A financial strategy for easing your credit card debt can be as simple as doing a credit card rollover.
Think of it like a tool for your finances.
Like any tool, it is more effective when applied to the right situation; when the strengths and weaknesses of rolling over your credit card debt to a new card are properly understood, the results can be powerful.
What is a credit card rollover?
Some people call a balance transfer, a ‘credit card rollover’ to describe what goes on when transferring your debt from your existing credit card to a new one.
The banks want your business, so they allow you to bring the debt on your old card over to the new one at a discounted rate. For example, you can go from paying interest of 19% p.a. on your balance to 0% for a fixed period.
In the process, you become their new customer.
0% p.a. for 16 Months on Balance Transfers
0% p.a. and no balance transfer fee for 16 months on Balance Transfers. Reverts to variable cash advance rate.
Low purchase rate of 13.74% p.a..
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Low minimum income threshold of $15,000 needed for eligibility.
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So, why would a bank want to reduce your interest rate?
Banks design their cards to compete with each other and are often putting credit cards on the market with very attractive terms in order to take customers away from the competition.
They do this with introductory terms like the rollover, or with low/no annual fees (for a limited time), and other incentives.
Do all credit card rollovers have the same terms?
No, they vary from card to card, so it is important to have a plan of attack for when the interest rate goes back up.
The terms of the rollover must be understood completely in order to gain benefit from the feature. It is best to have a read through the T&C’s on the online application before you apply.
What are the benefits of a balance transfer or rollover?
One benefit is that your old card is completely paid off. You can keep it open or close it down.
Another benefit is that your new card has perks built in to encourage you to do the rollover.
If you plan ahead, you can shop around for the features that you like the best. Basic features may include no or low annual fee and no/low interest for a period of time.
Who can benefit from this?
Asides from the eligibility of each card, anyone carrying credit card debt on a card can do a rollover and it is easy to do.
The part that takes a little more work is understanding which terms are best suited to your situation.
Say that your debt is $10,000. You are considering two cards; the first gives you 3.99% p.a. for 9 months, saving you $836. The other offers 2.9% p.a. for 12 months, saving you $1,222. How do you know which one is better?
It depends on the other conditions on the card and whether you think you can pay down a lot of that debt before the balance transfer period expires.
How do I find the best deal?
To do this, you are going to need to compare credit cards, review your options and then select a card to apply online.
Remember, everyone has a slightly different idea about what the best deal looks like.
- First, check to see what the per annum rate is on your current card.
- Make sure that you understand the conditions of the promotional rate on the new card. Be aware of the time period for the promotional rate. Also, you can usually consolidate multiple cards into one card, rolling debt from them all into one card. However, this does not mean that your old cards automatically close – you’ll need to do that yourself.
- Shop around for balance transfer deals on Credit Card Compare and determine what features are attractive to you.
- Create a timeline for paying off the debt. You can use our credit card debt calculator to figure it out. Then look at the new credit card and see when the balance transfer period expires. Ask yourself can you pay off the balance during that time? If not, you can still proceed, but you are going to need to work harder to pay it off so you’re not left with a credit card with a monthly balance on it. Or you’ll have to do another rollover as soon as your balance transfer intro rate runs out.
- Now check the new card to see if there is a restriction on rollovers. If not, just apply online to open an account with your new card and request the rollover.
Remember, the banks are a competitive lot.
They are always motivated to attract new customers, and one way they can do this easily is by tapping into the business of their competitors.
So if you have shopped around and cannot find the deal that you need today, you may very well find it tomorrow.