Zero rate balance transfer traps
Data from the Reserve Bank analysed by banking research company Infochoice, indicates that consumers with a card debt of $10,000 can save up to $4,300 by using the balance transfer offers now in the marketplace.
However analysts say that most people end up paying more, because they are being caught out by a myriad of complex terms, conditions rates and loopholes which are usually only disclosed in long legal contracts.
For example, what is not so prominently revealed is what you will be charged once that promotional period runs out – it is often much more than the headline card interest rate.
What is also not highlighted is the fact that there is often no interest free period on new purchases while part of the transferred balance remains unpaid. And interest on those purchases could keep accruing for months or years because you can't pay them off until the transferred balance is paid off in full.
Other traps also apply to the highly popular balance transfer offers.
For example, if you miss a monthly minimum repayment on some cards, the deal is off and the whole balance begins to be charged at a higher interest rate.
One card issued by one of the big banks is offering a zero rate on balance transfers for six months. The balance then attracts a rate of 19.99 per cent, despite the card being a ‘low-rate' card.
Shaun Cornelius, chief executive of Infochoice, says the devil is in the detail of credit card contracts, and the detail often escapes ordinary consumers.
"It is a bit concerning really – the promotion of the zero rate balance transfer offers. The big headline ‘zero per cent for six months' is what catches people’s attention but the contracts can be complex beasts. There are a lot of conditions and various rates."
Source: Herald Sun