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Help with loansIs a Balance Transfer Credit Card Right For You?
What is a balance transfer credit card?
A balance transfer allows you to move existing credit card debt to a different credit card with a new lender.
The benefits of balance transfers
A recent report by ASIC into credit card lending in Australia revealed that 53.1% of consumers who transferred their balance reduced their total debt by 10% or more.1 By choosing a credit card with a lower interest rate than what your current credit card offers, you can reduce the interest you pay on your existing balance and ultimately pay off your debt quicker.
Citi offers a number of balance transfer credit cards with an introductory 0% p.a. interest rate.
Balance transfers also offer a way to manage your finances in one single credit card, which can, in turn, simplify your monthly repayments. Having a set period – the promotional period – to repay your debt can help you commit to a timeline to repay your debt.
Our balance transfer calculator can help you see how much you could save on interest with and work out how a Citi balance transfer credit card stacks up against your current credit card.
Case Study
Jessica currently pays $150 a month towards her $5,000 debt on her current credit card with an interest rate of 12% p.a.
She has decided to transfer this debt to balance transfer credit card offering an introductory 0% p.a. interest rate for 12 months, followed by 15% afterwards.
If Jessica continues to pay $150 a month she would pay her debt off in 3 years, 1 month, paying a total of $5,491 (plus the transfer fee if applicable).
If she stayed with her current credit card, it would take her 3 year, 5 months, paying back a total of $6,038.
How to manage your balance transfer
Effective management of your balance transfer will ensure that you reduce your debt. But in order to get the most from your balance transfer credit card, there are a few rules you need to follow.
1. Choosing the correct balance transfer card
Before you take on a balance transfer credit card you need to review;
- The annual fee,
- How much you can transfer
- The ongoing interest rate
- Balance transfer fees (typically a percentage of the amount transferred with minimum requirements)
Remember that every time you apply for credit, it will show up on your credit file – so the more applications you make could potentially impact your future borrowing plans.
2. Cancel your old card after the balance has been transferred
Not only does this remove the temptation to continue to spend, but it also means you won’t be paying any unnecessary annual fees.
3. Avoid making new purchases on your balance transfer credit card
The promotional low-interest rate only applies to the balance you've transferred from your old card; any new charges will usually attract a higher interest rate (unless you pay off the closing balance in full, including balance transfer balance). Interest free days generally do not apply to balances transferred.
4. Ensure you can pay off your balance transfer amount within the promotional period
You'll only receive the full benefit of a balance transfer if you completely pay off the amount you've transferred within this introductory period. This is because, if the balance is not paid in full by the time the introductory rate ends, the unpaid balance will be charged interest at the standard APR on the account.
5. Remember to make the minimum monthly payment
Your minimum repayments shown on your credit card statement, it’s the lowest amount you need to pay in order to meet your credit card agreement.
You may be charged a late payment fee if you miss a payment or are late making a payment so you need to check if you can afford you meet the minimum payments before you take on a balance transfer - and remember to pay them each statement period.
If you have decided that a balance transfer credit card is right for you and your financial situation, Citi offers four different balance transfer credit card for you to choose from. Learn more about the range and compare the cards’ features and benefits.
References:
What is a balance transfer credit card?
A balance transfer allows you to move existing credit card debt to a different credit card with a new lender.
The benefits of balance transfers
A recent report by ASIC into credit card lending in Australia revealed that 53.1% of consumers who transferred their balance reduced their total debt by 10% or more.1 By choosing a credit card with a lower interest rate than what your current credit card offers, you can reduce the interest you pay on your existing balance and ultimately pay off your debt quicker.
Citi offers a number of balance transfer credit cards with an introductory 0% p.a. interest rate.
Balance transfers also offer a way to manage your finances in one single credit card, which can, in turn, simplify your monthly repayments. Having a set period – the promotional period – to repay your debt can help you commit to a timeline to repay your debt.
Our balance transfer calculator can help you see how much you could save on interest with and work out how a Citi balance transfer credit card stacks up against your current credit card.
Case Study
Jessica currently pays $150 a month towards her $5,000 debt on her current credit card with an interest rate of 12% p.a.
She has decided to transfer this debt to balance transfer credit card offering an introductory 0% p.a. interest rate for 12 months, followed by 15% afterwards.
If Jessica continues to pay $150 a month she would pay her debt off in 3 years, 1 month, paying a total of $5,491 (plus the transfer fee if applicable).
If she stayed with her current credit card, it would take her 3 year, 5 months, paying back a total of $6,038.
How to manage your balance transfer
Effective management of your balance transfer will ensure that you reduce your debt. But in order to get the most from your balance transfer credit card, there are a few rules you need to follow.
1. Choosing the correct balance transfer card
Before you take on a balance transfer credit card you need to review;
- The annual fee,
- How much you can transfer
- The ongoing interest rate
- Balance transfer fees (typically a percentage of the amount transferred with minimum requirements)
Remember that every time you apply for credit, it will show up on your credit file – so the more applications you make could potentially impact your future borrowing plans.
2. Cancel your old card after the balance has been transferred
Not only does this remove the temptation to continue to spend, but it also means you won’t be paying any unnecessary annual fees.
3. Avoid making new purchases on your balance transfer credit card
The promotional low-interest rate only applies to the balance you've transferred from your old card; any new charges will usually attract a higher interest rate (unless you pay off the closing balance in full, including balance transfer balance). Interest free days generally do not apply to balances transferred.
4. Ensure you can pay off your balance transfer amount within the promotional period
You'll only receive the full benefit of a balance transfer if you completely pay off the amount you've transferred within this introductory period. This is because, if the balance is not paid in full by the time the introductory rate ends, the unpaid balance will be charged interest at the standard APR on the account.
5. Remember to make the minimum monthly payment
Your minimum repayments shown on your credit card statement, it’s the lowest amount you need to pay in order to meet your credit card agreement.
You may be charged a late payment fee if you miss a payment or are late making a payment so you need to check if you can afford you meet the minimum payments before you take on a balance transfer - and remember to pay them each statement period.
If you have decided that a balance transfer credit card is right for you and your financial situation, Citi offers four different balance transfer credit card for you to choose from. Learn more about the range and compare the cards’ features and benefits.
References: