RateCity shows you that it is possible to save money by paying no interest on your credit card and pay off your debt sooner.
May 27, 2010
Most of us have credit card debt, but just how much we owe and how much interest we pay each month is another story. Rest assured that there is a way that you could cut out having to pay interest on the balance amount and save you the stress and more importantly, money!
It sounds too good to be true
Take Rachel for instance, she currently has two credit cards with a total balance of $10,000. She has one with a balance of $4000 which she is charged an interest rate of 18 percent per annum and the other one with a balance of $6000 at an interest rate of 20 percent per annum.
Over the next six months, if Rachel does not make any repayments or any transactions she will be charged a total of over $370 on her balance of $4000. For her other card with a balance of $6000 she will be charged a total of over $620. That is nearly $1000 in interest charged after six months.
The smart option for Rachel would be to consolidate both cards and transfer them over to a financial institution offering an attractive balance transfer credit card. For instance, currently HSBC and ANZ are offering balance transfers at an introductory rate of 0 percent for six months.
By transferring the total balance to one of these balance transfer cards Rachel will not pay a cent of interest on the balance and will ultimately save $1000 over six months! It will also give her a chance to focus on paying off her balance sooner and not have to worry about paying the interest.
What to be aware of
Even though balance transfers are a great option and can save you money, there are some things to be aware of, such as:
- Be sure to check what the interest rate for purchases is set at as this can be quite high. HSBC's Credit Card purchase standard rate is 16.99 percent per annum and ANZ's Low Rate MasterCard is charging 13.24 percent. As long as you put a hold on your spending and focus on paying off the balance you will avoid these charges.
- Also be aware of what the interest rate will revert to once the introductory period ends as this can be quite high. For example, the revert rate for HSBC is 20.5 percent and ANZ is 13.24 percent, which can be a big difference if you owe a few thousand dollars and don't pay it off in time.
To start saving right away compare online to find a competitive balance transfer credit card with a zero or low interest rate.