Australians currently hold a staggering $18 billion in credit card debt, with numerous 0% interest offers available for balance transfers. While these promotions might seem attractive, they raise the question: is switching to a new card a wise choice?
There are over 60 such offers on the market, enticing consumers to transfer high-interest balances for what appears to be an interest-free period. Properly navigating these options can provide much-needed relief from financial strain. However, misusing these cards can lead to merely recycling debt instead of eliminating it.
According to Nine’s money editor, Effie Zahos, adopting a long-term strategy is essential for effectively managing debt. A more extended interest-free period gives consumers increased time to settle their debts. For instance, ANZ offers a Low Rate card with 26 months of 0% interest, followed closely by Virgin, Bankwest, and Westpac, providing up to 24 months.
It’s crucial for customers to do thorough research and understand the total cost of these promotional offers. For example, ANZ imposes a 3% fee for transferring existing debt and an annual fee of $58 in the following two years. If one transfers a debt of $5,000, these fees can effectively raise the cost to 5.32% over the 26-month period.
Creating a solid repayment plan is equally important. Dividing the total debt by the number of interest-free months and automatically setting up payments can help ensure the balance is fully paid off before the promotional period ends. Missing this deadline can result in steep interest rates that can quickly negate any potential savings.
Always remember that the information provided regarding these financial products is general and should not be interpreted as personalised financial advice. It is vital to consider your financial objectives and circumstances before making any decisions based on such information.