RateCity
Debt doctor: Do balance transfers really save you money?
August 19, 2009
In the current economic climate, balance transfer offers have become a popular way of saving money. They allow you to move the balance of your credit card onto another card with a lower interest rate, therefore reducing the amount of interest you are charged.
Can a balance transfer offer help me?
If you're paying a high interest rate on your current credit card then you may find a balance transfer offer useful. It could help you manage your credit card debt by reducing your interest repayments, which could mean you pay off your balance sooner.
If you're simply managing an ongoing balance, a balance transfer may be an easy way to save money by paying a lower interest rate over a fixed period.
What should I look for?
When looking for a balance transfer offer, there are three things you should keep in mind: the balance transfer interest rate, the term over which this interest rate applies and the ongoing purchase rate. The most competitive offer will provide the best of all three.
The most competitive deals
One of the most competitive products currently available is the Bankwest Lite MasterCard. It offers a long balance transfer of 15 months at 4.99 percent per annum. The 15 month term means you could financially benefit from the low interest rate for a greater period of time. It also offers Australia's lowest MasterCard purchase rate of just 9.99 percent per annum.
"I'd strongly urge anyone considering a balance transfer deal to consider not just the balance transfer rate, but also the introductory term," said Andrew Banks, Head of Credit Cards at Bankwest. "The longer the term, the more interest you can potentially save."
How much can you save?
Let's say for example your current credit card has an interest rate of 15 percent per annum. and a debt of $4,000. That means if you're making the minimum payments on your card, you are being charged up to $600 a year just on interest. By moving this balance onto a product like the Bankwest Lite MasterCard, the interest you are charged could be reduced to under $200. Considering that's a saving of roughly $400, it's something worth thinking about.
To find out more about the Bankwest Lite MasterCard range, visit www.bankwest.com.au/lowratecreditcard