Will a credit card balance transfer get you out of debt?

Will a credit card balance transfer get you out of debt?

Staying ahead of credit card debt can be like trying to negotiate your way through sinking sand. The more you struggle the deeper into debt you get. Credit card balance transfers can seem like the solid ground you’re looking for but be cautious, it's only for the committed. 

Balance transfers can be beneficial for those who are struggling to pay off one or more credit cards and want to consolidate their debts. They are appealing because they usually offer a much lower interest rate for the introductory period, which is usually 6 months. However, there are a few facts about balance transfers that you need to take into consideration.

Interest rate rise after introductory period

Are you committed to paying of your debt within the initial introductory period? This period of low interest rates is a great opportunity for you to get back on top of your debt and pay it off as quickly as possible. However, once the introductory period has lapsed the interest rate will revert back to a rate that is usually much higher. 

Balance transfer transaction fees

Balance transfers can have transaction fees, so check that you're not paying hundreds when you switch over your debt. Scan over the terms and condition with a fine-tooth comb to make sure you’re aware of what you’re singing up for. Many lenders skyrocket rates as soon as you miss a payment.

Be a cautious shopper

Sometimes less is more, so when you’re rolling over your debt and putting in a concerted effort to become debt free, try to avoid impulse buys. The feeling of being debt free will leave you a lot giddier than an extra pair of shoes.

Shop – for the best credit card balance transfer

If you are focused and committed on paying off your debt, a balance transfer could be a great way to do it. Like everything, there are the good and the bad. Every credit card will offer you something different so you need to track down the one that best suits your needs.

A few things to consider are;

  • How much can you commit to paying off each week?
  • How large is your debt?
  • How often will you use the card once you have paid off your existing debt?
  • Can you restrict all spending during the introductory period?

Answer these questions honestly as it will help you identify the right credit card balance transfer for you.

Start your research by using RateCity's credit card balance transfer comparison tool.

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Learn more about credit cards

What is a balance transfer credit card?

A balance transfer credit card lets you transfer your debt balance from one credit card to another. A balance transfer credit card generally has a 0 per cent interest rate for a set period of time. When you roll your debt balance over to a new credit card, you’ll be able to take advantage of the interest-free period to pay your credit card debt off faster without accruing additional interest charges. If your application is approved, the provider will pay out your old credit card and transfer your debt balance over to the new card. 

How to pay a credit card from another bank

Paying or transferring debt from one lender to the other is called a balance transfer. This involves transferring part or all of the debt from a credit card with one lender to a credit card with another. As part of the process, your new lender will pay out the old lender, so that you now owe the same amount of money but to a new institution.

Many credit card providers offer an interest-free period on balance transfers to help new applicants better handle their debt. During this period, cardholders are not required to pay interest on the debt they brought over from the other card. This can be a great opportunity for consumers to pay off credit card debt with no interest. There are often fees associated with balance transfers; normally, these are a percentage of the amount transferred.

So make sure you read the terms and conditions of the card before transferring any debt across.

How to get rid of credit card debt

  1. Calculate your debt. Credit card calculators make it easy to determine the repayments required to chip away at your debt in the shortest timeframe possible for your budget.
  2. Repayment plans. Take some time to formulate a credit repayment plan. Consider increasing your income, scaling back your lifestyle or refinancing.
  3. Talk to your credit provider. If you’re still struggling with your debt, give your credit provider a call. You may be able to come to a new arrangement.

How is credit card interest charged?

Your credit card will be charged interest when you don’t pay off the balance on your credit card. Your card provider or bank charges you the individual interest rate that is associated with your card, which is usually between 10 and 20 per cent. 

The interest will be added onto your bill each month or billing period if you don’t pay off the balance, unless you are in an interest-free period.

You will be charged interest on anything that hasn’t been paid for inside the interest-free period. Usually you will receive a notice on your bill or statement saying you will be charged interest so you have some form of notice before you’re charged.

How to calculate credit card interest

Credit card interest can quickly turn a manageable balance into unmovable debt. So being able to understand how interest rates translate into dollars is an important skill to acquire.

The common mistake people make is focusing on the credit card’s annual percentage rate (APR), which often sits between 15 and 20 per cent. While the APR does provide a rough idea of how much interest you’ll pay, it’s not entirely accurate.

This is because you actually accrue interest on your balance daily, not annually. So, you need to work out your daily periodic rate (DPR). To do this, divide your card’s APR by the number of days in a year (e.g. 16.9 per cent divided by 365, or 0.05 per cent). You can then apply this figure to the daily balance on your credit card.

How do you use credit cards?

A credit card can be an easy way to make purchases online, in person or over the phone. When used properly, a credit card can even help you manage your cash flow. But before applying for a credit card, it’s good to know how they work. A credit card is essentially a personal line of credit which lets you buy things and pay for them later. As a card holder, you’ll be given a credit limit and (potentially) charged interest on the money the bank lends you. At the end of each billing period, the bank will send you a statement which shows your outstanding balance and the minimum amount you need to pay back. If you don’t pay back the full balance amount, the bank will begin charging you interest.

How to increase your Qantas Premier credit card limit

When your income or spending habits change, you might wish to increase your credit card limit. The Qantas Premier credit card allows you to do this over the phone. You can contact Qantas Premier Card Support by calling on 1300 992 700. Unlike some other credit providers, Qantas doesn’t give you the option to increase your limit online.

Qantas will only accept your application if you have a good history of repayment and have not increased your credit or bought another credit product from Qantas in the past six months.

Before approving your Qantas Premier credit card limit increase, Qantas will perform a credit assessment on your current financial circumstances and ask why you would like to increase your credit limit.

To ensure that there are no bumps in your application process, you must provide accurate and recent information about your financial situation. You should also account for any future changes you’re anticipating which could hinder your ability to repay the loan.

Once the assessment is complete, Qantas will either approve or deny your application. If they approve it, you will need to sign a credit limit increase agreement - and you can request a written copy of the credit assessment. However, if your application is rejected, Qantas can opt not to provide a copy of the assessment.

What does Westpac credit card insurance cover?

If you own a Westpac credit card, one of the perks may be  free travel insurance. If you’re eligible, you may be covered if you get sick while travelling, have lost your luggage, have to cancel a trip or have an accident while you’re on the move.

Besides these standard inclusions, the Westpac credit card insurance policy may also cover you for hospital essentials, emergency dental treatment and alternative transport if your original plans go awry. It may also cover loss of income when you get back home after being sick  overseas and your pets’ boarding costs too.

If you have any queries, the Westpac credit card insurance contact number is 1800 091 710. You can submit a claim online.

 

How to increase my Commonwealth credit card limit?

Commonwealth Bank credit cards are extremely popular in Australia for everyday purchases and big ticket items alikers. A number of the card’s functions can be customised, depending on your needs and desires. If you wish to increase your Commonwealth credit card limit using the CommBank, you can usually do so on the app or via NetBank.

In the CommBank app, tap on the ‘Cards’ icon and choose your credit card. Then, click on ‘Credit Limit’ and select the ‘Increasing your limit’ option. If you don’t have the CommBank app, you can also increase your Commonwealth Bank credit card limit through NetBank. Simply log on and go to Settings, then click on ‘Product Requests’ and then choose ‘Credit Card Limit Changes’. 

Once the bank has received your application, they will review your account and payment history. Based on this assessment, your application will either be approved or denied. If approved, your new limit will be applied to your card instantly. 

While increasing your credit card limit may be an easy process, it’s important to remember that you should only request limits that you can manage. A high limit increases the risk of having a larger debt, even with cards that provide low-interest rate options. So, it’s important to think carefully and seek advice from people you trust before increasing your Commonwealth Bank credit card limit.

How do you cancel a credit card?

It’s important to cancel your old cards to avoid any additional fees. Unless you’re doing a balance transfer, you’ll need to pay the outstanding balance before you cancel your credit card. If you’ve opted for a card with reward points, make sure you redeem or transfer the points before you close your account. To avoid any bounced payments and save yourself an admin headache, redirect all your direct debits to a new card or account. Once you’ve done all the preparation, call your bank or credit card provider to get the cancellation underway. Once you receive a confirmation letter, destroy your card and make sure the numbers aren’t legible.

How do you use a credit card?

Credit cards are a quick and convenient way to pay for items in store, online or over the phone. You can use a credit card as a cashless way to pay for goods or services, both locally and overseas. You can also use a credit card to make a cash advance, which gives you the flexibility to withdraw cash from your credit card account. Because a credit card uses the bank’s funds instead of your own, you will be charged interest on the money you spend – unless you pay off the entire debt within the interest-free period. If you pay the minimum monthly repayment, you will be charged interest. There are many different credit card options on the market, all offering different interest rates and reward options.

How does credit card interest work?

Generally, when we talk about credit card interest, we mean the purchase interest rate, which is the interest charged on purchases you make with your credit card.

If you don’t pay your full balance each month (or even if you pay the minimum amount), you are charged interest on all the outstanding transactions and the remaining balance. However, interest is also charged on cash advances, balance transfers, special rate offers and, in some cases, even the fees charged by the company.

The interest rate can vary, depending on the credit card. Some have an interest-free period, otherwise you start paying interest from the day you make a purchase or from the day your monthly statement is issued. So avoid interest by paying the full amount promptly.

Should I get a credit card?

Once you've compared credit card interest rates and deals and found the right card for you, the actual process of getting a credit card is quite straightforward. You can apply for a credit card online, over the phone or in person at a bank branch. 

Can a pensioner get a credit card?

It is possible to get a credit card as a pensioner. There are some factors to keep in mind, including:

  • Annual income. Look for credit cards with minimum annual income requirements you can meet. 
  • Annual fees. If high fees are a concern for you, opt for a card with a low or $0 annual fee. 
  • Interest rate. Make sure you won’t have any nasty surprises on your credit card bill. Compare cards with a low interest rates to minimise risk.