Want to be debt free by next year? A 15-month balance transfer credit card allows you to repay your debt and pay $0 interest
Finding a 15 month balance transfer card is like finding a ticket to freedom from high interest mounting debt. If you understand and comply by the terms, these credit cards will consolidate your debts and give you the opportunity to pay it down without the burden of interest. Consider the terms of the offer and compare it to other credit cards with similar promotions to ensure that you’re using the right debt consolidation strategy for you.
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How do 15 month balance transfer credit cards work?
New customers who apply for a 15 month balance transfer credit card will get the full functions that you find with any card, with the bonus of a long term, low interest, debt consolidation offer. When you apply you will be requested to provide any relevant information regarding the debt you wish to transfer. In most cases the debt can be from credit or charge cards, but usually can’t be from an existing account with the same bank. If approved, the bank will then make arrangements to have those balances transferred to your new account.
Upon approval, you will have the benefit of not being charged any to that particular debt for 15 months. Since you are not accumulating more debt in interest, ideally, you should find it easier to pay it down. All balance transfers come with terms and conditions (including the amount you can transfer), so make sure to consider these before applying. Depending on the card you choose and how you use it, a balance transfer can be a worthwhile way to reduce your debts.
How can I compare 15 month balance transfer credit cards?
Not only should you be looking at the specific terms of a 15 month balance transfer offer, you need to consider the other features of the credit card in order to determine its benefit to you. Look at the following points carefully, and compare them between different cards before making a final choice:
- Length of low rate offer. Not all debt consolidation offers are at 15 months. Ensure that the interest-free period you are given is sufficient for paying down your debt.
- Revert rate. Check to see what the interest rate reverts to once the 15 month period ends. With some cards it will be the purchase rate, while with others it will revert to a higher cash withdrawal rate.
- Standard rate. Credit cards typically come with two interest rates, one for your purchases and one for when you make any cash withdrawal. This is a feature that you should compare carefully if you plan on using your credit card for financial transactions as well as the balance transfer offer.
- Annual fee. Annual fees vary greatly between different credit cards and should be one of your comparison points.
- Balance transfer fee. With some cards, there will be a one-time fee charged by the bank for the transfer of your balances.
- Transfer amount. You will be allocated a portion of your available balance for debt consolidation. This could be as high as 95%, but in some cases can go as low as 80% of your available balance.
What are the drawbacks of using a long-term balance transfer credit card?
Annual fees, high revert rates and a limit on the amount of money you can transfer are all features of a 15 month balance transfer credit card that can hurt you if you don’t carefully choose the one with suitable terms for you.
However the primary drawback to a long-term balance transfer credit card is that it is not ideal for making purchases or cash withdrawals. Since 2012, credit card companies are obligated to follow a certain hierarchy regarding how payments are directed. All repayments are first applied to the items on the statement that attract the highest interest rate, which are usually cash advances. Next will be standard purchases and fees, before any payments can be applied to your interest-free balance transfer. Unless you are prepared to clear your monthly balance and make an additional payment towards the consolidation debt, that debt will never go down if you use the card for purchases and advances.
Not even interest-free days on purchases will save you, as most credit cards that offer this feature only allow it if there is no additional balance on the card, and the balance is paid completely in full by the statement due date.
Using a balance transfer credit cardJane was approved for a 15 month balance transfer credit card, and was able to consolidate $10,000 of her debt onto one card with no interest. With a new credit card in her wallet, she thinks there can be no harm in finally buying that $500 television she has had her eye on. Especially when her new credit card features 55 interest-free days.
Jane did not read the fine print, and does not realise that with an outstanding balance, she does not qualify for interest-free days. Not only that, but her payments will not make it to her balance transfer amount. If she continues this way, then no progress will be made towards bringing that balance down before the special interest-free offer ends.
A 15 month balance transfer credit card definitely has its advantages, but only if you use it right. Compare your various options carefully against your spending habits to make sure that this is the right product for you.Back to top
How can I apply for a balance transfer credit card?
How you apply will depend on the bank and credit card you have chosen after doing your research. Still, there are some standards that most banks follow during the application process regarding eligibility:
- Age. Most credit cards allow for applications from individuals as young as 18.
- Residential status. Whether or not the offer is available to Australian residents only will be of special concern to those who are living in Australia with a temporary work or student visa.
- Level of debt. Banks will not offer credit cards to individuals who already have a high debt to income ratio.
- Income. A number of credit cards will have a minimum income requirement in order to qualify.
You will also need to have the following details during the application process:
- Contact information. The bank will need to be able to reach you with any additional questions either by phone or via email.
- Residential information. A physical address within Australia will be required.
- Income information. Proof of how much money you make can be shown with your current pay slips or tax documents.