Transfer appeal for maxedout cards

CONSUMERS who are considering switching to a balance transfer credit card are mired in debt four times larger than the average Australian balance of $3069.

Research by Finder.com.au has found that people researching balance transfer cards owe more than $12,000 on their existing credit cards. Its analysis of 9500 online searches also found they are paying an average 16.7 per cent interest on those cards.

Balance transfer credit cards typically offer zero interest for up to two years, giving borrowers some breathng space, but there may be traps.

Finder.com.au spokeswoman Bessie Hassan said for someone with a $12,000 credit card debt, a 24-month balance transfer card could save more than $3000 in interest.

“Australians looking to consolidate debt via a balance transfer may be struggling to service their existing payments, which is why they have an above-average … debt,” she said.

“While balance transfers generally have some fees attached, the interest savings may be significant and worth the effort of shopping around.”

Most card providers charged a balance transfer fee of between 1 and 3 per cent of the transfer amount, while annual fees could be between $50 and $150, Ms Hassan said.

“See what the revert rate is – the rate you’ll be charged once the interest-free period expires – and whether this is the purchase rate or the cash advance rate. Typically, the purchase rate will be lower than the cash rate.

“Some consumers may get into hot water if they take out a balance transfer but forget to cut up their old card.”

MoneySmart senior executive leader Laura Higgins said consumers should always ask questions.

“These products can work really well … but you have to invest in understanding them,” she said. Checking your own credit card behaviour would also help, Ms Higgins said.

“It’s a good time to address the underlying issue. Look closely at your saving and spending habits.”