Aussies are carrying $286 million in credit card interest after Christmas. Take advantage of a balance transfer offer to repay your debt faster without the cost of interest.
Christmas is the time the our credit cards take the biggest hit, so it’s no surprise that Australians are now facing a post-holiday surprise in the form of sky-high interest and credit card debt. Not all hope is lost though, as there are some simple steps you can follow to take control of your credit card debt. Here we’ve unpacked just how much Aussie cardholders owe and the balance transfer offers that could help reduce your debt hangover in the new year.
Interest free balance transfer credit cards could be a lifeline for those who splurged at Christmas. And it seems many Australians agree – we’re noticing the number of people searching finder.com.au for balance transfers during the post-Christmas period is 158 percent higher than this time last year. Bessie Hassan, Consumer Advocate at finder.com.au
How much do Australians owe after Christmas?
You could say that Aussies are either overly generous or perhaps too flippant with their credit card purchases over Christmas time. Regardless, a forecast of the Reserve Bank of Australia reveals that the nation borrowed a whopping $27.5 billion on credit cards for purchases and cash-out transactions in December 2015. $3.2 billion of these transactions were spent on Christmas gifts alone. Now that the silly season has settled and the Christmas decorations have been put away, Aussie cardholders are faced with the reality of an average of $1,668 debt each and a collective $286 million in credit card interest to repay. Sadly, more than one in three cardholders (or 35%) aren’t expected to pay off their credit card bills in time. On the contrary, it’ll take roughly more than five months to repay the balance.
While these figures are worrying, here’s where debt consolidation strategies come in handy. If you want to fast-track your debt repayment without the cost of interest, an interest-free balance transfer credit card could be your answer.
How can I compare balance transfer credit cards?
One in three cardholders aren’t expected to pay off their Christmas credit card bills in time Bessie Hassan
Balance transfers credit cards can be a savvy way to repay your debt faster without accruing interest along the way. However, as at the time of writing, there are currently 98 credit cards offering interest-free balance transfer deals for up to 20 months in the Australian market, it’s important to know what to look out for to find the right card for you. To make things easier, we’ve highlighted the important factors to consider and compare when looking for a credit card to drive your debt consolidation:
- Length of balance transfer. There are a number of 0% balance transfer cards on offer, but the low interest will only be in place for an allotted period. Consider how much you owe and how long the 0% interest is in place to determine whether you can repay your debt before the revert rate kicks in.
- Revert rate. Speaking of revert rate, make sure to compare this before applying. The revert rate refers to the interest rate your remaining balance will be charged if you’re unable to repay the total amount by the end of the introductory period. “They can revert to much higher rates if you don’t pay off the transferred debt during the transfer period. So it's a good idea to work out how much you need to repay each month to ensure your balance hits zero by the end of the balance transfer term,” suggests Ms Hassan.
- Size of your debt. Most balance transfers restrict how much you can transfer to a percentage of the credit limit. This can vary from card to card (for example, from 70% to 100% of the credit limit), so it’s important to check this to confirm whether the card can support your debt. Plus, you’ll need to consider the size of your debt, the promotional interest rate and the length of the balance transfer to calculate how much you’ll need to repay each month to pay off the total amount before the promotion ends and the revert rate rolls in.
- Other features and costs. While your main concern is the details of the balance transfer, it’s important to consider other costs and features of the card to ensure you can both afford and benefit from it. Look at the annual fee and one-off balance transfer fee (usually 1% or 2% or your transfer amount), in particular. It’s not recommended to use the card for anything but debt consolidation until the amount is entirely repaid, but you might want to consider if the card comes with a low interest rate on purchases or interest-free days if you plan to use the card after you’ve repaid the debt and the promotional offer has ended.
Long-Term Balance Transfer Credit Cards Comparison
If you’re burdened with debt following Christmas, you’re not alone and there are things you can do to take control of your credit card. An interest-free balance transfer credit card could be a worthwhile way to repay your debt faster without collecting interest in the mean time. As the market is currently saturated with competitive interest-free balance transfer offers, you’ll need to compare what’s out there to find the best debt consolidation solution for you.