Credit cards deals that hit hard

Balance-transfer deals can help those in financial strife, but the fine print can be costly, writes

DESPERATE credit card customers turning to balancetransfer deals to wipe their debts at record speed could get caught out with costs they never expected.

Australians are swimming in balances owing on their plastic cards – they have hit a record high in Australia of $52.9 billion. So many lenders are rolling out quick-fix solutions that come with expensive start-up costs. But experts warn customers not to be fooled by card providers’ slick marketing.

Many spruik these offers luring customers in with a zero per cent honeymoon interestfree period without highlighting the fees and charges involved.

Analysis by financial comparison website Mozo

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revealed the number of balance-transfer deals with an upfront fee had doubled in the past year, with fees ranging anywhere from one to three per cent of the total balance transferred.

For a cardholder with the average level of debt at $4400 signing up to a card with a 3 per cent establishment fee it will cost them $132 just to get started. Mozo spokeswoman Kirsty Lamont said this could hit hard.

“If you are looking at a balance-transfer deal it’s really important to check the fine print for establishment or use larger credible websites to make purchases. more than one card when travelling, in case of an emergency. handling fees,’’ she warned. “They charge an upfront cost of the per cent of the balance you transfer so make sure you choose a card without this fee or your first repayment will just be going towards this fee rather than paying off the debt.”

On Mozo’s database, the longest balance-transfer honeymoon period is on Citi’s platinum card at 26 months. But it comes with a $49 annual fee and a 2.5 per cent fee. Tribeca Financial’s chief executive Ryan Watson said balancetransfer deals could help those in card debt get out of strife, but it was vital to “look at the fine print.” “When completing a balance transfer you should cut up that new card to ensure you don’t get deeper into debt,’’ he said.

“I can’t stress enough, credit should only be used in case of an emergency – not for everyday splurges.”

Customers should also check the revert rates – the interest rate that applies once the honeymoon period expires – because this can sting. It usually flicks over to the more expensive cash advance interest rate instead of the purchase rate.

Another trap is if new purchases are made on the card, the interest-free period does not apply on these expenses. FRUSTRATION: Engineer Mike Mason, 39, recently had his credit card details stolen by fraudsters in the US.