Be it food, drinks, watching Netflix or shopping, we all binge sometimes.

When you eat too much or have a few too many drinks, you often wake up the next morning with a sore stomach or a hangover.

When you have a shopping ‘binge’, you often end up with a bad case of a different and much more painful case of ‘hangover’: credit card debt!

While here at Spending Hacker we strongly discourage people from using debt to buy items of personal consumption, I understand that it is a bit of an epidemic in the developed world and Australia is no different.

Unfortunately, the massive advertising industry has done a very good job to condition us all to constantly want new stuff and worse yet, want it now (whether we can actually afford it or not)!

As a result, many Aussies put their shopping on the plastic.

Using a credit card in itself is not necessarily a bad practice.

A credit card can actually be a very useful and effective tool in managing your spending as it allows you to make a single payment at the end of your billing period for everything you bought.

This can be very useful for budgeting purposes and managing your monthly cash flow.

However, a credit card can quickly become a double edged sword if you are not careful and disciplined in how you use it.

If you don’t pay the outstanding balance in full at the end of every statement period, the little piece of plastic in your wallet will show you its true ugly face and the people who issued it to you will have a really big party at your expense!

Welcome to the nasty world of credit card debt. A world full of pain for you and fat profits for your bank (“Thank you, come again”).

Now you are in the unenviable position of having to pay interest in the whopping vicinity of 20% for those clothes and gadgets you bought or that holiday you were so keen on!

Worse yet, the stuff you bought does not produce you any income or goes up in value!

As a matter of fact, if it’s a physical item, it almost certainly goes down in value from the moment you took it out of the wrapper.

Not good!! 🙁

Below is a great little 6 minute video from the federal government’s truly outstanding (trust me that this is not something I am saying lightly but this is really a great example of our taxpayer dollars being put to good use) MoneySmart program explaining some of the most common traps and mistakes people make when using credit.

It’s aimed at a younger ’20 something’ audience but the insights there are applicable to people of any age!

Have you noticed they mention your credit record in the video?

Well, that credit record has gone through quite a lot of changes in recent years and now has a new (and potentially very nasty) ‘friend’ called the credit score.

You can learn everything you need to know about this ‘duo’, how to obtain your personal credit report and credit score as well as how to stay on top of any changes in them (very important!) in this comprehensive guide I wrote on the topic.

Still loving this shiny new iPhone, big screen TV or pair of shoes you got for an amazing ‘bargain’ price in the so called Christmas/Boxing day ‘sales’? 😉

Just as a quick side note, it is worth knowing that these so called ‘sales’ are one of the oldest marketing tricks in the retailers’ playbook.

They all do them every single year because they work and consumers fall for it each and every time!

Professional bargain hunters and seasoned Spending Hackers like myself know this is just a trap and avoid them like the plague (unless they have been carefully verified to offer genuine bargains) .

The really good deals usually come out towards the end of January (right after Australia day) and into February when retailers had time to assess their bottom line for the previous calendar year and first half of the financial year.

If they are not happy with the number they see after the dollar sign, this is when they get truly desperate and start ‘slashing and burning’ their prices to clear last year’s stock.

(This is also the time of the year when the most amount of retailers fail and shut up shop for good).

This is also the time of the year people like myself tend to ‘pounce’ and clean up.

Stores are empty (kids are back at school and their parents are back at work nursing their ‘debt hangover’) and sales staff are very ‘accommodating’ indeed.

Winning! 🙂

Now let’s get back to the topic at hand.

The aim of this post is not make you feel bad about the money you spent. Not at all.

I do not believe in crying over spilt milk.

Instead, I reckon it is much more productive to help people learn from past mistakes and provide effective solutions to patch things up (whenever possible).

If you are currently carrying a balance on your credit card which you haven’t been able to pay off and it’s just sitting there accumulating interest (and interest on interest, a.k.a “compound interest”), doing a balance transfer may be a potential way out, provided you are a very disciplined person and are determined to do whatever it takes to clear this debt on time.

What is a credit card balance transfer?

For those of you who might not be familiar with it, a balance transfer is a process whereby you transfer your existing credit card debt to another credit card provider and in return get a significantly reduced interest rate for a set period of time.

This should allow you to clear your debt much faster but again you must be disciplined to do so!

For a more in-depth explanation of what is a balance transfer and how it works, you can read the balance transfer guide from the federal government’s MoneySmart program.

In case you find it easier to grasp an idea by watching a video, here is a quick one featuring Michelle Hutchison from comparison site Finder.com.au (which contributed this post for us back in 2015) explaining the concept of a credit card balance transfer.

The use of a balance transfer to clear your debt quickly and save on interest has also been endorsed by none other than Australia’s ‘First Lady of Personal Finance’ but again, ONLY if you are disciplined and know exactly what you’re getting yourself into!

Why would banks and other finance providers offer balance transfers? What’s in it for them?

The answer is as simple as it is disturbing: it’s a ‘honey pot’ for them!

They are aiming to attract new business and hope that after you transfer the balance to them, you won’t be able to clear your debt during the reduced interest period.

I’m sure you can guess what happens next:

They throw out a big party and you’re definitely not invited, even though you’re the one paying for it!

However, with the right offer at your disposal and an effective game plan, you can beat the banks in their own game, take full advantage of the reduced interest period and walk away debt free on the other side.

That way, you’ll be the one throwing a party!

Before I cover the best balance transfer offers themselves, I strongly recommend you watch this video from the ABC’s outstanding Consumer Affairs show The Checkout (which unfortunately has been put on indefinite hiatus by “Aunty” 🙁 )

If you choose to play this ‘game’, you need to be aware that your adversaries (and make no mistake: they ARE your adversaries! They are definitely not on your side!) are true ‘sharks’ and have been playing this game for a lot longer than you.

Most importantly: in many cases, as this video explains, they are the ones who win this game and NOT you!

While you may have found the video above quite hilarious (the Checkout crew are good like that), let me assure you that the tricks and pitfalls it discusses are very real indeed.

Ignore them at your peril!

The Best Balance Transfer promotions currently on offer

The offers I’m about to present all have the best reduced interest rate possible: ZERO.

However, they do require you to fork out some extra dough in fees before you can access them.

It is up to you to decide whether this extra cost is worth your while.

26 months of interest-free balance transfer (balance transfer fee applies as well as annual fee after the first 12 months)

The offer is from Bankwest on their Breeze Mastercard.

In case you’ve never heard of Bankwest, they are a subsidiary of the Commonwealth Bank based out of Western Australia

You’ll get 26 months to pay off your outstanding balance.

There is no expiry date for this balance transfer promotional offer which means Bankwest can end it any time they like (but they will honour it for all applications submitted prior to the withdrawal of this offer).

Key things to note about this balance transfer offer:

1. A balance transfer fee of 2% of the transferred balance will apply and and you’ll get charged that as soon as your application is approved and the card is issued; and
2. An annual fee of $79 (or $99 if you are approved for the platinum card) will apply after the first 12 months.

Other important things to keep in mind with this offer:

• You must apply for the balance transfer at the same time you apply for the card itself.
• You can’t get this offer if your debt is on an existing Bankwest credit card product. That’s because Bankwest wants to use this promotion to get new business, not ‘recycle’ existing customers (remember that loyalty doesn’t pay!).
• The maximum balance amount you can transfer with this offer is 95% of the credit limit you get approved for on this card. The minimum balance transfer request they’ll accept is $500.
• The standard purchase rate will apply to any transferred balance which remains unpaid at the end of the 26 months. This is currently 12.99% p.a. (Remember that ‘Honey Pot’ I talked about?).
• DO NOT USE THIS CARD TO BUY ANYTHING UNDER ANY CIRCUMSTANCES!!!
  If you do, those purchases will not have any interest-free days which means you will pay interest from day one!
• Bankwest will NOT close any of your credit card accounts with the other banks for you. You will need to do it yourself (and you should!).

26 months of interest-free balance transfer (balance transfer fee applies as well as annual fee after the first 12 months)

This offer is available until  22/05/2019 and is from St. George Bank on their vertigo platinum card.

You’ll get 26 months to pay off your outstanding balance.

Key things to note about this balance transfer offer:

1. A balance transfer fee of 2% of the transferred balance will apply and and you’ll get charged that as soon as your application is approved and the card is issued;  and
2. An annual fee of $99 applies after the first 12 months.

Other important things to keep in mind with this offer:

• You must apply for the balance transfer at the same time you apply for the card itself.
• You can have the balance transferred from up to three different cards but you can’t request a balance transfer from any other credit cards issued by St.George, Bank of Melbourne and BankSA. Again, that’s because St. George wants to secure new business, not ‘recycle’ existing customers.
• The maximum balance amount you can transfer with this offer is 80% of the credit limit you get approved for on this card. The minimum balance transfer request they’ll accept is $200.
• The cash advance rate will apply to any transferred balance which remains unpaid at the end of the 26 months. Right now that’s 19.49%!!
  If you take up this offer, I suggest you put this number on your fridge and paint it on your bedroom ceiling right above your bed so you never forget how painful this ‘shark bite’ can be if you drop your guard! If you fail to clear the debt, you’ll be swallowed whole: hook, line and sinker!
• St. George bank will NOT close any of your other existing credit card accounts for you. You will need to do it yourself (and you should!).

18 months of interest-free balance transfer (annual fee applies) 

The previous two balance transfer offers I mentioned above both included a 2% balance transfer fee which means you need to potentially cough up an additional sum of money before you could secure this balance transfer.

This offer only requires you to pay an upfront amount of $64 in order to secure it.

It is also relatively easy to qualify for if you’re a low income earner.

Basically, if you’re an Australian resident that earns at least 35K a year and don’t have any major nasties on your credit file, then you should be good.

This offer is available until  31/03/2019 and is from Virgin Money on their Velocity Flyer Card.

Key things to note about this balance transfer offer:

1. An annual fee of $64 applies in the first year. You’ll get charged that as soon as your application is approved and the card is issued;  and
2. This annual fee will rise to $129 from the second year onward.

Other important things to keep in mind with this offer:

• You must apply for the balance transfer at the same time you apply for the card itself.
• The maximum balance amount you can transfer with this offer is 80% of the credit limit you get approved for on this card.
• The cash advance rate will apply to any transferred balance which remains unpaid after 18 months. At the moment, this rate is 20.99%.
• DO NOT USE THIS CARD TO BUY ANYTHING UNDER ANY CIRCUMSTANCES!!!
  If you do, those purchases will not have any interest-free days which means you will pay interest on any purchases from day one at a rate of 20.74% !
• You can’t transfer any outstanding balances from other Virgin Money credit cards you have as they are aiming to attract new business, not ‘reward’ existing customers.

Do NOT sign up for any balance transfer offer before reading this:

Always remember that these are financial institutions, not charities!

They are not interested in giving you free money!

They are doing this because they know there are huge profits for them in doing these kind of promotions!

Finally, unlike you, this is their ‘bread & butter’.

They do this all day every day and according to all the data, THEY (and not you!) win in the majority of cases!

Therefore, If you are not 100% confident (and you MUST be 100% confident, 99% is not enough!), you can follow the game plan outlined below and clear your existing debt within the promotional balance transfer period, you should NOT take up any of the offers mention above.

I say again, DO NOT TAKE ANY OF THE OFFERS MENTIONED ABOVE!!

The best solution for you is to see a financial counsellor and their service is completely fee-free and commission-free.

If you want to do your own research on current balance transfer offers and know how to read financial comparison tables, you can check out comparison sites Rate City, Infochoice, Mozo and Finder.

You MUST do this as soon as you apply for any of the above offers if you want to have a fighting chance against the sharks:

• Cut up all your existing credit cards to avoid temptation and think very carefully about your ability to responsibly use a credit card going forward. Until you are 100% confident you’ve learnt your lesson, it is debit cards and cash ONLY for you!
• Once the new card arrives in the mail, grab it and give it the same treatment as your existing credit card/s. This will make sure you don’t make any new purchases on that card (which is exactly what the sharks are hoping you’ll do!).
• Take the current amount of credit card debt you have and divide it by the period of your interest-free balance transfer offer. This is your REAL minimum monthly repayment (regardless of what the card issuer says!).
  From now on, no matter what, you must pay at least this amount every month towards your existing debt without fail. No ifs, no buts, no exceptions!! Do it as if your life depends on it (because it actually does!).

Once the debt is cleared and you feel confident in your ability to effectively use a credit card again (and please be brutally honest with yourself!), feel free to call the bank and ask them to send you a new card so you can start using it for new purchases.

If instead you’d rather start from a clean slate and actually get a card that is worth having, I suggest you check our comprehensive report on the best credit cards in Australia.

Important disclaimer. Please read!

This content is provided for informational purposes only and does not constitute general  financial advice or specific advice on financial products.

I am not a licensed financial adviser and in compiling this guide, have not taken into account your specific financial situation and particular needs.

I strongly suggest that you never borrow money unless you are confident of your ability to repay it on time!

Failure to repay the outstanding balance in full during the promotional interest-free period will cause your debt to increase very rapidly due to the effects of compound interest.

The sharks will eat you up – hook, line and sinker!

Only licensed financial advisers, who hold an Australian Financial Services Licence (commonly referred to as an AFSL) or their authorised representatives, are legally allowed to provide either general or specific financial advice (including product advice).

Spending Hacker does not hold an AFSL and neither myself nor any of my researchers have any formal qualifications or training in financial advice.

Therefore, we accept no responsibility for any adverse financial consequences you may suffer as a result of applying or using any of the products mentioned above.

You are solely responsible for any action you choose to take or not take as a result of reading this post.

If you’d like to get financial advice for your personal situation and particular needs, you will need to see a licensed financial adviser (or financial planner as they are sometimes also called).

If you decide to do so, this guide should help you choose the right financial adviser/planner for you.

 

Image courtesy of bplanet at FreeDigitalPhotos.net