Check the cost of balance transfer

If you overindulged on your credit card during the festive season and have a debt that you can’t pay off straight away, you could be thinking about taking up a balance transfer offer. There are plenty available – some for as long as two years. You can find out what’s on offer on comparison sites such as Canstar, RateCity and Finder.

When comparing offers it’s important to look beyond the balance transfer rate and period. You need to consider if there is a balance transfer fee, what the annual fee is on the credit card and what rate you’ll be charged when the promotional period ends. These can all affect the cost to repay your debt and the results may surprise you.

In the table we compare three offers – all with different rates, annual fees and balance transfer fees. Even though the Heritage Bank offer was for a shorter period, the fact that the card has no annual fee and no balance transfer fee meant it came out on top.

For larger balances the gap narrows. These calculations assume you pay it off in about two years. If you were to repay smaller amounts, say $278 a month, over a longer time, on the $10,000 debt, the Bankwest Breeze is cheapest, costing $751, followed by St George at $773, while Heritage Bank is the priciest at $888.

So do your sums and think about how much you can repay each month before choosing an offer. Also make sure you don’t make any new purchases on the card, and focus on clearing the debt.