Credit card providers shy away from balance transfers

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June 15, 2011

Australia's credit card debt levels have hit record highs yet credit card providers are offering little reprieve. Instead, reigning in the number of balance transfer cards and upping some interest rates.

In the past six months, the number of balance transfer cards monitored by RateCity has dropped from 256 in December to just 224 in May. Among these cards the average revert rate, or the rate charged following the honeymoon period, has increased by 42 basis points to 19.18 percent.

The average balance transfer period has dropped too, down from 11.5 months in December to the current average of 6.9 months. There has also been a decline in the number of credit card providers offering "zero interest" balance transfer options than there were in December.

RateCity CEO Damian Smith says it's more difficult for credit card users to pay down debt using balance transfer cards than in the past.

"Our latest findings show that the balance transfer credit card market has become less attractive than December 2010 despite the average balance transfer interest rate falling by 25 basis points to 3.77 percent," Smith says.

"The Reserve Bank of Australia's latest statistics on credit card debt shows that we've hit a new record with $49.3 billion of credit card debt owning on our cards in March. The amount of money accruing interest has also increased by $450 million to $3.64 billion since February.

"Putting these two sets of statistics together, some people with a large credit card debt will find it harder to use balance transfer cards to get their debt under control."

The good news
Despite the less attractive balance transfer credit card market, there is some good news for those using plastic. That's because smart borrowers can still find a good value credit card by shopping around for the best deal.

"While there are less balance transfer options available on the market, according to RateCity's database, it's even more important for Australians who are struggling with their debts to compare balance transfer deals carefully to make sure they are getting the best value," Smith says.

For instance, RateCity monitors 12 personal credit cards that have a no-interest balance transfer rate for up to six months.

"If you transferred a $5000 debt from a card charging the average purchase rate of 17.30 percent to a no interest card and paid it off during the honeymoon period, you would save about $200 in interest," Smith says. "Compared to paying the same amount each month on the card with 17.30 percent, you'd still owe about $200.

"Be careful with the terms and conditions including the annual fees because they could end up costing you more than what you saved on interest."

The best balance transfer cards
Some of the best no-interest balance transfer credit cards available through RateCity currently include:

  • Macquarie Bank's JetStar MasterCard - reverts to 13.24 percent after six months, $49 annual fee
  • GE Money Coles Group's Source MasterCard - reverts to 20.49 percent after six months, no annual fee
  • Citibank's Clear Card - reverts to 21.74 percent after six months, $65 annual fee
  • HSBC's Credit Card - reverts to 21.99 percent after six months, no annual fee
  • Bank of Queensland - reverts to 21.49 percent after three months, $55 annual fee



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