July’s best balance transfer cards
If you’re looking to reduce your credit card bills then you could move your existing balance onto a card issued by a different provider. Many providers will offer a zero interest period for a set number of months – anything between three and 26 months – so that you can use this time to make some headway into your balance. All of your monthly payments will go to the principal rather than on interest so you could pay slightly less than you usually do and still significantly reduce your balance.
How balance transfers work
If you find a balance transfer deal you like and that you’re eligible for, then you can go ahead and apply. You’ll have to tell the provider how much you’d like to transfer, which provider you’re currently with and your account details.
If you’re approved, you can expect your new card to arrive after 10 working days or so. You activate the card and the issuer asks for the transfer of the balance from your old provider, which take one to three working days. You’ll usually have to pay a transfer fee, most often between 1.5 per cent and three per cent of the balance, which is added to the transferred amount.
Make good use of the zero interest period
Once it’s all set up, you need to make the most of the introductory period and pay as much off the balance as possible so that you’ve either cleared the debt or have hardly any left. This is very important because once the introductory period ends, the card often reverts to its cash advance interest rate, which is usually higher than its regular rate.
About the balance transfer fee
Most BT cards have a fee, especially the products with the longer zero interest periods. This fee is a one–time payment as it’s usually a percentage of the amount you’re transferring, or, for smaller balances, a minimum dollar amount. The fee is typically added to the balance so it also comes under the zero percent introductory deal. The cards with the shorter introductory periods might have no BT fee, but you need to be sure you’ll pay off your balance within the timeframe offered.
Finding the best balance transfer card
There are lots of balance transfer cards out there, so when you’re on a comparison site looking for the best one for you, these are the questions you need to ask yourself.
How much can you repay each month?
Look at your income and expenditure to see how much you can plough into the balance every month without it being too painful.
How long will it take to pay off the balance?
Divide the balance by the amount you can pay each month to see how many months of zero per cent interest you’ll need. You should factor in a month or two extra as a buffer.
Do you need the card for anything else?
If you’ve found a card that offers you the right zero percent period and you don’t have to pay a BT fee on it, then you’ve probably got a good deal. The thing to watch out for is a card that encourages you to spend money on it – any money that’s added to the outstanding balance typically won’t be interest – free so it could hamper your efforts to clear the debt.
Once you know where you are and what you’re looking for, you can start seriously comparing the deals on offer. If you’re able to pay the balance off within 12 to 18 months, then a no BT fee card will probably work well. If, on the other hand, you’ll need longer, then paying the BT for a card with a longer zero interest period is probably worth it.
Without further ado, here’s InfoChoice’s favourite BT cards for July
The Citi Rewards Credit Card offers BT customers a 26–month zero interest period for a fee of 1.5 per cent of the transferred balance. Once the introductory period ends, the card reverts to its cash advance rate of 22.24 per cent p.a. on any balance left outstanding. You can transfer up to 80 per cent of your approved credit limit.
This card offers a few perks, however, such as a waived annual fee for the first year, which will save you $199. You’ll also get free international travel insurance and purchase insurance, as well as a rewards programme with an earn rate of one point per dollar.
The CUA Platinum Credit Card offers a zero interest period of 13 months on balance transfers with no BT fee (you can transfer up to 80 per cent of your approved credit limit). There’s an annual fee of $149, but this is waived for the first year and you’ll also get free international travel and purchase insurance.
At the end of the introductory period the card reverts to its cash advance rate of 21.74 per cent p.a. so any balance still remaining will be subject to this rate. There’s the Rich Rewards scheme, which earns one point per dollar spent on eligible purchases.
The CUA Low Rate Credit Card also offers 13 months at zero interest for balance transfers for no BT fee. The purchase rate on this card is 11.99 per cent p.a. but if you have any of your old balance left after 13 months, it’ll receive the cash advance rate of 21.74 per cent p.a. so you need to be sure you can clear the balance.
There’s an annual fee of $49, but this is waived for the first year. As a low rate card, there are no perks such as travel insurance or reward scheme, but you do have overseas ATM access.