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Tips for using a credit card balance transfer

Transferring your card balance is a good way to save money on interest while you pay off your credit card debt.

What is a credit card balance transfer?

If you're being charged interest on existing credit or store card debt, you'll be able to move that debt onto another card that offers an interest-free or low-interest period on the money transferred.

A balance transfer makes it easier for you to repay your credit card debit in flexible equated monthly installments.

Used in a smart way, a credit card balance transfer can be a faster and cheaper way to pay off your debt.

Things to know about credit card balance transfer

Check the terms of the card

Regardless of what credit card you use, it's really important to check the terms and conditions before applying for a balance transfer. Make sure you're aware of:

  • How long the low-interest period will last
  • Any transfer balance fees
  • The cost benefit of switching versus the fee
  • What the interest rate on the card will be when the low-interest period ends

Subject to the credit limit on the card you're transferring your balance to, you may be required to transfer a minimum amount. You can transfer your debt over from more than one card, but they must be current and the payments up to date.

Always repay at least the minimum amount due

When you transfer your balance over to a new card, you're only required to make a minimum monthly repayment. However, you'll be able to clear your debt faster if you repay more each month.

The easiest way to make sure you keep up with repayments is to set up a recurring auto debit

You can also chip away at the debt by making multiple repayments throughout the month. This means that if you have some extra cash, you can use it to pay off the debt before you're tempted to spend the money elsewhere. 

Explore more: 7 great ways to use extra cash

If you have an outstanding balance when the low-interest period ends, you'll start being charged a higher interest rate.

The less you use the card, the better

The goal of a credit card balance transfer is to enable you to repay your debt while saving money on interest. The less you use the card, the less money you owe, and the faster you can pay back that debt.

Know when the low-interest period will end

The low-interest period for the balance transfer feature is limited. When it ends, you'll be charged a new, higher interest rate. Make a note of the date when this will happen and aim to pay off your balance before then.

Consider moving your debt when the low-interest period ends

If you do still have money left to repay at the end of the low-interest period, review your options and consider moving your debt.

You may want to look at a credit card balance transfer at that time with another lender, which could offer you a further low-interest period.

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