Yahoo Finance Quick: 0% interest balance-transfer offers are getting shorter
Money-saving opportunities are shrinking for Aussies with credit card debt.
Some interesting things are happening with Aussies’ credit card debt.
Firstly, we seem to be putting the credit cards away - the amount of outstanding debt has just dropped for the second time in nine months, according to the latest Reserve Bank figures. But, at the same time, the number of credit card accounts has risen for the ninth month in a row, to 12.6 million.
What could be happening is that Aussies are shrewdly parking their debt at 0 per cent interest. More than 200,000 more credit card accounts are open today than there were a year ago.
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Even so, RateCity calculates that with a total of $17.73 billion of credit card debt attracting interest, Aussies are collectively shelling out $8.57 million a day in interest charges.
For these cardholders, there may be a better, interest-free way, but you'd better be quick because the money-saving opportunities are shrinking.
The 0% deal changes
One option, when you have outstanding debt, is to transfer your balance to another institution, but to lure you across, some will charge you 0 per cent interest on a transferred credit card balance for a time. That maximum time is now 34 months.
In June, I listed the best 0 per cent balance transfer deals for as much as 36 months – or a full three years. But Citi has since reduced its offer to 28 months, from 36 months. It also levies a common 2 per cent 'balance-transfer' fee. All the providers that offer 0 per cent for longer also do this, which means none is actually entirely interest-free.
If you want to avoid such a fee, and thus a penalty of $200 on a $10,000 transfer, Suncorp, Virgin Money and Westpac will still give you 28 months. Of these, Virgin Money has the highest annual fee at $129, while the other two charge just $55 and $59, respectively.
Note: To qualify for any and all of the below, you will typically need to be a new customer.
The best 0% transfer deals
BankWest now comes out on top, with 0 per cent for 34 months, although, like Citi, it also applies a 2 per cent balance-transfer fee. You’ll also pay 2 per cent with NAB, which offers 32 months interest-free, but the balance-transfer fee is just 1 per cent. The other 32-month, 0 per cent product is the Vertigo card, offered by St George, Bank SA and Bank of Melbourne.
From there, your choice of cheap cards comes down to the biggest balance-transfer trap: the purchase rate. The trap is that there are no interest-free days on new purchases. So they cost you extra every time. Remember, though, you shouldn’t be making any new purchases, but rather parking your debt and avoiding incurring more interest.
You can see that NAB and ANZ have the lowest new-purchase rate - 12.49 per cent - while the longer-duration BankWest products levy slightly more at 14.99 per cent (but note there is no annual fee under a limited offer).
And there is one final pitfall every institution hopes you fall into with these cards: sticking with them after the 0 per cent balance transfer is over. The so-named revert rate will be at a nosebleed level and much higher than the purchase rate. So, set your alarm, don’t do any new spending and you could well come out ahead.
It may well be time for a switch to ditch your interest altogether.
Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter and Instagram.
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