Want a balance transfer card? Check the return rate first

Avoid high costs at the end of your 0% balance transfer period by checking the return rate before applying.

If you want to control your credit card debt, switching to a 0% balance transfer card could help you save on interest charges during the introductory period. But one of the key features often overlooked when making balance transfers is the interest rate that applies. after the introductory period ends. This can have a huge impact on the price of a card when you are still paying off your balance transfer debt.

Typically, the 0% promotional balance transfer rate will revert to the card’s standard variable purchase rate or cash advance rate. But credit card providers can change the standard balance transfer return rate at any time, which could have a big impact on a card’s overall affordability.

For example, we recently noticed that the 0% balance transfer offer for 24 months available on the St.George Vertigo Platinum reverts to the cash advance rate, which is currently 21.49% per annum. Previously, balance transfers to the Vertigo Platinum were at rock bottom. current purchase rate (currently 12.74% per year).

Unfortunately, the majority of credit cards are now reverting to the standard variable cash advance rate. But getting a card that comes at a competitive purchase rate or “standard balance transfer rate” — like the Bankwest Breeze or Westpac Low Rate — could save you a lot of money on interest charges if you always repay your debt at the end of the introductory period.

To put that into perspective, let’s say you had $5,000 in credit card debt and the balance transferred to a card offering 0% for 24 months. If you pay $150 on this card every month, you’ll end up with $1,400 in debt at the end of the introductory period.

If your credit card reverted to a cash advance interest rate of 22% per year, it would take another 11 months to pay off that debt and cost you a total of $149.81 in interest charges. But if a purchase rate of 13% per year applied at the end of the 0% balance transfer period, you could pay off the remaining debt in 10 months and you would only pay $84 in interest. That’s a difference of 1 month in repayments and $65.81 in interest charges.

Keep in mind that this scenario only focuses on paying off existing debt. So if you had made other purchases during the 24-month introductory period, you might end up paying more interest for longer. If the card you choose has an annual fee, you’ll also need to factor that into the overall costs and reimbursements.

Regardless of these factors, getting a balance transfer card that reverts to a purchase rate will cost you less in interest charges at the end of the 0% period compared to a card that reverts to the advance rate. of funds. So even if you get a card that offers 0% on balance transfers for 24 months, be sure to check what interest rate will apply at the end of the honeymoon period and factor that into your refunds to ensure you get the most out of the deal.

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