Can a Balance Transfer Credit Card Get Me Out of Debt?

One in six Australians struggles with credit card debt, according to ASIC figures. People who miss their monthly payments can find themselves trapped in a spiral of debt with exorbitant fees and interest rates often as high as 20%.

If you're burdened by credit card debt, you should compare options to help lower your interest rate and make your monthly payments more affordable. One of the most effective can be balance transfer credit cards, although this option isn't suitable for everyone.

How do balance transfers work?

Australians have a wide range of balance transfer credit cards to choose from, with some very competitive options. These allow you to transfer your credit card debt from the old card to the new card, along with some other debts, and pay a low interest rate or even 0% interest while the introductory period lasts.

Balance transfer deals typically last between 6 and 18 months, depending on the card and on your own credit profile. If you still use the card after this time, you will be switched to the standard interest rate, which could be higher than your old credit card, so you should be confident that you can clear your debt before that time or the cycle will continue.

Most cards charge a fee when you transfer the balance, which can be as high as 5% of the amount transferred, but some offer free balance transfers. Your bank or credit card company will review your credit history and tell you what type of balance transfer credit card you are eligible for. This may not be an option if you have poor credit.

What are my other options?

If you're not eligible for a balance transfer credit card or you prefer another option, you could also consider a debt consolidation loan. Like a balance transfer card, this can combine multiple debts into a single monthly payment, including credit card debt.

Consolidation loans don't have the same low interest introductory period, but the overall interest will usually be lower and you'll avoid fees, which can make this a better option if you have more debt to pay off. The more positive your credit score, the better the rate you'll be offered. If you have bad credit, you might still be able to access a good interest rate if you take out a secured loan supported by collateral.

Which option is right for me?

Generally, a balance transfer credit card may be a better match if you have a smaller loan that can be paid off within the introductory offer period. A consolidation loan is more suitable if you have larger debt that will take longer than 18 months to pay off, as you'll likely pay less overall in interest and fees.

Talking to a financial adviser should help you to make an informed decision about which option would be most beneficial in your situation. You can also discuss the reasons you got into debt in the first place to try to avoid this happening again.

For confidential advice and a free debt analysis, get in touch with Debt Fix today. Call us on 1300 332 834 for a no-obligation consultation.