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Balance transfer credit cards have become the go-to card for Aussies that want to consolidate their debts under one interest rate, making it easier and affordable to pay off their debt. However, there are three common fees that many cardholders tend to overlook that can end up landing them in more trouble than before.
Overlooked revert rates
Balance transfer credit cards offer enticing deals such as a 0% interest rate for a promotional period to help cardholders reduce debt. It can also be used to make those important purchases without attracting an interest rate. Depending on the bank issuer, cardholders can transfer 70% to 100% of the debt and choose a comfortable time frame in which they know they will pay off what they owe.
However, a survey by SocietyOne revealed that 65% of Aussies overlooked the revert rate fee that comes with the card. This is the interest rate the card reverts to after the introductory period has ended. This differs from card to card and can range from 6 to 26 months. For example, once the promotional 0% interest rate has ended the card can revert to 21.49%.
Balance transfer fees
The survey further found that 57% of respondents were not aware of the balance transfer fee that they might have to pay. There are various balance transfer cards that are on the market that come with various features. Some of these having a 2% balance transfer fee.
Not keeping this in mind when taking out a credit card can affect your budget or plans on effectively using the card. A 2% balance transfer can mark the difference in whether you can comfortably afford your cards repayments or find yourself being pushed into the red.
Interest charged on new spending
A balance transfer card can help take care of your existing debt, but be careful not to add to the list. 57% of cardholders were unaware that they will be charged interest on new spending placed on the card. By reading the fine print of what comes with the card can help you avoid the shock when your credit card bill comes.
24% of Aussies that had a balance transfer credit card did not pay off their balance within the interest-free period. Not taking advantage of the interest-free period can cause cardholders to attract a hefty fee that could easily lead them into a debt spiral. It is important to only put important purchases on the card and use the interest-free period to pay it off to avoid attracting a hefty fee that can land you in hot water.
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