Credit Cards: Interest in Balance Transfers

Credit Cards: Interest in Balance Transfers

CANSTAR releases credit card star ratings report, researching 53 credit cards offered by 10 institutions to determine the cards offering outstanding value

According to the Reserve Bank of New Zealand (RBNZ) Kiwis owed $6.6 billion at the end of November. That alone is a record-breaking amount; add Christmas and New Year spending to that and chances are we curently owe more on plastic than ever before.

"Credit cards can be a very useful way to manage cashflow, provided you are smart about how you use your card and manage to get the benefits without incurring the costs," said CANSTAR General Manager – New Zealand, Jose George.
"Credit cards offer terrific benefits, including a way to easily itemise your spending, fraud protection, rewards programs and great online functionality. Ensure that you pay your card in full each month though, to avoid interest charges."

Large number of interest-free credit card deals available
According to CANSTAR there are currently a large number of interest-free balance transfer offers on personal credit cards – with many of these offering 0 percent interest for 12 months or more.
"A balance transfer deal can be a popular way to reduce the cost of your debt, particularly if you have some post-Christmas retail regret," said Mr George.
"Do be aware though that you rarely get something for nothing. While you might not be paying interest on your debt there are other costs associated with many of these deals, including annual fees, balance transfer fees, purchase interest rate and revert rate (the interest rate that the debt will revert to when the balance transfer period expires).
"Ultimately the nirvana of credit card balance transfers would be a 0 percent interest rate, with a low annual fee and relatively low revert rate."

Top balance transfer offers
CANSTAR has assessed a range of balance transfer offers currently available, in terms of their potential cost for someone trying to pay a $5,000 outstanding balance over two years.

"Consumers need to do their homework. Based on the products listed above, someone paying off $5,000 over two years could end up paying as little as $5,304 or as much as $5,946 on a 0 percent offer," said Mr George.
"That difference is easy money for you to save."

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