Most of us struggle with credit card debt from time to time (and if you’re one of the lucky few who always pay your whole balance each month, well done you!). It’s oh so easy to buy things with your card, but not always so easy to get that balance down.
If a major appliance suddenly fails or you just can’t wait any longer for that holiday you’ve been dreaming of, it’s often tempting to put those larger purchases on your credit card and then transfer the balance to a new card that offers zero interest on transfers.
On the surface, zero interest credit cards seem like an attractive option – after all, you get to transfer that big balance across and then pay it off over time with no fees right?
There are loads of lenders who dangle attractive balance transfer offers in an effort to entice consumers to sign up to a new card. But be warned – in many cases these can end up costing you a packet.
If you have the discipline to pay off the balance in full before the interest free period ends, then a balance transfer card may be a great option for you. But it’s important to work out the repayments that will be required to pay off the balance within the transfer period and then stick to that repayment schedule. Not sure what your repayments will need to be? Check out this handy credit card calculator from Money Smart - it's also a great tool to find out how much time and money you'll save by making higher repayments.
There are a plethora of options available, and the interest free period typically ranges from 6 to 24 months. Not everything in life is free though and most lenders will charge you a balance transfer fee of 1 or 2 percent. You may also pay an annual fee for your new card, which can be $100 or more, so check out the conditions of the card before you sign up.
The real sting though is the interest rate – if you’re not disciplined enough to pay off the whole balance within the interest free period, any savings you make can be quickly erased by interest. And if you do go down the balance transfer route be very, very careful not to use your shiny new credit card on any new purchases – since the money you pay off on your card each month goes against the oldest debt (the balance transfer), you’ll pay interest on those new purchases until everything is fully paid off.
Or alternatively, a personal loan with a fixed schedule of repayments may be a better option for you, as you’ll never be faced with the option of delaying your repayment until a later date. If this sounds like you then check out our flexible mini loans that are simple, easy and quick.