For those who have racked up a significant amount of debt, a 0% balance transfer credit cards deal can help them get their finances under control, it has been suggested.<
>Indeed, Reserve Bank statics analysed by research company InfoChocie reveal that those Aussies owing £10,000 on plastic cards can save as much as $4,300 by taking advantage of the balance transfer deals currently on the market.
However, a Herald Sun article points out that such a deal needs to be approached with caution and that if the terms and conditions of the offer are not strictly adhered to then people could find themselves quickly out of pocket.
As such, the publication points out that missing a monthly demand for payment on some cards could result in the interest attached to the entire balance being charged at a much higher rate.
Borrowers should also bear in mind how long the balance transfer offer will last for and what interest they will be charged after it expires.
Going on to make further purchases on balance transfer credit cards was also advised against as a negative payment hierarchy programme could mean that following debt repayments will see the lower interest debt that was initially transferred across paid off first, while the charges attached to new purchases will continue to grow.
Shaun Cornelius, chief executive for Infochoice, states: “It is a bit concerning really, the promotion of the zero rate balance transfer offers. The big headline 0% for six months is what catches people’s attention but the contracts can be complex beasts.”
He adds that the numerous conditions and rates attached to such credit card products “can be quite confusing”, claiming that banks could do more to market 0% balance transfer offers in a more transparent manner.
Similar calls were recently made by Money-AU.com, which stated that negative payment hierarchy is among the most common credit card mistakes that borrowers can make, yet is one that can easily be avoided.