What could the average Australian save with a 0% balance transfer?
There are plenty of balance transfer credit cards on the market, but which one offers the most savings?
If you’re struggling to repay a credit card debt, you’re not alone. According to RBA data, Australian credit card holders have an average debt of $3,130. As you may know, if you don’t pay your balance in full by the statement due date, this $3,000 debt can quickly snowball with interest and become difficult to pay off. And with Christmas coming up, your spending is probably about to skyrocket. So now might be a good time to get your existing debts in order.
If you’re struggling to clear an existing debt as it grows with interest, it might be time to consider a card with a 0% balance transfer offer. You can transfer your debt to one of these cards and pay no interest for the length of the promotional period (which can last for up to 24 months). You still have to pay off your balance, but you can do this without any additional interest costs until the revert rate applies at the end of the introductory period.
How much could you save with an interest-free balance transfer credit card?
Well, this will depend on how much debt you have, when you want to pay it off by and if you can clear the debt before the interest free offer ends. But for the sake of an example, let’s say you have a credit card debt of $3,130 that is collecting 19.74% interest. As the type of balance transfer you might want will also depend on how much you can afford to repay each month, we’ll look at a few examples here.
If you want the maximum time to pay off your debt, you could look at a card like the NAB Premium Card, which offers 0% for 24 months. With this offer, you’d need to pay around $130 each month to repay the entire balance before the introductory period finishes. But if you did this, you could save $875.27 in two years if you moved your debt to this card.
This card usually only offers up to 20 months interest-free and comes with a 2% balance transfer fee. But if you apply through finder.com.au, you’ll get the extra four months interest-free and the balance transfer fee will be waived.
The Westpac Low Rate card also comes with 0% for 24 months, but it has a 2% balance transfer fee so your overall savings will be a slightly lower $874.67.
If you want to get rid of your debt burdens sooner, you could look for a card with a shorter promotional period. The American Express Essential credit card currently offers 0% for 12 months with a 3% balance transfer fee. If you paid around $260 each month and cleared your debt in the 12-month period, you could save $478.40 and clear your debt within a year.
Otherwise, a card like the St.George Vertigo Visa with 0% for 18 months and a 2% balance transfer fee could save you $651.43 if you paid off the $3,130 debt before the revert rate kicked in. You’d have to allocate around $173 each month to pay off your balance in this time.
The savings may be smaller than the cards with the 24-month deals, but at least the debt will be off your hands sooner.
What if I have a large debt?
The reality is that many Australians have credit card debts of more than $3,000. Let’s say that you’ve accumulated $10,000 debt. You could save $3,191.48 with the NAB Premium Card or $3,053.48 with the Westpac Low Rate card if you repay your entire balance by the end of the promotional period. The savings are bigger, but so too are the payments you’d need to make each month to clear the balance in full before the revert rate applies.
How do I know which card is right for me?
These are just some of the offers currently available through finder, but you should compare your options before applying to find the right card to manage your debt. If you want to know how much you could save, you can also use the finder balance transfer calculator. You just need to enter how much you’re transferring, your existing interest rate and then you can see how much you could save in the “amount saved” column. This calculation considers the annual fee and balance transfer fees but assumes that you’re not making any additional purchases and that you repay the entire debt before the promotional period ends.
You may also need to consider other factors when comparing balance transfer credit cards including the amount you’re transferring (does the card have a balance transfer limit?), where you’re transferring your card from (are there any restrictions?) and the revert rate (what if I can’t pay off the balance in time?).
When used properly, a balance transfer credit card can be a smart way to save on interest and pay down your debt quicker. Just make sure you compare your options before you apply and aim to clear the entire debt before the 0% offer ends to avoid falling into another debt trap.