Finding a cheap credit card deal

Sophie Elsworth looks at some of the best transfer offers for plastic

CREDIT card users unable to pay off their debt in full each month are experiencing some relief as interest rates on plastic slowly fall.

Customers who are revolvers – those who banks love most because they do not pay off their debts in full each month – often get stung by exorbitant interest charges.

But in recent months several lenders, including American Express, Bank of us and QBANK, have lowered the purchase rates on some of their card deals. Now some deals are in the single-digit range, with rates as low as 8.99 per cent.

Customers who struggle to wipe monthly debt are certainly not alone. In the Senate Economic References Committee back in 2015, concerns were raised over some customers never paying off their credit card debt, while being stuck on deals with double-digit interest rates.

Financial comparison website Mozo’s spokesman, Peter Marshall, said it’s great to finally see some rates under 10 per cent.

“There are plenty of cards out there that have lower rates,’’ he said. “If you are carrying a balance on your card you are much better off transferring the balance to a new card and taking advantage of a zero per cent balance-transfer offer.”

This is when the customer transfers one card debt to another and enjoys a zero per cent honeymoon period, provided they make no purchases on the card during this time.

The Australian Securities and Investments Commission’s latest credit card lending report showed that in June last year, $45 billion in card balances were outstanding – an increase of $1.2 billion in five years.

Mr Marshall said customers should zoom in on the fees and charges on their card to see if they can do better elsewhere.

Calculations by Mozo show that, for a customer carrying the average card debt of $4400 and setting their minimum repayments at 3 per cent of the balance, it would take about 13 years to pay off and would cost them $7012 in interest charges.

This is on a card with the highest interest rate at 24.99 per cent. But if that same customer had a card with the lowest rate of 8.99 per cent it would take them six years and nine months to repay and cost $1159 in interest.

American Express’s vice president of consumers cards, Austin Huntsdale, said card customers need to make sure they have the right product to avoid being badly stung.

“Look at the line of credit you have; do you have a line of credit that is appropriate for your financial situation?’’ he said, adding customers who are struggling should contact their card issuer regarding repayment plans.

If you can’t pay off your debts, check: THE IF

interest rate. you can avoid an annual fee.

THE

number of interestfree days available.

length of balancetransfer honeymoon periods (if applicable).

the interest rate reverts to on a balancetransfer deal once the honeymoon period ends.

THE WHAT