A balance transfer card is not a one stop magic wand to clear all your financial woes, but it can be used to ease the financial burden that most Australians find themselves in. Most Australians use it to consolidate debt, save money on interest, or pay off debt faster. The shocking news is that Society One released a survey showing that when taking out a balance transfer more than 57% of people are unaware of it’s hidden fees. Here is why you need to know the hidden fees that come with a card.
Ignorance can come at a hefty price
Taking out a balance transfer card without fully understanding its features along with the fees that come with it can come at a hefty price. The survey further found that 65% of people did not know about revert rates.
Basically, this means that after the introductory period ends of paying a 0% interest rate or a low interest rate, it could revert to the original interest rate which could be higher than you expected. If unplanned for, it can throw a major spanner in the works when it comes to your finances.
The balance transfer fee
Nothing comes for free in terms of the balance transfer card. That is why it is vital that you check or ask about the hidden fees that come with the card. Failing to do so will leave you feeling like you have been jinxed into a deal that you weren’t ready for. Some balance transfer cards come with a transfer fee of up to 3% when transferring your balance. On its own it might appear to be a small number, but depending on the amount you are transferring 3% can be significant.
Cash in on the introductory interest rate
Don’t let the introductory interest rate of 0% cause you to relax. This is the time where you want to take advantage of a great opportunity by paying off your debt before the interest rate reverts. Mark this as the top priority to save you on thousands of dollars that could be spent when the interest rate reverts to 21.99% p.a.
A serving of annual fees
Some balance transfer cards can charge up to $700 in annual fees. This could mark the difference of you managing your debt, or spiralling out of control in debt. As a nation we currently owe $33 billion in credit card debt, which is $4,282.88 per credit card holder at an interest of $705.82 p.a, which was revealed by Australian Securities Investment Commission.
Avoid the urge to swipe
Once you receive your balance transfer credit card looking all new and shiny, you could get tempted into spending on it. This can be a poor move, as it could result in you taking longer to paying off your debt. You could also work yourself into more debt making it hard to meet your repayment deadline before the interest rate reverts.
It’s always best to keep in mind that you need to check both the features and fees that come with a card, before you are shocked by how expensive it’s becoming to maintain.
Whatever you don’t understand ask your provider to clarify for you. This should be done before you even sign up for the card. A take home is that you need to compare balance transfer cards to find one that works with your financial needs, and won’t dig you further into debt.