Balance Transfer Credit Cards – How to Shop for One

So you want to enjoy luxury shopping on your credit card but want to do it a little smarter? After reading this article you might just be able to do that!

For most people, paying off credit card debt isn’t easy, particularly if you have two or more credit cards. With credit cards, the more you use them, the more you rack up debt. That is, unless off course cards are used more frequently to cash in on bonuses and incentives. The good news is that you have an ace up your sleeve, if you apply what we’re about to share here: 

Fortunately, in the case of Australians, balance transfer credit cards offer an alternative way of managing your credit card debts. They can help you streamline your finances and focus on clearing your balance. But you have to sift through different options to find the right card if you want it to work for you.

The easiest way Australians do this is by using a comparison engine; here is an example of one: https://www.creditcard.com.au/low-balance-transfer-credit-cards/. The same company also offers free courses on personal finance, developed by finance guru Roland Bleyer and his team. 

So what should you know about picking the ideal balance transfer card?

Consider the Introductory Period

One of the aspects that make balance transfer cards viable options for most people is the 0-percent or lower interest rate for the introductory period. The period can be anywhere from 6 to 24 months after opening the account.

Take the time to look at the introductory periods offered by different cards. The longer the period, the more flexibility you have in repaying the balance. You want a period that works well for your repayment plan and financial ability.

But be wary of longer periods as they can make things feel comfortable, and you’re likely to backslide, possibly failing to pay the balance within the given time. If you fail to pay the balance by the end of the period, you are likely to get a higher interest rate than what you had on your original card.

Review the Features

Financial experts usually advise people to avoid cards with lots of features when transferring a credit card balance. It, however, depends on your circumstances.

If you’re confident about paying the balance quickly, say within one to six months, you can opt for a card that has more features. Most people who have funds to pay down the balance usually opt for cards that have more features.

However, if your goal is to clear the balance, a card with fewer features makes sense. More features mean a higher credit limit and more fees.

Take the time to look at the features to determine if they’ll be relevant during the introductory period. Some great features you should consider include rewards, bonus points, no foreign fee, low interest, and special offers.

Inquire About the Transfer Limits

When your card application is approved, you’ll get a credit limit, which determines how much you can transfer. Keep in mind that the credit limit usually depends on your credit history.

For example, if you have a $10,000 balance on your card, and you get approved with a $7,000 limit, it means you’ll be left with $3,000 on your old card. Knowing the transfer limit will help you determine the card to pick.

Most lenders usually have minimum and maximum amounts for balance transfers. The transferable balance can be a flat amount or a certain percentage of your limit. Some can allow you to transfer up to 100 percent while others cap it at 75 percent.

You can request a higher credit limit if you feel the given limit is pretty low.

Look at the Fees & Charges

Balance transfer credit cards may come with a zero-interest rate, but they’re not free.

There is always a balance transfer fee, which is usually around 1 percent to 5 percent of the total balance. For example, if you transfer $4,000 and the fee is 3 percent, you can expect to pay a fee of $120. You can always compare transfer fees to find an option that charges the lowest fee.

You’ll also need to pay an annual fee, which can range between $70 to $200, depending on your card. But, you can be lucky to find lenders that offer zero fees during the first year of your card.

Don’t forget to inquire about the charge on purchases and cash advance. In most cases, you can be charged about 18 percent to 22 percent of the amount.

Final Thoughts

When shopping for balance transfer credit cards, it’s helpful to take the time to compare your options and pick a card that has the least fees. There are free tools, such as Creditcard.com.au, you can use to compare by feature, rate, or fees to understand the difference.

You can also see the value you’ll get by picking a specific card. While shopping around, keep in mind that the introductory offers will only last for the agreed period. The rate will revert to a higher rate, so pay attention to that rate, too.

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