to save considerable money in interest.
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