The 6 Month 0% Balance Transfer Credit Card: What is it?

If you’ve got an outstanding credit card balance and want to save money, then you’re probably already familiar with the idea of transferring a balance to a new account to take advantage of a low interest rate. The 0% balance transfer for 6 months is a particular type of offer where you get the lowest possible rate, 0%, for 6 months. This rate compares favourably with many of the other offers. If you have a $5,000 balance and you were paying a standard interest rate of 20% on it, which is fairly commonplace, then over the course of 6 months you’ll pay $500 in interest alone. If you apply and are approved for a balance transfer credit card with 0% on balance transfers for 6 months, you’ll save $500! What you do with that saving is up to you, but many people will use it to repay their debt faster and cheaper.

Maximising the Benefits of 0% Balance Transfer Cards

Q: What are the benefits? A: The main benefit is, of course, the money saved. And we’re not talking about a small handful of change either – depending on your situation, you could save hundreds of dollars! With a 0% balance transfer offer you get to open a new account, transfer your outstanding balance to it and then pay 0% on it for the duration of the promotional offer. When you have a sizable debt, you could literally save hundreds of dollars per month.

Q: When does the interest rate offer expire? A: The balance transfer offer on these cards lasts for 6 months. Other balance transfer offers are available with longer offers on balance transfers, but these generally are not available with a 0% interest rate.

Q: What does the interest rate revert to? A: After the promotional interest rate on balance transfers expires, the interest rate that you will pay on the amount of money transferred will change to a different, and generally higher, interest rate. Often the interest rate will revert to the standard purchase rate, but it may also revert to the cash rate, which is even higher still. You should be aware of exactly what rate interest will revert to before applying.

Q: Can I balance transfer to another account after the offer ends? A: Many people use 0% balance transfer offers to save the amount of money they pay in interest every month and then use the amount saved to pay back their debt faster. However, if you’ve got a large debt and 6 months at 0% isn’t going to be enough to clear the balance, then you can apply for a different card with a promotional balance transfer offer and move your debt to it in order to continue paying as low a rate as possible.

Q: Is it possible to open another account at the same bank? A: If you need more time to pay off your debt and want to open a new account so that you can keep paying a low interest rate, you’ll usually have to apply for an account at a different bank. Most banks in Australia run various balance transfer deals simultaneously, however, they will not approve you for another balance transfer credit card with them. Another complicating factor is that Citibank power credit cards from various banks and building societies such as Bank of Queensland, Suncorp, CUA and IMB. Therefore, it may not be possible for you to open a new balance transfer card with any of the aforementioned banks if you already have one with Citibank. This does muddy the waters somewhat and can be the reason why your application is declined.

Q: Is there a balance transfer fee? A: The balance transfer fee is worked out as a small percentage of your existing balance. Thankfully balance transfer fees are not normally charged in Australia, which really helps maximise the amount you can save and takes a lot of the hassle out of transferring balances.

Q: How does the annual fee impact the amount of money saved? A: The annual fee on a credit card can range from around $50 p.a. to several hundred dollars, so it can and will impact the amount of money you save. However, just because a credit card has an annual fee doesn’t mean you should avoid it at all costs. If the card you are interested in has a 0% balance transfer deal lasting 6 months and you’ve got a large debt, then the amount you’ll save in interest will also be significant, probably enough to make a small annual fee like $50 worth paying. However, when you’re trying to save money and a card has a much higher annual fee of, say, $200, then it would be worthwhile looking for a card with a similar balance transfer deal and a lower annual fee.

Q: Are there any other fees? A: Before you apply, take a look at the small print and check that there aren’t any other fees payable. These could include charges for account maintenance, late payment, rewards program membership and the like. Be fully aware of what you can be charged for prior to opening your account as opposed to getting a surprising charge from the bank.

Q: What happens if I miss a payment? A: Late payments will typically result in you paying a penalty fee to the bank on top of your payment. Missed payments can also cause damage to your credit rating, which makes it more difficult for you to get a new account with a low balance transfer rate.

Q: How do I apply for a card? A: Applying for a 0% balance transfer credit card is as easy as applying for any other offer. Compare the available offers, check that you meet all the bank’s requirements and proceed to fill in the application form. Pay close attention to accuracy and provide as much detail as possible so that your application can be processed quickly.

Q: How can I improve the chances of being approved? A: Make sure that you have all the necessary documents and details to hand before you start the application. This should mean that you can answer any question asked and stop you wildly guessing. Being accurate is extremely important as the bank will check your credit file for outstanding debts elsewhere and your monthly repayment record. Another way to increase the chance of success is to clean up and improve your credit score. Check your credit file online and fix any errors that there may be. If your score is on the low side, get up to date on all your payments and pay back as much of your debt as possible so that your income to debt ratio looks less risky for the bank. Also, only ever apply for offers that you are actually eligible for in the first place.

Q: Should I use the card to buy with? A: Assuming that you want to transfer a balance and get 0% on it for 6 months in order to pay as much of it off as possible, then no, don’t use the card to buy with. Your new balance transfer card may have a fabulously low rate of interest on balance transfers, but the standard rate charged on purchases is usually much higher. Even when there is a combined low interest offer on balance transfers and purchases, it’s best to not add to your problem and focus on paying off the debt as quickly as possible.