Money

Swap credit cards for a better deal

Paul Clitheroe.
Paul Clitheroe.

Australians are taking serious steps to reduce personal debt, and it's great to see Reserve Bank figures that show the average credit card balance slipped by almost $30 in July.

It's welcome news because for years the outstanding balance on our cards has been steadily rising. Along with extra repayments, swapping to a card with a better rate can help you make inroads on your card debt.

In the current competitive market, card issuers are offering plenty of low honeymoon rates particularly on card transfers, in a bid to poach your business from their competitors.

Having a lower rate card can really make a difference. On the average card debt of $3,300, switching from a card with an interest rate of 20% to a card with a rate of 10.75% could see you shave $305 off your annual interest bill (assuming the card balance stays at $3,300 for the year).

A quick check of comparison website RateCity reveals stacks of cards with interest rates below 5% on balance transfers. One card from Westpac for instance, charges a rate of just 0.99% for nine months, with an ongoing rate of 13.49%.

With plenty of balance transfer deals to choose from, look for an offer that suits your ability to make the best use of the low rate period. A 0% offer that jumps to 15% after three months may be no good if there's  no chance you'll pay off the debt in that timeframe. You could save more if you choose an introductory rate of, say, 2% that runs for 12 months.

It's possible to save money with balance transfers but there are also traps to avoid. In most cases the low honeymoon transfer rate only applies to the transferred amount. New purchases are charged at the card's normal rate from the moment the transaction is made. And, when a new credit card has been established with a balance transfer from another card, there may be no interest-free days on purchases until the card debt is paid out in full.

One pitfall to be very clear about, is the rate you will pay on the remaining balance transferred once the introductory rate expires. With some cards this is the cash advance rate, which can be more than 20%.

The trick is to take full advantage of the honeymoon period to pay off your existing debt, and avoid ramping up your card spending (even with the festive season approaching) or you'll remain in financial trouble.

Another thing - if you switch to a new card, get rid of the old one. Cut it up. Hanging onto it for emergencies is not a good move. Chances are you'll be tempted to use it again, especially with its full quota of available credit. When you ditch the old card don't forget to tell the card issuer otherwise you'll still be expected to pay annual card fees.

Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money magazine. Visit www.paulsmoney.com.au for more information.

Topics:  clitheroe credit card interest rates reserve bank



Gnarly Harley wins a toe hanging world title heat

Coffs Coast surfer Harley Ingleby produced one of the heats of his career to defeat French style-master Antoine Delpero in round 3 of the Jeep World Longboard Championships in China on Thursday.

Harley Ingleby gives a malibu masterclass at World Longboard Champs

Staff members held-up in club robbery

Two staff members were threatened during the robbery last night.

Investigations are under way after four men robbed a Macksville club

A close call in the surf

SAVED: Mitch Harvey helped rescue a young man at Main Beach in Woolgoolga.

Two men were rescued in the surf at Woolgoolga.

Local Partners

Is it time to crackdown on illegal camping at Mt Warning?

SECURITY improvements at Mt Warning are in question after a backpacker died atop the popular peak this week.


Man builds playground entirely out of packing tape

Artist Eric Lennartson is in the process of completing his huge tape sculpture at the Ipswich Art Gallery.

VIDEO:And here's where you can play on it.

Countdown to Woodford Folk Festival begins

ECONOMIC BOON: Woodford Folk Festival is celebrating its 30th anniversary this year.  Photo Contributed

The first larger-than-life inhabitants have stepped into Woodfordia

'I need to do what I can': 65km walk for cancer patient

Karlee Robinson is walking from Caloundra to Noosa for her cousin Aaron Parker, who has terminal brain cancer.

What do you do when someone you love has terminal brain cancer?

Brad Pitt bids to keep custody battle private

Brad Pitt will go to court to keep his custody battle private

Sia has split from her husband

Sia has split from her husband Erik Anders Lang.

Amy Schumer thanks Barbie trolls for hateful comments

Amy Schumer is in the lead role for the new Barbie movie

Shannen Doherty's husband is suing for destroyed sex life

Shannen Doherty's husband is suing her former manager

Azealia Banks' battery case against Russell Crowe dropped

Russell Crowe will not be charged with battery

Mel Gibson named Best Director at AACTA Awards

Mel Gibson poses in the media room after winning the AACTA Award for Best Direction for Hacksaw Ridge.

HIS wartime drama Hacksaw Ridge sweeps 6th annual awards in Sydney.

INSIDE STORY: The highlights of your $150 million CBD

GRAND PLAN: The highlights of the Ipswich CBD redevelopment and where they will be located.

Work on city heart's radical transformation to begin next year

VOTE IN OUR POLL: Sand mine opponents face serious dilemma

Public meeting for the proposed sand mine at Maroochydore last week.

Coast MP calls on Minister to stop KRA proposal with stroke of a pen

Developer's grand new multi-million dollar estate

NEW ESTATE: This is the only plan revealed by the property developer's new Billabongs Estate in Agnes Water.

DEVELOPER given the go ahead for a massive estate with 149 homes.

Banks reclaim Gladstone homes as job losses bite

LONG FALL: Property experts Heron Todd say, based on key market indicators, Gladstone is still travelling to the bottom of the market, with property prices set to get cheaper.

Property valuers say Gladstone housing market hasn't hit the bottom

The million dollar property to test Mackay's market

This Victoria St building will go to auction Tuesday and investors will be watching closely to see how much it sells for.

'High profile architect designed CBD asset' goes to auction

Ready to SELL your property?

Post Your Ad Here!